11/09/2023

The new rules for the long-awaited extension of the fixed recoverable costs regime have been published.

Designed to promote efficiency, transparency and cost predictability, the changes represent the biggest shake-up in costs and claims procedures for a decade.

To summarise the new rules:

• Small claims track up to £10,000.
• Fast track covering claims from £10,001 to £25,000.
• New intermediate track for claims of £25,001 to £100,000.
• Multi-track covering claims over £100,000.

Understanding the fixed recoverable costs (FRC) regime

Fixed recoverable costs set the amount of legal costs that the winning party can claim back from the losing party in civil litigation.

The regime introduces a structured framework for assessing legal costs in civil cases, particularly those of lower value and complexity. Unlike the traditional system, where costs are determined based on a variety of factors, the new regime establishes predetermined costs that parties can recover. While cost recovery in most cases is likely to be lower than it is now, the extension of the FRC regime provides all parties with an element of predictability, which will help inform strategy.

What are the changes to the current regime and when do they take effect?

Intermediate track

There are currently three different ‘tracks’ to which the court will allocate a claim: the small claims track; the fast track; and the multi-track. The fast track will stay as it is. It will be the normal track for claims up to £25,000 where the trial is likely to last for no longer than one day and oral expert evidence is likely to be limited to one expert per party in relation to any expert field, and expert evidence in two expert fields.

The intermediate track is a new track to cover claims valued at more than £25,000 but not more than £100,000, which would previously have been considered less complex matters within the multi-track.

The intermediate track will be the normal track where the trial will not last longer than three days, oral expert evidence is likely to be limited to two experts per party, and the claim is brought by one claimant against either one or two defendants or is brought by two claimants against one defendant.

Complexity bands

When a claim is allocated to the fast track or the intermediate track, the court must also assign the claim to a complexity band which determines the costs that will be allowed. For each track, there will be four complexity bands numbered 1 to 4 in ascending order of complexity, with associated grids of costs for the stages of a claim. The parties may agree the complexity band to which a claim should be assigned.

Please be aware that there is a London weighting provision where the receiving party will be entitled to recover an additional 12.5%.

Complexity

There will be judicial discretion to allocate suitably complex claims to the multi-track, even where value is up to £100,000. Once allocated, matters can be reallocated in ‘exceptional circumstances’ or reassigned. There is a fixed amount of costs recoverable for any such application.

Part 36 consequences

Rather than indemnity basis costs awards where a Part 36 offer is bettered, the new regime can apply an uplift of 35%. Early and realistic Part 36 offers will become key.

Unreasonable behaviour and alternative dispute resolution (ADR)

There is no compulsory mediation, which some anticipated, but there is the opportunity to invoke an unreasonable behaviour clause and costs may be reduced or increased by up to 50% if successful. Fixed costs recoverable of £1,200 can be claimed for ADR in the intermediate track regardless of banding.

Vulnerability

There are now provisions for additional fixed costs to be awarded where either a claimant or a witness is deemed vulnerable. The rule requires that the vulnerability must have resulted in additional work of a demonstrable value at least 20% of the fixed costs. This is open to challenge and likely to be one of many areas of uncertainty and conflict.

Defendants’ costs

Defendants can now recover the same fixed costs as a claimant, rather than costs being capped at that amount. If they successfully defend a claim and successfully bring a counterclaim, they will be entitled to their costs and the counterclaim will be treated as a claim, although there are caveats to full recovery, including where it commences in the portal and where it is a non-personal injury claim.

Multiple claimants and/or defendants

As a rule, each claimant will be entitled to their own fixed costs, save where claimants are jointly entitled to the remedy or where the court orders that claimants are entitled only to 25% of the principal fixed costs sum if each claimant’s claim arises from the same or substantially the same facts or issues. Multiple claimants or defendants will not automatically exclude matters from a particular track as there will be additional payments built in to reflect this, nor will it automatically affect banding.

Disbursements

Disbursements are brought together in section IX of CPR 45. Translation fees are now expressly recoverable in the fast track, but the position is not so clear for existing protocol claims.

There is now provision for advice from a specialist legal representative, intended trial advocate or for the drafting of statement of case in both band 4 fast track claims, as well in the intermediate track at various points.

We expect to see a number of in-house ‘specialist’ advisors emerging. There are no restrictions on disbursements in the intermediate track save that they must be reasonably incurred and must not relate to work for which costs are already provided for in the fixed costs calculations, for example, agency work.

Claims which are excluded from the fixed costs regime

• Housing – delayed for two years and will, in the meantime, be allocated to fast or multi-track according to circumstances.
• Aarhus Convention claims will fall under section VII of Part 45 (intermediate track) but will be moved to Part 46 special costs cases.
• Intellectual property claims.
• Where a party is a protected party.

Claims which must be allocated to the multi-track:

• Mesothelioma and asbestos lung disease claims.
• Clinical negligence (save where breach and causation are admitted) – although it is worth noting that clinical negligence claims have their own consultation to be implemented at a later date and for claims worth up to £25,000.
• A claim for damages in relation to harm, abuse or neglect of or by children or vulnerable adults.
• Claims where the court could order to be tried by jury are excluded.
• A claim against the police, except for road incident claims for police negligent driving, an employers’ liability claim against the police and any other accident or fall on police premises.

Advice on the fixed recoverable costs regime

As ever, the devil is in the detail and anyone dealing with claims will be analysing these reforms in the context of their claims portfolio to assess the financial implications and how the changes to the fixed recoverable costs regime will inform future behaviours and strategies. While the changes to personal injury claims lie in the future, there is an immediate impact on other claims that will require urgent consideration.

For advice on any debt recovery matter, please contact Richard Anderson at Beswicks for further information. You can email richard.anderson@beswicks.com or call us on 07825 409595/01782 205000. Take a look at our services to find out more about how we can help you.