Contributors
From 1 October 2023, fixed recoverable costs will apply to most civil litigation claims with a value of up to £100,000. This includes all fast track and intermediate track cases (subject to exceptions).
As recoverable costs for most cases under the new regime are likely to be less than currently available, if you have any potential claims up to the value of £100,000, you should consider if you can issue these claims before the new rules take effect on 1 October 2023. Claims should only be issued where all pre-action protocol obligations have been properly satisfied. Note there is uncertainty about whether the new rule will apply to matters that settle pre-issue after 1 October 2023. We await clarification from the Ministry of Justice on this issue.
What are fixed recoverable costs?
Fixed recoverable costs (FRC) are the amount of legal costs a 'winning' party can recover from a losing party at different stages of the litigation, from pre-issue to trial. They currently apply in most low-value personal injury cases in the fast track. The government is planning to extend FRC for claims up to £100,000.
What is the new FRC regime?
From 1 October 2023, FRC will apply to all cases (subject to exceptions)1:
- In the fast track (cases up to £25,000)2; and
- The new intermediate track (most matters between £25,000-£100,000)3.
Fixed recoverable costs will not apply to multi-track cases.
The creation of a new intermediate track is a significant change.
The intermediate track will provide a middle-ground between fast track and multi-track cases. For intermediate track cases, there will be no budgeting at the beginning of a claim nor detailed assessment at the end.
Four complexity bands will be introduced for the fast and intermediate tracks with associated grids of costs for the stages of the claim. Band 1 will be for the least complex cases and Band 4 for cases involving complex issues of law or fact. These bands will impact the level of fixed recoverable costs claimable, with more complex claims having higher FRC. Costs will escalate as a matter progresses with the aim of incentivising early settlement. As there will be higher FRC for more complex cases expect wrangling between parties about band allocation.
Part 36 Offers and cost consequences of unreasonable behaviour
Where a party fails to beat an opponent's Part 36 offer FRC will be increased by 35%.
Where a party has acted unreasonably the court has the power to reduce the fixed costs payable by 50% or have the FRC uplifted by 50%.
Impact on those bringing claims in the fast and intermediate track
The intent behind these reforms is to keep litigation costs proportionate to the sums claimed and to provide increased costs certainty for litigants. The new regime is likely to drive down costs recovery between the parties. While parties and their advisers should look to increase efficiencies when running litigation; it does not necessarily follow that cases subject to FRC will become cheaper. While complex cases should be allocated to the multi-track, it may be that some cases covered by FRC will need to be considered in detail to ensure they are viable from a costs perspective.
The Ministry of Justice has also announced that it proposes to review and extend the FRC regime more generally in three years.
What do you need to do before the new regime is implemented?
Check if you have any pending claims (for less than £100,000) and consider if it is appropriate to issue before October 2023, to avoid falling under the new FRC regime. Looking at the proposed level of fixed costs for each complexity band, the majority of sums are less than what would have been recoverable under the standard basis time costs regime (pre 1 October 2023). For details of the draft amendments to the Civil Procedure rules, click here.
[1] Exceptions include the following claims: intellectual property, clinical negligence unless breach and causation is admitted, housing, mesothelioma/asbestos lung disease claims, damages re: harm, abuse or neglect of or by children or vulnerable adults; claims against the Police regarding intentional or reckless tort under the Human Rights Act 1998, Aarhus Convention claims and where a party is a Protected Party. The majority of other claims worth between £25,000 and £100,000 will be captured. FRC will apply to personal injury cases where the cause of action accrues on/after October 2023.
[2] For claims up to a value of £25,000 where the trial is likely to last for no longer than one day and oral expert evidence is limited to one expert per party in any field, and expert evidence is limited to two expert fields.
[3] For claims of 'modest complexity' valued between 25,000-£100,000 which can be tried in three days or less, with no more than two expert witnesses giving oral evidence on each side and where the case can be managed under an expedited procedure: more complex cases will be allocated to the multi-track.
