Court fees out of proportion

The proposed rise in court fees is a cause for concern to owners and occupiers alike Litigation is about to get much more expensive. In a move that some have already dubbed the “High Court poll tax”, ministers have announced that court fees are set to rise from April 2015 by as much at 600% per claim. Property disputes will be especially affected by this hike. What is intended? A draft statutory instrument – the Civil Proceedings and Family Proceedings Fees (Amendment) Order 2015 – laid before Parliament and expected to come into effect in April 2015 sets out a new regime for the fees payable at the start of proceedings. Claims up to £10,000 are unaffected, with fees ranging from £35 to £455 depending on the value. It is then that the rocket boosters are fired up. For any money claim worth more than £10,000, a 5% fee will be payable when the claim is issued, subject to a maximum of £10,000. This maximum fee will also apply when the monetary amount claimed is unknown. The fees have no correlation to the court resource used, and are to be paid when a case is commenced, even though most cases settle long before trial. To put these changes into perspective, a litigant bringing a £100,000 claim who at present pays a court fee of £910 will instead face a fee of £5,000. A small company bringing a claim for a simple £200,000 contract debt where there is no real defence to the claim would ordinarily commence proceedings and apply for summary judgment at a short hearing without the need for oral evidence. The issue fee would at present be £1,315. Under the new regime, the fee would be £10,000, even if the case is likely to be resolved in half a day’s court time. Such a significant fee may be beyond the means of the company (a fact likely to be well understood by the defaulting debtor). Is it a fair process? Property disputes are likely to feel a particular sting. Many claims in the sector are large enough to “matter” but not so big that money is no object in pursuing them. Many are for unspecified sums of money or for declarations as to the proper value of sums due. £10,000 may be completely disproportionate to the damages ultimately recovered. The Lord Chief Justice has expressed “deep concerns” about the changes. Lord Neuberger, President of the Supreme Court, observed in an unrelated lecture – Justice in an age of austerity – given on 15 October 2013 that, “the rule of law requires that any persons with a bona fide reasonable legal claim must have an effective means of having that claim considered”. The requirement to pay such a large fee in full and up front will leave many without the ability to remedy their disputes. This cannot be right for our democracy or our economy. The system proposed has only one quality in its favour: simplicity. It is, however, unfair for at least three reasons. First, it fails to recognise that the cost to the state of administering a claim does not relate directly to its value. A claim in respect of an unpaid invoice for £250,000 may be resolved in a couple of hours of court time at a summary judgment hearing. A £75,000 professional negligence claim may involve a week-long trial, with cross-examination of witnesses of fact and expert witnesses. Yet under the proposals, the fee for the two-hour case would be £10,000, whereas the week-long case would cost £3,750. Second, the burden on the court system at the point of issue is minimal. The real costs are incurred only when there is a trial or other hearing. Yet the proposal will require most litigants to pay the great majority of court fees at the very outset, before any significant costs are incurred by the state. Third, many disputes are settled shortly after the claim is issued, as defendants wait to see if claimants are willing to go as far as commencing proceedings. To front-load court fees so dramatically so that up to £10,000 is spent, and lost forever even if the case settles the next day, is flawed save as a revenue-raising exercise. Are there alternatives? One way to deal with the funding of the courts is to charge fees that relate to court time. Such a system should not be overly complex to administer, and would be fair in that there would be a direct link between the fee incurred and the use of the courts’ resources. In simple terms, an hourly or daily fee for applications and trials could be set at a level that covers the cost of providing the court service, and which is directly referable to the burden imposed by each case (albeit with an enhanced fee element if required). Penalties could be put in place for those who grossly underestimate the length of time that a hearing will last – a regime that exists already where parties fail to give accurate time estimates. At the very least, consideration could be given to introducing a phased scheme for payment of the fees. For example, 25% of the whole fee might be charged on issue, 25% at the first case management conference (or equivalent), with the remaining 50% payable, say, three months prior to the first day of trial. Such a scheme should help to ensure that claimants can continue to afford to issue their claims and not act as a barrier to justice. It is to be hoped that the Ministry of Justice will postpone the current likely commencement date of April 2015 while further consultation is conducted. The changes are a barrier to justice, a dent to the UK’s commercial competitiveness and a cause for concern to owners and occupiers of property alike. Daniel Levy is head of property litigation at Mishcon de Reya