Practical Law

The Ministry of Justice (MoJ) has consulted on increasing court fees, including in the TCC. The aim is to reduce the cost to the taxpayer; to achieve full cost recovery by making those who can afford to pay contribute more to the costs of the courts.

Many lawyers are up in arms about the proposals. My initial thought was that the proposals seemed broadly reasonable, especially when compared with the cost of arbitration, but that can’t be the only measure. The MoJ must also consider the disproportionate impact on smaller disputes, often brought by individuals or SMEs.

The current fee scale

At the moment, the maximum TCC court fee is £3,290. This applies to all claims over £300,000, regardless of the disputes value or the amount of court time it takes up.

When you consider that you get a top quality judge, the fabulous facilities of the Rolls Building and the infrastructure provided by the court service, it is a great deal for court users. As a percentage of the sums claimed in the big disputes (for example, it is 0.28% of a £1 million dispute or 0.006% of a £50 million dispute) or even as a percentage of the legal costs of bringing disputes to court (certainly less than 1% of the cost of the average case heard by the TCC), it is faintly ridiculous.

The MoJ’s proposals

Consequently, it is little wonder that the MoJ wants to change the fee structure. It currently costs £625 million to run the courts and there is a £120 million shortfall. The MoJ aims to recoup £105 million of that shortfall. It says that it is looking to do this without impeding access to justice or causing court users to turn to other jurisdictions or tribunals to hear their disputes. After all, the UK legal services sector generates an estimated £20 billion a year, including £4 billion in exports and a trade surplus of £3.3 billion in 2011.

So what is the formula for taking advantage of what the MoJ calls “an untapped increased willingness to pay more”, without killing the proverbial golden goose?

There are two proposals for money claims in commercial proceedings:

• An issue fee of 5% of the sum claimed, capped at £10,000 plus a fee of £1,000 per day of the hearing.
• An issue fee of 5% of the sum claimed, capped at either £15,000 or £20,000.

So how does this compare to the competition?

The MoJ’s research suggest that, if it adopted these proposals, the English courts would be cheaper than Singapore and Dubai, more expensive than New York and about the same as Australia. But it is the comparison with arbitration, the biggest genuine rival to the TCC, that is the most interesting.

A great deal of the construction work undertaken by my firm is international arbitration, so we have first-hand experience of the cost of paying for three top arbitrators at £500 per hour each (for the hearings, preparation and decision writing, plus the cost of their travel, hotels, dinners and other expenses) and of paying for room hire (in London, around £1,000 per day).

The new regime will cost the parties considerably less. While we all recognise the need to minimise the costs our clients incur, even in these economic times, in the context of high value disputes, many can see that the proposals seem fair and in line with the market.

But is it fair?

However, the position looks rather different when you apply the regime to smaller disputes involving individuals and SMEs. The concern is that in these cases, such a hike in the court fees (which would represent over 400% for a £300,000 claim) will stop those who are not cash rich being able to seek justice. Any change must ensure that the Davids and Goliaths of the construction world have a fair crack at justice.

The suggestion that fees for claims under £500,000 should remain as they are and then should increase slowly thereafter, would go some way to address this.

Finally, there is the question of what the MoJ will do with the money. Though not immediately apparent from the MoJ’s literature, it seems that the commercial and business courts cover their own costs. Almost all of the shortfall arises in the Family Division. This gives rise to a philosophical and political question: is it right that the users of the TCC (and other business courts) should subsidise the Family Division? I don’t know, but I suggest that if all or some of the increased costs were to go towards paying for the much needed IT improvements (such as an effective online filing system) they might have met with less resistance!