It’s always been a bit of a myth that UK costs rules are so very different from US costs rules. The so-called English cost rule, that costs follow the event, has for some time only applied to a minority of disputes dealt with by courts (compare the numbers of family disputes and disputed small claims to the number of contested civil claims in the fast track or above; the former outweigh the latter). The minority status of the English rule is even clearer if one considers tribunals of course. Most UK disputes have for some time been governed by a US-style cost rule: each party bears their own costs. The myth looks like being further eroded as a result of yesterdays announcements for civil justice (‘Solving Civil Disputes’ and the proposals to reform the funding of civil justice implementing the Jackson reforms). Not only is qualified one way costs shifting to be brought in for personal injury and clinical negligence cases, but the small claims limit appears about to be significantly increased.
I want to suggest briefly here that the latter may lead to unforeseen consequences. In particular, the small claims court may be about to change profoundly if its limits go from £5,000 to £15,000 as proposed in the Government’s latest justice Green paper. By any standard, this is a significant jump upwards (although I understand it does not apply to personal injury and housing disrepair cases). Whilst commentators will be tempted to ask whether such claims are genuinely small, and therefore fit to be dealt with under small claims procedures where (it is presumed) parties are typically unrepresented, I believe that response misses a major point. It is reasonably common already for small claims hearings to involve one or more represented parties. The shift upwards in the limit will increase the willingness of parties to gain representation for such cases and the economic incentives available for firms to do so. Assuming contingency fees will be allowed in such circumstances, genuinely US-style contingency fees will operate in the small claims court as opposed to the hybrid Ontario-style fees that are envisaged in ‘proper’ litigation. It’s not clear to me, on a quick perusal of the MoJ consultation papers issued yesterday, that the Ministry has considered whether this is what it plans to do. It will be very interesting to see what impact increasing the limit, removing costs recovery and (perhaps) encouraging US-(as opposed to Canadian) style contingency fees has on the number of cases in the small claims court, levels of representation and the judicial resources that need to be expended on them. The small claims jurisdiction may be about to change significantly.