Changes to the Civil Procedure Rules: What to look out for in 2023?
The Civil Procedure Rules (“CPR”) and the Practice Directions to them (“PD”) were implemented on 26th April 1998. They replaced the Rules of the Supreme Court and their purpose according to Lord Woolf, the then Master of the Rolls was:-
• To reduce the costs of litigation
• Simplify the procedure rules and modernise technology
• Remove unnecessary complexities in the litigation process
Over the past 25 years, the CPR and the Practice Directions have been repeatedly altered to adapt to the needs of the times. Generally this happens upon a direction being given by government to the Civil Procedure Rule Committee to draft new rules, following so called “Consultations”: the reality of these, however, is that government usually decides what it wants to do, has a consultation, and then implements what it had proposed in the first place!
The changes to Rules are effected through statutory instruments, a recent example of which is the Civil Procedure (Amendment No 2 Rules) 2022 which made amendments to CPR 15. However, where alteration to the Practice Directions are concerned, these can made by “Updates” signed off by the Master of the Rolls and by the Parliamentary Under-Secretary of State for Justice on behalf of the Lord Chancellor. We are now up to the 152nd Update made on 15 November 2022 which provide for a pilot scheme to allow authorised court officers to make standard form case management directions on paper in certain circumstances.
Against this moving feast of a legislative background, what then, can we expect by way or Rule or Practice Direction changes in 2023? There are three “dead certs.”. Each will be taken in turn.
1. Qualified One Way Costs Shifting (“QOCS”)
QOCS Protection, as it is known, was implemented by Rule change in April 2013 following the acceptance by the government of recommendations made by Sir Rupert Jackson in his Review of Civil Litigation Costs: Final Report published in December 2009. Under the QOCS regime in section II of CPR 44, losing claimants pay no costs in personal injury claims (which include clinical negligence). In return, on a win, defendants are not liable for payment of any success fees on the claimant’s costs, and only in limited circumstances are After-the Event insurance premiums payable either- (there are carve outs for actions involving mesothelioma).
There are exceptions to QOCS. If the action is struck out, QOCS Protection is automatically lost (see CPR 44.15). Likewise, if the court makes a ruling that the claimant has been fundamentally dishonest and the court gives permission. In either of those eventualities, the miscreant claimant is liable in costs to their last penny (see CPR 44.16).
What happens, however, where an honest claimant has won the case, but on the way, has been ordered to pay some of the defendant’s costs, for example where the Particulars of Claim has been amended and the opponent has the consequential costs incurred in amending the defence?
The answer lies in CPR 44.14, which permits such a defendant to enforce the adverse costs to the aggregate of any damages and interest ordered [emphasis added] in the claimant’s favour. Thus, if the damages awarded by the court are £10,000 and the defendant’s costs are £1,000, the claimant receives £9,000. Conversely, if the damages are £10,000 and the defendant’s costs are £12,000, the latter is out of pocket to the tune of £2,000 because the entitlement to enforce is capped and can be no more that the claimant’s damages (and interest) as ordered.
So far, so clear, but there is a problem (at least the government believes there is) where the claimant’s entitlement to damages has arisen not by an order of the court, but by an agreement to pay. Suppose, in our example, the parties have agreed that the terms for the payment of the £10,000 are to be set out in a Tomlin Schedule, or that the entitlement to the damages has arisen following a late acceptance of an offer under CPR 36. In either of those eventualities, there will have been no order of the court for the payment of damages, merely an agreement to pay, with the result that CPR 44.14 is unavailable: the defendant cannot enforce any of the costs against the damages, so that the defendant’s entitlement to the £12,000 for costs, is not worth a penny in real money.
“That does not matter”, the defendant may say, “because under CPR 44.12, I can set-off my costs against any costs I owe the claimant”. Such a defendant would be correct if the court was willing to give permission for costs orders to be set off against costs in QOCS cases (see Howe v Motor Insurers Bureau [2020] Costs LR 297 ) but in Ho v Adelekun [2021] Costs LR 927, the Supreme Court overruled Howe, thereby closing the set-off route. It followed that a costs order obtained on a late acceptance of a Part 36 offer or arising under a Tomlin Schedule, became worthless to a defendant in money terms, since neither CPR 44.12 and CPR 44.14 were available. Worse than that, that same defendant was still be liable to pay the damages in full and any costs awarded in the claimant’s favour. Ouch!
In order to address scenarios such as these, amendments to CPR 44.14 are currently before the Rule Committee. If adopted, the rule changes will mean that:-
1. Agreements to pay including Part 36 acceptances, will become orders to pay and enforcement will be permissible
2. The setting -off of costs against costs will be allowed as of right without any requirement (as was the case under Howe) for that to be just.
It follows that on a late acceptance of a Part 36 offer by the claimant, the defendant’s costs arising from the date that the offer should have been accepted will be eligible to be set off or enforced against the aggregate of any costs, damages or interest awarded in the claimant’s favour. In addition, agreements to pay expressed in a Tomlin order will also fall within the amended CPR 44.14 meaning that “QOCS Protection”, as the legal profession has known it for the past decade, with have been significantly diluted. Left to himself, is that something which Sir Rupert would have favoured? Surely not.
2. Costs Budgeting
Also under the government’s scrutiny is costs budgeting, its introduction on 1 April 2013 in Part 7 Multi-track actions being the product of another recommendation of the Jackson Report.
Earlier this year, the Civil Justice Council approved the creation of a Costs Working Group which was then given the task of carrying out a review of costs budgeting. Following the completion of a public consultation process which ended in mid- October, the Working Group is deliberating upon the impact and effectiveness of costs budgeting under the following headings:-
1. Is costs budgeting useful?
2. What if any changes should be made to the existing costs budgeting regime?
3. Should costs budgeting be abandoned?
4. If costs budgeting is retained, should it be on a “default on” or “default off” basis?
5. For cases that continue within the costs budgeting regime, are there any high-level changes to the procedural requirements or general approach that should be made?
The need for the review stems from that fact that 10 years on, it can scarcely be said that costs budgeting has settled down as Sir Rupert predicted that it would. Detractors point to the expense of the budgeting process, the front loading of costs and to that fact that as most actions settle, it is pointless, for example, working out what counsel’s brief be should be for a trial in two years’ time when that will never happen.
Compellingly, too, those detractors point out that in cases subject to QOCS, the defendant’s costs are irrelevant save for the rare occasions when an action is struck out under CPR 44.15 or the claimant has been fundamentally dishonest under CPR 44.16, when those costs become recoverable in principle. In these circumstances, the argument goes, there should be no budgeting of the defendant’s costs in QOCS cases which includes clinical negligence.
Which way will the Working Group jump in its recommendations? The smart money must be on the removal of any requirement for defendants to serve budgets in actions to which section II of CPR 44 apply, but so far as claimants are concerned, costs budgeting is likely to remain. As to who will undertake the working out of budgets in the future, the Senior Costs Judge at the Costs Law Reports Conference on 28 September, floated the idea of breaking the link between case management and costs management by having the costs judge, rather than the procedural judge, setting the budget and at the same time, to assess summarily, the costs incurred to date. Such a significant move might be beyond the Working Group’s remit, but is certainly an interesting and logical thought.
3. Fixed Costs
Another recommendation made by Sir Rupert Jackson was the extension of Fixed Costs in cases worth up to £100,000 from the present limit of £25,000 (see his Report dated 31 July 2017 “Extending Fixed Recoverable Costs in Civil Cases”). Specifically, it was his view that the fixed costs regime should be extended to all civil claims across the fast track, including a new process and separate grid of costs for noise induced hearing loss (NIHL) claims valued below £25,000, together with the introduction of a new, intermediate track and corresponding Fixed Costs regime for less complex claims from £25,000–£100,000.
Five years on, it appears that finally the government is going to put Sir Rupert’s proposals into effect, albeit not without a volte face or two on the way. Initially, the recommendation for an intermediate track was rejected, but at the meeting of the Rule Committee in October, it was minuted that the government had changed its mind and that new rules under CPR Part 45 with an intermediate track, would be implemented in April 2023. Then another volte face: implementation, said the Under Secretary, would be deferred until October 2023 in order that “they” [the Rule Committee?] can “get it right”, so no new rules until next autumn.
One other development. The government has said (but saying and doing are different things) that fixed costs will be further reviewed and updated for inflation, currently running at 10%, something that has never happened before. That, at least, will be good news for claimant lawyers and may go some way to assuage their gloom at the extension of the fixed costs regime as a whole.
These are the three main areas of change which we, at Kain Knight, expect to see in 2023. Doubtless there will be others, either by rule changes or perhaps by the following side wind. If fixed recoverable costs are introduced for claims worth up to £100,000, that, at the stroke of a ministerial pen, will take those cases out of the multi-track, and gone with them, will be costs budgeting. Maybe costs budgeting is, after all a threatened species. Events in 2023 will tell.
Colin Campbell, Consultant at Kain Knight, Deputy Costs Judge
