The extension of fixed costs – two steps forward and five steps back

October 13, 2023

The views expressed in this article are those of the author, Chris Richards.

There are very few people in this world who get excited when they hear the phrase ‘legal costs’. There are even fewer people who might be prepared to wade through an article on the same subject. However, something very significant is happening which will have a huge bearing on anyone who is involved, or might be involved, in any kind of civil litigation. The article below discusses the changes which are being made to fixed costs in civil litigation and I promise it is worth a read.

What is happening?

The general rule in this country is that if you bring a civil claim against someone, and you win, the other side will pay your costs. I suppose the idea behind this rule is that most civil claims need the involvement of lawyers to bring them properly, lawyers cost money, and you should not have to pay if the other side are at fault. There are some exceptions – for example, in small claims, where the value or complexity is limited – but this is the general rule.

The way that legal costs have traditionally been calculated is as follows. Where a solicitor does work preparing a case, they make a record of the time that they have spent. They then compare this to their hourly rate. If the hourly rate is £50, and the solicitor has worked for three hours, the bill is £150. Where the solicitors are having to pay money to third parties (medical experts, engineers, barristers, and so on) the solicitors will agree a fee with the third party reflecting the work which needs doing.

The person bringing the claim will usually have an agreement with their solicitors to pay them for the work that they have done. However, if the claim succeeds, the person bringing the claim can try to recover these costs from the other side. There is some protection for the other side. The Judge will only order the other side to pay costs which have been reasonably incurred, and are reasonable in amount. Judges are very happy to cut the bill down to size if they think it is excessive.

This is a gross oversimplification but it shows how things worked before fixed costs came along.

The idea behind fixed costs is that the costs that a successful party is able to recover from the other side are, well, fixed. The solicitors can still bill their client whatever they have agreed. However, the amount that they can actually recover from the other side is limited. The specific figures are set out in Part 45 of the Civil Procedure Rules. The solicitors do not need to show that they have actually spent time working on the claim, or paid money to third parties, in order to get their fixed costs. If they reach a particular point in the litigation, they automatically get the right to recover a particular sum of money. As they pass through each stage, they get an additional sum.

On 31 July 2013, fixed costs were introduced for most personal injury claims worth less than £25,000. There were some types of cases which were excluded (e.g. industrial disease, clinical negligence) but most personal injury claims were affected. Claims which did not involve personal injury were not affected.

This has now changed. From October 2023, the fixed costs system will be extended to most claims (not just those which involve personal injury). The value limit has also been increased all the way up to £100,000. The majority (even the vast majority) of claims will now be caught by the fixed costs system.

So what is the problem?

This all sounds sensible, right? If the costs are fixed, we know what they are. We are not left guessing about what the lawyers might charge. And we all know that pesky lawyers love to charge too much, and so fixed costs are a good way to keep costs low.

This is the idea – and it is a nice idea. But unfortunately the experience of the past decade has shown us that fixed costs (in my view) are implemented badly, often cause more problems than they solve, and reduce the extent to which ordinary people can get legal help when they need it. If the scope of cases where fixed costs are used is expanded, there is every possibility that the problems which already exist will be made worse (and potentially much worse).

What are the problems with fixed costs?

[1] Fixed costs immediately tip the scales towards the wealthy

Remember that fixed costs only affect the costs which can be recovered from the other side. If you are wealthy, you can spend whatever you like on the claim and forget about what you are actually going to recover from the other side. In my field of experience, which is personal injury law, you often have David going up against Goliath. You have a Claimant, who is a private person, with little means, who is going after a big company, or an insurer, who have effectively infinite resources. If the Claimant is suddenly limited in what they can recover from the other side, the Defendant can drag the case out and essentially grind the Claimant into submission. As soon as the costs involved in preparing the claim start to exceed the costs which can be recovered from the Defendant, the Claimant’s lawyers will find themselves either working for free or asking their client to pay the difference (which is usually a non-starter). You will start to see solicitors refusing to act in complex cases even where the underlying prospects of success are good. I have already seen this happen. I was involved in a personal injury case where the lawyers threatened to drop out part-way through simply because the money had run out. This is going to happen more and more.

[2] The experience so far is that the fixed costs have been set at too low a level

The senior judiciary have made clear that the main benefit in their view of moving to fixed costs is that legal costs as a whole will be reduced (see the speech by Lord Justice Jackson on 28 January 2016; Saving money is always a nice idea – but I might add that trying to cut the money being spent on important public functions can often do more harm than good.

The thing that makes me uneasy is that many of the fixed costs which are in place at the moment have already been set far too low. The example I would give is cases where claims are brought after minor road traffic accidents where there is an allegation that the injuries have been fabricated. These cases are really important. The Claimant will either be vindicated and awarded compensation, or shown to be a liar and suffer all sorts of terrible consequences. They need to be prepared properly and an immense amount of work is needed. The amount of costs that can be recovered under the current rules is usually somewhere in the region of £3,000. This might sound like a lot of money. However, once you deduct the cost of premises, training, utilities, insurance, other failed cases, and so on, I would genuinely be surprised if a qualified solicitor preparing the case has more than 6 hours available to them. There is so little money that unless the lawyers do reams of unpaid work the resources may simply not be there to prepare the case properly.

Another bizarre thing is that the current set of fixed costs have not been updated since 2013. The Bank of England inflation calculator tells me that if you were getting paid £100 in 2013, you would need to be being paid £130 in 2023 in order to be getting the same value. In other words, if the fixed costs stay the same over this period, and are not updated, you will suffer a 23% reduction in the value you are receiving once adjusted for inflation. Hang on – isn’t that a problem? Does anyone remember it being said when fixed costs were being brought in that over the next decade there would be a 23% reduction in what could be recovered? There has still been no confirmation (even as of September 2023) that the fixed costs which are being now brought in will be periodically uplifted for inflation. There is every possibility that we will be here in 2033 nursing another 23% reduction.

[3] Fixed costs break the link between the work done and the costs paid

This is really important. The normal situation is that you will only recover your costs from the other side if you can prove that you have actually done the work. With fixed costs, this rule goes out of the window. You will get the same amount of costs regardless of how much work has actually been done dealing with the claim. There is suddenly a huge incentive for lawyers to spend less time working on the claim. The less time spent, the greater profit that can be made (and ‘profit’ in this sense may simply mean making enough money to keep the lights on). There is a real risk that lawyers, if the costs are reduced, will feel forced to cut corners simply to keep their noses above the water.

[4] Fixed costs depend on rules which are often poorly drafted

The rules setting out which costs can be recovered will need to not only be pretty detailed, but also sturdy enough that the right figure can be reached without any disagreement. Unfortunately, the experience so far has been the opposite. The rules which set out the current entitlement to costs are often (in my view) poorly drafted.

The best example of this is the mess that was made of ‘infant advices’. It has been a requirement for a very long time that if a child (or a disabled person) brings a claim for personal injury compensation, and a settlement is reached with the other side, there should be a short advice in writing from a barrister or solicitor to check that the sum which has been agreed is appropriate. However, those writing some of the costs rules basically forgot (at least, it seems to me) to include the fee for the infant advice in the rules. Everyone agrees that the fee for the advice should be recoverable. But given that it is not in the rules, it cannot be recovered. Why on earth should the solicitors have to pay out of their own pocket? Even the Court of Appeal had to waste their time trying to make sense of the rules, and essentially said that they were not going to interfere (see Aldred v Cham [2019] EWCA Civ 1780)

We have been provided with the rules which are going to apply from October 2023 ( We are already starting to see the same sort of problems reappearing. Kerry Underwood has pointed out one obvious gremlin concerning the recoverability of counsel’s fees (see There is nothing to suggest that the new rules will work any better than the old ones. There is a danger that we will end up with the same problems, the same satellite litigation, and the same waste of money and time.

[5] Fixed costs introduce needless complexity

There is only so much information which can fit in a lawyer’s head. The more time that lawyers are wrestling with costs rules, the less time they have to actually review the facts of the case and apply them to the law. The normal system of having the costs assessed by a Judge keeps things simple. The Judge has some general rules to follow (e.g. those in CPR 44) but can look at the case in the round and decide what costs are appropriate to award. If the costs are fixed, and if there are incredibly complex rules governing what costs can be awarded, not only is the burden much higher on the lawyers, and the Judge, there is so much more potential for things to go wrong. The new rules which are going to apply from October 2023 are almost 10,000 words long and will need to be memorised by every lawyer and Judge. All it takes is one rule to be missed and a completely wrong decision can be made. We need a legal system which resembles a Swiss Army knife – not a Swiss watch.

What should be done? 

One obvious (but not particularly fashionable) solution would be to leave things as they are. There are already some fixed costs for some cases. The cases which have a higher value or complexity do not have fixed costs. These are the cases where the most damage can be done by imposing fixed costs. Why not leave things alone and see what happens?

An alternative would be to not suddenly increase the limit for fixed costs up to £100,000, but instead increase the limit gently. Why not try £50,000, and give it a few years to see how everything beds in? This would give us the chance to change course quickly if something goes wrong.

My own preferred option would be to have Judges assessing costs in the usual way, but for the Ministry of Justice to carry out a detailed study to work out what costs should normally be incurred for a particular type of case. If the Judge is looking at a costs bill of £10,000, but can see (perhaps from a handy calculator) that normally only £4,000 would need to be spent, the Judge would be able to bring the numbers down with confidence. This gives us the certainty of fixed costs, but with the flexibility of the old system.