Important changes have been introduced to the legal costs system, which applies to most forms of court litigation.
What are fixed recoverable costs?
Fixed recoverable costs (FRC) are set amounts that are recoverable by a ‘winning’ party in litigation from a ‘losing’ party. The amounts are set by the Civil Procedure Rules (CPR).
FRC are designed to:
- provide certainty to both costs exposure (for the loser) and recovery (for the winner).
- limit the amounts that people spend on litigation, or at least what the winner can recover.
What is changing?
The regime was significantly extended on 1 October 2023. It now covers many claims with a value of up to £100,000 (although there are some exceptions).
The costs that a winning party can recover are based on the stage at which the case is finally resolved plus (in some cases) a percentage of the claim value. This contrasts with the previous position where the amount was based on the extent of the work carried out by the parties’ lawyers.
Notable changes to the regime include:
1. The introduction of a new intermediate track for claims up to £100,000 where:
- the case can be tried in three days or less;
- the case can be tried with no more than two expert witnesses giving evidence on each side; and
- the claim is brought by one claimant against one or two defendants, or by two claimants against one defendant.
Where the relief sought includes a claim for non-monetary relief, such as an injunction, the claim will not usually be allocated to the intermediate track unless the court considers it to be in the interests of justice. This will mean that FRC will largely be for lower to medium value money claims.
Judges will also retain a discretion to allow them to allocate more complex cases to the multi-track even if their monetary value is less than £100,000. If this happens, then FRC will not apply.
2. The introduction of complexity bands.
The intermediate track has four complexity bands, with band 1 being the least complex and band 4 involving complex issues of law or fact. Fixed costs are greater for higher bands.
The new complexity bands also apply to the existing fast track.
How much can the parties recover?
A new Practice Direction sets out a series of tables detailing the FRC levels.
In many cases, costs available for recovery will be lower than under the previous regime.
It is also worth noting that under the extended FRC regime, there is no need for costs management or assessment of costs during or at the end of proceedings. Therefore, costs associated with these now unnecessary processes will be saved.
It is possible for FRC to be increased or reduced (so to some extent they are not definitively `fixed’). Factors that can affect FRC amounts include Part 36 offers and unreasonable behaviour. The court also has the power to award more than the FRC where there are vulnerable parties or witnesses.
Exceptions and Exclusions
The new FRC regime will apply to all cases that are allocated to, or would normally be allocated to, the fast track or the intermediate track, but there are exceptions which can be found in the CPR.
For example, the regime only applies to personal injury claims where the cause of action arose on or after 1 October 2023 and they will only apply to disease claims where the letter of claim has not been sent to the defendant before 1 October 2023.
If you would like to know more about exceptions to the new regime just ask the Gaby Hardwicke lawyer advising you on your case.
Key Benefits and Take Aways
One of the big advantages of the new regime is the certainty it will provide as to costs recoverability, which will help parties decide whether to proceed to trial or look to settle. Initially though, there will almost certainly be a stage of uncertainty whilst courts and practitioners understand how the new regime works in practice.
Parties will also be able to check their potential costs liability at each stage, which may help with planning and assessing the risks of pursuing and/or defending a claim to trial.
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