Fixed Recoverable Costs Regime: A Reminder

The Fixed Recoverable Costs Regime (FRC) came into force on October 1^st, 2023. It was implemented to allow parties to control costs in certain financial levels of claim in advance, with the purpose being to cap recoverable costs (what the winner can recover from the loser in a claim) both at;

1. The beginning of the claim; and
2. Each stage in litigation.

Whilst the new FRC Regime continues to “bed down” and despite the intended benefits of making costs in claims valued up to £100k more manageable, cost recoverability in FRC cases may cause parties to consider very carefully their claim and the direction of their litigation.

To recap, the FRC scheme will apply to proceedings valued up to £100,000 (the claim must have been issued on October 1^st, 2023, or after that date). Not all cases will be caught by FRC, the exceptions being:

• FRC will not apply if any party is a protected party: CPR 45.1(6).
• Personal injury claims will only apply FRC where the cause of action accrues on or after 1 October 2023.
• Residential housing claims are exempt, although may apply from 2025 once other relevant legislation has been implemented.
• Other types of case generally suitable for the multi-track irrespective of value are: mesothelioma, clinical negligence, abuse of/by children or vulnerable adults, trials by jury, and some Human Rights Act claims against the police: CPR 26.9(10).
• Costs greater than FRC can be applied for where vulnerable parties or witnesses have resulted in additional work leading to costs 20% above FRC: r. 45.10.

The Central Change

The new intermediate track is the most prominent change to the FRC regime. When previously assessing the monetary value and complexity of cases, the courts used to allocate cases onto three “tracks” to categorise the level of the claim. This consisted of:

1. Multi-Track (for more complex cases of £25,000 or more.)
2. Fast Track (for claims of between £10,000 and £25,000.)
3. Small Claims Track (for claims of £10,000 or less.)

FRC introduced the Intermediate Track. The breakdown of the structure of the tracks is as follows:

1. Multi-track (for complex cases, estimated to last over a number of days depending on complexity, amounting to £100,000+ and take place in either the High Court or County Court.)
2. Intermediate track (for claims between £25,000 and £100,000, with the trial estimated to last no longer than 3 days.)
3. Fast track (for claims between £10,000 and £25,000, usually for straightforward matters, not exceeding one day at trial.)
4. Small claims track (for claims amounting to up to £10,000.)

Assignment of Intermediate Track Claims

The complexity bands applied by FRC to the Intermediate Track are as follows:

The Specific Changes to the Law:

As a result of the FRC Regime there have been substantial changes to the following:

1. Part 45 of the Civil Procedure Rules (CPR) [1998] (regarding fixed costs) and, helpfully, a new Practice Direction (PD45) sets out tables of costs, which you can view here.
2. Part 26 (regarding case management in the Preliminary Stage.)
3. Part 28 (regarding the fast track.)
4. Part 36 (regarding offers to settle.)

Defining the complexity of your case: case complexity bands

Once your case has been allocated, the court must now also assign claims from band 1 to band 4, based on complexity.

Parties can attempt to agree on which band of complexity that the case falls into but this may be disputed by the parties to the dispute or by the court (who may form a different opinion on the status of complexity). If so, the court will have regard to the same set of principles considered on allocation of the case and this includes, but is not limited to:

• Claim value
• Trial length
• Complexity
• The number of parties involved in the proceedings
• The number of witnesses involved in the proceedings
• The amount of evidence required
• Whether expert evidence is needed
• The remedy sought

(Further principles to consider can be found in CPR Rule 26.13 (1A to 3B) and more information can be found here)

Outcomes

Claimants are likely to seek to allocate claims to the higher tracks (the intermediate track and multi-track), in an attempt to put themselves in a position to recover a higher sum of money for legal costs, whereas defendants are more likely to oppose this for the obvious reason of potentially having to pay lower fees.

A final thought

Recoverability of costs in claims on less than £100k should be at the forefront of the minds of any party to potential litigation. The question of proportionality (what I might recover in my claim, and what might I recover for costs) is crucial. This may mean in many cases that it is more cost effective to attempt mediation or some other form of ADR at an early stage to try and conclude matters before proceedings are issued.

How Pinney Talfourd can help

Our Commercial Litigation Team is here to guide you through these changes. Whether you’re a claimant or a defendant, we help you strategically navigate the complexities of the FRC Regime to maximise your position and manage costs effectively.