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The Calm Before the Storm


I recently watched Leon, which is one of my favourite films from yesteryear. I was struck by Gary Oldman’s line just before his team of corrupt police officers raid a property: “I like these calm little moments before the storm. It reminds me of Beethoven. Can you hear it?”

In the world of costs, it seems as though things move quicker than any other area of law. Just as you become familiar with a principle, rule, procedure or court form, a revision or amendment will throw you back into the shadows of uncertainty. As we approach the end of 2022, significant reform is once again upon us. Perhaps this is a last opportunity to enjoy the calm before impending changes throw us all into chaos (again). But what exactly is on the horizon?

Extension of Fixed Costs (FRCs)

This is the ‘big one’ and will have the most wide-reaching implications for parties and practitioners. The Master of the Rolls is a keen driver of integrating new and improved pre-action protocols with mandatory ADR leading seamlessly into a digitalised online court system. Whilst that is a mammoth task in and of itself, work remains outstanding from Sir Rupert Jackson’s Review of Civil Litigation Costs from 2010 and his Supplemental Report of 2017 building on the ethos of the Woolf Reforms. Whilst we await imminent publication of the draft rules that extend fixed recoverable costs to the overwhelmingly majority of civil claims below £100,000, it is beyond doubt this step will be a watershed moment in legal history. Most civil claims worked on by solicitors up and down the country will now be subject to an apparently streamlined process that carries with it only fixed or predictive remuneration. The extension of FRC to intermediate cases will deal with claims valued between £25,000 and £100,000. One of the main future battlegrounds will be how the court determines the complexity of a case and subsequent allocation to one of the four bands that in turn dictates the level of remuneration for lawyers. Significant changes to how claimants operate in the sub £100,000 space will inevitably lead to further consolidation in the marketplace. One lesson learned from the last round of reforms is to expect ‘test’ litigation for the best part of a decade after new rules are enacted.   

Costs Budgeting

The primary question is whether budgeting will survive in principle. It has many dissenters who believe it to be an unnecessary drain on already stretched resources for very little return. Assuming budgeting does survive the reforms, secondary questions centre on how the process can be streamlined and improved. Some ideas include changing the default position to ‘budgeting off’ rather than ‘budgeting on’ – and only undertaking the exercise after a case management conference (rather than at the same time). Other ideas include initially budgeting only certain phases and dealing with the remainder at pre-trial review stage. Insurers and compensators appear keen to retain the budgeting process in view of the transparency it provides on legal spend and the ability to resolve costs much quicker at conclusion of a claim; whereas the claimant fraternity appears to support wholesale abandonment and returning to a system where simple costs estimates are provided at various stages of the litigation.  

Guideline Hourly Rates (GHRs)

The fallout continues from the last review into GHRs that culminated in the long-awaited updates in October 2021. The Civil Justice Council proposed that a working group be established to undertake regular future reviews and deal with issues such as methodology, data collection and inflationary increases. However, far more fundamental questions still remain, such as what purpose do GHRs serve in a landscape where fixed costs will capture the overwhelming majority of civil claims with a value of up to £100,000. Are there better alternatives? Those representing paying parties tend to rely heavily on GHRs as representing a reasonable figure in most claims up to £250,000. In contrast, receiving parties are quick to highlight that GHRs are only a guide and have no real relevance to the individual facts of any one particular case. Consequently, rates require judicial determination via the discretionary powers of the judge applying the relevant criteria at CPR 44.4, but this produces inconsistency. With hourly rates occupying so much judicial resource and legal spend, is the profession arguing its way into some form of fixed hourly rates matrix based on a similar banding system of complexity proposed for the new intermediate track?

Qualified One Way Costs Shifting (QOCS)

Following a series of Court of Appeal decisions over the last few years, the application of the QOCS rules have become considerably one-sided, with defendants being unable to enforce orders for costs in their favour absent an actual damages order from the court. It appears this imbalance is to be remedied by simple amendment to CPR 44.14(1) that will allow enforcement to take place where damages are payable by agreement (such as Part 36 offer and acceptance, Tomlin Order etc.) as well as formal order of the court. At last, common sense underpinned by fairness! 

Failing to Prepare Is Preparing to Fail

Keoghs continues to lead the discussions on market reform and implementation. We are here to support our clients and wider stakeholders during these difficult and changing times. Watch this space for future announcements on the coming changes, how they will impact day-to-day business and what steps can be taken to mitigate disruption.

The orchestra is ready. Beethoven’s symphony is about to start. Can you hear it?

Ben Petrecz

Ben Petrecz


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