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Proposed Fixed Costs for Disrepair Claims

As you may be aware, in 2010 Lord Justice Jackson published his final report of his review of the rules and principles governing the costs of civil litigation. This report, amongst other things, introduced fixed costs for certain low value claims, in the area of personal injury and took many disrepair claims out of the scope of legal aid funding.

This introduction of fixed costs impacted quite significantly on personal injury claims, which, prior to the Jackson Reforms, were profitable cases for claimant solicitors to take on because of the recoverability of legal costs, which were not fixed. Following the Jackson Reforms and the introduction of the fixed costs regime in low value personal injury claims, many firms of solicitors have started taking on more profitable housing disrepair claims, where there are currently no fixed costs.

Implications of the Jackson Reform

As a result of the Jackson Reforms, many local authorities and registered providers of social housing have seen a dramatic increase in the number of housing disrepair claims being brought against them. We conducted our own research at Forbes Solicitors and contacted all of our Registered Provider clients and asked them to confirm how many claims have been started under the Housing Disrepair Pre-Action Protocol (the Protocol) in each of the last three years.

Due to the number of participants, the data may not be representative of the market as a whole. However, the data does show a dramatic rise in the number of claims which started under the Protocol, between 2014 and 2016.

All of the Registered Providers, with the exception of one, received significantly more claims in 2016 than in 2014.

All respondents received more claims in 2015 than in 2014.

3 of the 5 respondents experienced a decline in the number of claims received in 2016 as compared with 2015. Both of the respondents that experienced a rise in claims in 2016, as compared with 2015, experienced a significant rise, one experiencing an 81% rise and the other experiencing a 50% rise.

LJ Jackson's new proposals

Lord Justice Jackson has carried out a further review of civil litigation costs, which have been published in his recent supplemental report of July 2017. In this report, he states that the traditional approach of the winner recovering costs from the losing party "is a recipe for runaway costs". He therefore recommends that all recoverable costs in fast track cases be fixed and that the figures be reviewed every 3 years.

The overriding objective of the courts is to ensure that civil proceedings are carried out in way that is just. The Civil Court Rules provide for ensuring that a proportionate amount of the court's time is be given to each case. To facilitate this objective, civil proceedings are allocated to one of three 'tracks' designed to deal with cases of different values and complexity. All defended cases are allocated by the court to an appropriate track according to certain factors, including the value of the claim.

Under the proposals in LJ Jackson's supplemental report, all fast-track cases would be placed into four bands of complexity, band 1 being the least complex and band 4 the most. Standard housing disrepair claims have been included in band 3, or for more complex housing disrepair claims, these would be included in band 4. However, what constitutes 'complex housing disrepair' has not been specified and will be decided on a case by case basis.

LJ Jackson has said that the parties should endeavour to agree, pre-action:

(a) The appropriate track for case; and

(b) In respect of fast track cases, the appropriate band.

He has said that claimants should state their proposals regarding the track and band in the letter of claim, and that defendants should do the same in the letter of response. If the case reaches allocation stage, LJ Jackson has said that the judge should allocate the case in the usual way and (for fast track cases) specify the band which will apply to the case, if that is in dispute. Under the proposals, either party could challenge the band to which the claim has been allocated, by making an application to the court on paper. However, he has also proposed that the unsuccessful party on such an application should incur a costs liability of £150. If the case settles before issue or before allocation, then under the proposals, the band allocation decision should fall to the judge assessing costs, if there is disagreement between the parties.

LJ Jackson's proposed matrix of fixed recoverable costs (FRC) for housing disrepair claims (band 3 or band 4), are as follows:

Matrix of FRC for fast track claims (applies to both claimant and defendant recoverable costs)

	Complexity Band
Stage:	1	2	3	4
Pre-issue £1,001-£5,000		£104 + 20% of damages	£988 + 17.5% of damages	£2,250 + 15% of damages + £440 per extra defendant
Pre-issue £5,001-£10,000		£1,144 + 15% of damages over £5,000	£1,929 + 12.5% of damages over £5,000
Pre-issue £10,001-£25,000	£500	£2,007 + 10% of damages over £10,000	£2,600 + 10% of damages over £10,000
Post-issue, Pre-allocation	£1,850	£1,206 + 20% of damages	£2,735 + 20% of damages	£2,575 + 40% of damages + £660 per defendant
Post-allocation, pre-listing	£2,200	£1,955 + 20% of damages	£3,484 + 25% of damages	£5,525 + 40% of damages + £660 per extra defendant
Post-listing, pre-trial	£3,250	£2,761 + 20% of damages	£4,451 + 30% of damages	£6,800 + 40% of damages + £660 per extra defendant
Trial advocacy feee11	£500 £710 £1,070 £1,705	£500 £710 £1,070 £1,705	£500 £710 £1,070 £1,705	£1,380 £1,380 £1,800 £2,500

The FRC which is applied would be based on the stage the case is at when it is settled and will be calculated as a fixed fee plus a percentage of the damages awarded.

Forbes Comment

The proposed FCR would be good news for landlords, because it would provide greater certainty over the likely costs they may have to pay for dealing with a disrepair claim and this in turn could potentially result in lower insurance premiums.

It is also likely to discourage claimant law firms from targeting the sector and giving serious consideration to the cases that they take on. This should help to prevent claimant firms taking on weak cases, which registered providers still have to spend time, money and resources on defending, even if they are not found to be liable.

However, there is a risk that claims may now be issued prematurely by claimant law firms, in an attempt to increase the costs which they will be able to recover, following settlement. This should be an incentive for landlords to ensure that any recommended repairs to a property are carried out as quickly as possible, because this will be key to avoiding litigation, and preventing tenant's solicitors to use outstanding works as an excuse to get litigation underway.

For more information please contact Justine Hunkins on 0113 3862692, or by email at justine.hunkins@forbessolicitors.co.uk.

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