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A new pilot scheme to limit legal costs

From the 14th January 2019 a new 2 year pilot scheme has been introduced to limit legal costs involved for certain Business and Property Court cases valued up to £250,000.

We’re all too familiar with the challenges the cost conundrum poses to many SMEs when it comes to litigation concerning business or property. On the one hand, they feel they may have a strong case, on the other, the possibility of runaway legal costs may discourage them from bringing their case to court. Often these proceedings just relate to money that they’re owed for work they have properly done or services supplied.

A new system needed to be put in place which dispels such fears and lays the ground rules for similar cases in the future. That’s why the Civil Procedure Rule Committee has introduced a pilot scheme which will improve access to courts. This will be achieved by streamlining procedures thereby lowering costs, introducing a ceiling to the likely exposure to costs and speeding up the resolution of claims.

The pilot is scheduled to run in the London Circuit Commercial Court and the three specialists Courts in the Manchester District Registry and Leeds District Registry.

In effect, the scheme is aimed at cases with a monetary value between £100,000 and £250,000. The scheme will not apply to those cases with a disputed value in excess of £250,000 or those that require more than two days at trial after appropriate case management. Furthermore, those cases involving numerous issues and parties, involve allegations of fraud or are likely to require reliance upon extensive witness or expert evidence, are not eligible. In general, expert evidence will not be permitted and if there is, it should be a report from a single joint expert.

In a bid to streamline the system, statements of case will be limited in length and there will be no costs management, automatic disclosure, witness statements or expert evidence. There will be a general rule that a party may rely on the evidence of no more than two witnesses.

Trials should last no longer than two days and will not be more than eight months after CMC. Parties will produce a schedule of costs referring to the various stages of the litigation not more than 21 days after conclusion of the trial. Each stage is capped with an overall cap of £80,000. Costs are set out at Practice Direction 51W in the Civil Procedure Rules – the bible for Civil Court proceedings.

Here are the caps for each step:

  • Pre-action £10,000
  • Particulars of claim. £7,000
  • Defence and counterclaim. £7,000
  • Reply and defence to counterclaim. £6,000
  • Case management conference. £6,000
  • Disclosure. £6,000
  • Witness statements. £8,000
  • Expert reports. £10,000
  • Trial and judgement. £20,000
  • Settlement/negotiation/mediation. £10,000

This scheme will be evaluated by Paul McMahon, assistant professor at the LSE, to assess demand for the scheme and see how it might be rolled out at the end of the two-year period. Its hoped the scheme will provide relief and encouragement to claimants who might otherwise be deterred by the possibility of runaway costs.

This is an exciting development and will allow more businesses to pursue claims that may have been a risk and without such adverse costs orders. It will also allow for better access to After the Event (ATE) Insurance for parties. Solicitors will now be forced to manage cases in a more cost-effective and meticulous manner which is good news for everyone.