In January 2015, the Government announced that the fee for issuing a money claim worth more than £10,000 will be increased to 5% of the sum claimed (or 4.5% for CCBC users), subject to a maximum fee of £10,000. On Wednesday, 4 March the House of Lords accepted the legislation and the changes will now take effect from Monday, 9 March.
This means that for many businesses, who give credit to their business customers, they will see the cost of their issue fees rise sharply. We have calculated that across a typical book of debt for most of our clients, the issue fee has increased by at least 100%. In some cases the fees have risen by an eye-watering 500%.
In addition, on a global scale, the UK issue fee may now be seen as a high entry price to begin a claim in this jurisdiction. On average, clients such as mortgage lenders will see their issue fees increase to £5,000+ per claim, rising from the £1,000+ mark already in place. This seems somewhat disproportionate for a simple money claim where there is a very good chance a defence won’t even be filed.
Court users and other stakeholders concerned have issued stern responses to the Government for this particular set of reforms, which are seen as being a step too far. The Judiciary have issued statements criticising the increases and in a rare move, the Regulatory Policy Committee (RPC), who are an independent advisory body, have issued a similar response to the Government’s plans. Their report actually takes the form of a 'red report' which is a report only used in circumstances where the committee members have grave concerns about a proposed reform. It was hoped that the Government would take this as a strong indicator that the reforms are not right for the industry and they would rethink the proposals before they came into force.
Unfortunately, all points made by businesses and the Judiciary have been ignored resulting in the Law Society taking the step to issue a pre-action protocol letter against the Government, seeking a judicial review of the Government’s decision to increase fees in this way. The Society claims the new fees would be equivalent to selling justice, and would be contrary to the principles of the Magna Carta, which sets out the foundations for our entire legal system. There are other grounds for review as well with the Law Society and other legal representative bodies challenging the Government on the fact that it is proceeding without any supporting evidence to justify the increases. The argument here is that this is effectively a tax and the Government does not have the power to raise fees for the purposes it has stated in its consultation. In the consultation it states that the fee increases are required to make ‘departmental savings.’
At one point during the debate on Wednesday (06 March) night, it seemed there was a chance that the House of Lords may have implemented an amendment to the motion by inserting at the end of the legislation “this House regrets that the draft Order unfairly and inappropriately increases fees for civil proceedings above costs and so damages access to justice.” We understand this charge was led by Lord Pannick QC who opposes the changes. However, after debate late into the evening, the amendment was withdrawn and the original motion was disappointingly agreed to at around 22:00 GMT.
We will be watching developments very closely over the next few weeks and wait with interest to see what will unfold during the next few months. We will hopefully update you with some good news soon.
Example of the fee increases
This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.