CLA urges restraint by the MOJ when considering applying Fixed Recoverable Costs to Business Disputes

In its response to the Fixed Recoverable Costs Consultation (“FRC”) undertaken by the Ministry of Justice (“MOJ”) the CLA has strongly urged the MOJ to defer the roll-out of fixed recoverable costs (“FRC”) to business disputes, citing concerns over access to justice. In the response to the consultation, which closed on 6th June 2019, the CLA observes that prior to considering FRC the MOJ and HMCTS need to complete upon the modernisation of HMCTS. The CLA also urged the MOJ to make a decision based on proper empirical data in relation to the costs of business disputes, which it suggests can be obtained through requiring parties to business disputes to file copies of approved costs budgets via a designated email address set up to gather data.

The CLA is particularly concerned that business disputes are at risk of being caught up in the fever pitch around reducing costs in routine personal injury claims without adequate impact assessment on the effect that this will have on businesses involved in commercial disputes. It proposes that as part of the reform process there be a fully-operational business list in all County Court centres so that the MOJ can trial the hearing of cases that would potentially fall within an intermediate track by specialist District Judges and Deputy District Judges. Ultimately the CLA recommends maintaining an exemption from fixed recoverable costs for business disputes akin to the exemption for Insolvency, Defamation and Mesothelioma Claims to Part 2 of LASPO with a further impact assessment once proper data is obtained.

Commenting on the proposals for FRC, CLA Steering Board Member and Head of Litigation and Dispute Resolution at Brabners LLP, Jeff Lewis commented:-

“The voice of businesses has often been lost in civil justice reforms in a noise created by the warring factions of those who represent personal injury lawyers and those who represent the insurance industry. There is a real danger yet again that access to justice for businesses will be jeopardised by the introduction of a fixed recoverable costs regime which will in essence punish the successful party in litigation and operate to the advantage of the unsuccessful party. The CLA hopes that the Ministry of Justice will take time to properly consider the impact on businesses, gather data and in the meantime exempt business disputes from the proposed fixed recoverable costs regime”.

Commenting on the proposals, Luke Harrison, Chairman of the Commercial Litigation Association and Head of Litigation and Dispute Resolution at Debenhams Ottaway LLP commented:-
“The ability of businesses to seek redress before the Courts is critical. Litigation, like any other aspect of business, is very often a business decision. It is often the case that parties act reasonably and disputes can be settled very early on via alternative dispute resolution. The current proposals of the Ministry of Justice provide for no incentive to alternative dispute resolution and are likely to further entrench parties in litigation as it is widely known that adverse costs acts as a driver, in the main, towards controlling the behaviour of litigants. Whilst control of costs in litigation is critical the current proportionality rules provide for an adequate mechanism of judicial control and at present the proposals for fixed recoverable costs are seeking to solve a problem that simply doesn’t exist.”

Notes
1. For further information in respect of the FRC Consultation please see https://consult.justice.gov.uk/digital-communications/fixed-recoverable-costs-consultation/.
2. The website of the Commercial Litigation Association is https://comlit.co.uk/.
3. For further comment or information on the association please contact Luke Harrison, Chairman of the CLA on 01727 735639 or lth@debenhamsottaway.co.uk
4. The CLA is the only national association representing the interests of all those stakeholders involved in the business of Commercial Litigation and Dispute Resolution. Its members are drawn from a number of professions including solicitors, barristers, mediators, forensic accountants, insolvency practitioners, third party funders, insurers and electronic disclosure providers. Its aim, amongst other things, is to enhance access to justices for those involved in commercial disputes through increasing efficiency and reducing costs of the litigation process.

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