Fixed recoverable costs regime – are you ready?

11 September 2023

Chloe Poskitt

From 1 October 2023, the fixed recoverable costs (FRC) regime will be extended across the fast track and in a new intermediate track for simpler cases valued up to £100,000. As the new regime introduces significant changes, parties need to make sure that they understand and are ready for them.

We have set out the below detailing the main features of the new FRC regime.

The changes include increased financial incentives to encourage settlement. This includes where a Claimant obtains a judgment against a Defendant which is at least as advantageous to the Claimant as its Part 36 offer then the Claimant will be entitled to additional costs (being 35% of the difference between the fixed costs for the stage applicable when the relevant period expires and the stage applicable at the date of judgment).

The Court may consider costs exceeding FRC where a party or witness is vulnerable or there are “exceptional circumstances”. Currently there is no guidance as to what constitutes “exceptional circumstances”.

FRC are the set amounts of legal costs that a winning party in civil litigation can recover from the losing party. The intention is to ensure that legal costs remain certain and proportionate.

The fast track and intermediate track each contain four unique bands to which a claim can be assigned by the Court based on its complexity. FRC vary depending on which band a claim is in. Parties may agree the complexity band but the Court may direct otherwise having regard to the factors in CPR 26.13(1). Those factors include the claim’s financial value; the nature of the remedy sought; and the likely complexity of the facts, law or evidence.

Where a party has behaved unreasonably, the Court has the power to order that the costs awarded be reduced/increased by an amount equivalent to 50% of the FRC which would otherwise be payable.

The fast track will remain as it is in terms of claims valued between £10,000 and £25,000 that can be tried in one day or less. It is however also incorporating existing FRC for personal injury claims up to £25,000. The fast track can include claims for non-monetary relief where fixed values have been assigned. It also has four bands for complexity, but with different criteria.

There is a new intermediate track to cover less complex claims valued at more than £25,000 but not more than £100,000 where the trial should last no more than three days. The intermediate track also has four bands for complexity, but with different criteria. Where non-monetary relief is sought, the claim will not usually be allocated to the intermediate track unless the Court considers it to be in the interests of justice.

The Court has discretion to allocate more complex cases valued at under £100,000 to the multi track to avoid them inappropriately falling within the FRC regime.

It will apply to claims where proceedings are issued on or after 1 October 2023 (save for certain exceptions). For personal injury claims, FRC will apply where the cause of action accrues on or after 1 October 2023. FRC will only apply to disease claims where the letter of claim has not been sent to the defendant before that date. The FRC regime also applies to pre action costs.

The tables for FRC can be found in Practice Direction 45. Given the deadline of 1 October 2023, it is likely that there will be a rush to either:

issue proceedings before this deadline to try to avoid the new regime; or
settle disputes.

The new FRC regime gives parties much better visibility as to recoverable costs which in turn will inevitably inform decisions about whether to pursue/defend a claim. However, the FRC regime does not impact the amount a party has to pay its own lawyers which is subject to separate agreement between them.

Practically speaking, when assessing the impact of the new FRC regime, parties should also consider whether to amend their dispute resolution clauses to include any future disputes being expressly referred to arbitration and/or expert determination rather than to court.

If you have any queries arising from the issues raised in this article, then please contact Chloe Poskitt.