Settling costs at the outset: the future for litigation

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James Clarke review’s Lord Justice Jackson’s recommendations to streamline the litigation process and cap costs.

Reform to the litigation process as proposed by Lord Justice Jackson is likely to be welcomed by clients who will have certainty from the commencement of litigation as to what their potential allowing them to assess the costs position should they lose.


On 31 July 2017 Lord Justice Jackson delivered his much anticipated report, entitled “Review of Civil Litigation Costs: Supplemental Report, Fixed Recoverable Costs” which sets out proposed changes he considers should be implemented to the litigation process in England & Wales. His proposals build on the reforms that he introduced in April 2013, which saw the adoption of a more robust approach by Courts to costs management and the introduction of costs budgeting.

Lord Justice Jackson’ s report makes a number of recommendations to streamline the litigation process and further control the costs of litigation. We examine his recommendations and in particular his recommendation that all recoverable costs in fast -track litigation should be of a fixed amount, pursuant to a pre-determined scale.

The report

In his report, Lord Justice Jackson acknowledges that there has been an improvement in how the costs of litigation are managed. He considers that further improvements can be made and proposes the extension of the Fixed Recoverable Costs (“FRC”) regime to the lower value Multi-Track claims. The aim of his recommendations is to promote effective costs management by making sure that recoverable costs are transparent and predictable, which will, in turn, allow parties to determine whether a claim is worth pursuing or defending.

A summary of the recommendations in his report is set out below.

Intermediate track: The introduction of a new Intermediate Track, which will be subject to FRCs and will deal with cases with a value of between £25,000-£100,000, which are of modest complexity and where the relief sought is mainly monetary compensation.

Streamlined procedure: Intermediate Track cases will limit the length of statements of case and witness statements, together with restricting disclosure, to streamline and speed up the process. In addition, there must be no more than two expert witnesses for each party and the trial will last no longer than 3 days.

Matrix of recoverable costs: The report includes a proposed matrix of recoverable costs ranging from the least to the most complex. For example, a “band 1” case that settles pre-issue and which is, for between £10,001 and £25,000 will result in recoverable costs of £500. Whereas a “band 4” case involving, for example, a complex professional negligence claim which settles pre-issue, for up to £25,000 will attract costs of £2,250 plus 15% of the value of the damages and an additional £440 for each extra defendant.

Choosing which track: The report also proposes that the pre-action protocols be revised requiring parties to try and agree which track a case should be assigned to and the appropriate “band” for the case. Separately, on allocation to the Intermediate Track a judge should assign it to a track and to a band within that track.

Changes to part 36: Lord Justice Jackson recommends that the current Part 36 consequences (where a party who does not accept what turns out to be a reasonable offer of settlement can be ordered to pay the other party’s costs on the indemnity basis) be changed from the payment of indemnity costs to a 30-40% uplift on FRCs. This is a significant alteration.

Capped costs pilot scheme: The report also recommends an opt-in capped costs pilot scheme for cases in certain Business and Property Courts. The pilot will apply to cases worth £100,000-£200,000, where the trial will last no longer than two days with recoverable costs for each stage of the litigation being capped along with an overall costs cap of £80,000. To reflect the cap on recoverable costs Lord Justice Jackson proposes a streamlined process be introduced which will include there being no automatic right to disclosure.  Again, this is a significant departure from current procedure.

When is this likely to happen?

The report is currently the subject of review by the Lord Chancellor, Master of the Rolls and the government. The government has indicated that it intends to consult on the proposals prior to their implementation, although no timetable for such consultation has been published. Whilst the target date for the implementation of the proposed reforms was October 2018, given the disruption of the election and Brexit, implementation of the reforms by this date now appears very unlikely. Many commentators consider a more realistic date for the implementation of Lord Justice Jackson’s further reforms to be April 2019.


To those who have followed the evolution of the 2013 reforms, Lord Justice Jackson’s most recent recommendations will come as no surprise. It was clear when the changes were implemented in 2013 that this was just the start of a larger and more comprehensive programme of reforms to be introduced over a number of years – the introduction of FRC’s being the next logical step.

Whilst some consider that the use of the “matrix of recoverable costs” will simply serve to further complicate matters and create uncertainty, Lord Justice Jackson’s proposed reforms, unlike the 2013 reforms, have, on the whole, been welcomed by the legal community. The willingness to embrace the proposed reforms represents the cultural change that the community has undergone regarding its approach to costs and costs management. Many, including this firm, welcome the incremental approach to the proposed reforms and the introduction of the Intermediate Track, which will help bridge the gap between the costs associated with Fast Track claims and Multi-Track claims.

From a client point of view, given that not all costs will be recoverable from the losing party, we anticipate that there will be a change in the way parties conduct litigation. Such changes will see an increased willingness to make use of alternative dispute resolution procedures and engage with the other side to try and narrow the issues in dispute before going to court. Given the uncertainty of outcome and huge costs associated with the larger cases, this is to be welcomed.