There has been a significant shift in the legal landscape with the implementation of the Fixed Recoverable Costs (FRC) regime in England and Wales effective from 1 October 2023. This landmark change aims to revolutionize the dynamics of cost in civil litigation, making legal expenses more predictable and transparent for all parties involved in litigation.
The Essence of the Fixed Recoverable Costs – When will the FRC apply?
The FRC system redefines how civil cases are categorized, introducing specific tracks based on complexity and monetary value. This approach ensures costs are proportionate to the nature of each case, fostering a fair and balanced legal environment.
A crucial element of this regime is the introduction of the Intermediate Track, catering to claims valued between £25,000 and £100,000. This track is particularly significant as it bridges the gap between simpler (small claims or fast track) and more complex cases (multi-track claims), providing a balanced pathway for moderately complex litigation.
In this system, each track is further divided into complexity bands. These bands are designed to align costs with the intricacies of each case, ensuring a balanced and equitable approach to managing litigation expenses.
For claims issued after 1 October 2023, the criteria for cases in the new Intermediate Track are:
- Claim value under £100,000
- The trial’s duration is limited to three days or less
- Each party may present no more than two expert witnesses to provide evidence
- Witness statements are limited to a maximum of thirty pages
- Expert reports are restricted to twenty pages
Some exceptions apply, particularly in professional negligence cases, such as cases involving more than two defendants or when case complexity is significant.
It is important to note that judges will retain the discretion to assign more complex cases with a claimed value less than £100,000 to the multi-track system to avoid subjecting complex cases to the FRC system inappropriately. Accordingly, it follows that the parties can apply to the by way of an application or request to the Court (in the Directions Questionnaire) for the track and band to be changed.
Are there any exemptions to the Fixed Recoverable Costs Regime?
Yes, there are some important exceptions which will take a claim outside of the fixed costs regime even where the above criteria has been met namely:
- FRC will not apply if any party is a protected party: r. 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 Complexity Bands
When the Court is allocating a claim, the Court must now also assign claims to 1 of 4 complexity bands (in an ascending scale): CPR 26.14 – 26.17. There are four complexity bands for the tracks, which ascend in complexity. In this article, we will only focus on the new Intermediate Track. The parties are open to agreeing to a band by consent however it is likely to open up an area where there is further disagreement between the parties at the case management stage.
There is limited guidance as to what type of cases will fall into each complexity band but the Court (and the parties) will need to weigh up various usual factors (witnesses, issues and trial length) and assess the likely costs of dealing with those issues notwithstanding the FRC regime. In the intermediate track, for example, band 1 is suitable where only one issue is disputed and the trial will last no longer than a day.
TABLE 14: rule 45.50 – amount of fixed costs in the Intermediate Track
| Complexity Band | ||||
| Stage | Band 1 | Band 2 | Band 3 | Band 4 |
| S1 From pre-issue up to and including the date of service of the defence | £1,600 + an amount equivalent to 3% of the damages | £5,000 + an amount equivalent to 6% of the damages | £6,400 + an amount equivalent to 6% of the damages | £9,300 + an amount equivalent to 8% of the damages |
| S2 Specialist legal representative providing post-issue advice in writing or in conference or drafting a statement of case | £2,000 | £2,000 | (a) £2,300; or (b) £3,500 if counsel is also instructed to draft a defence to a counterclaim | (a) £2,300; or (b) £3,500 if counsel is also instructed to draft a defence to a counterclaim |
| S3 From the date of service of the defence up to the earlier of the date set for CMC or the order giving directions under 28.2 | £4,000+ an amount equivalent to 10% of the damages | £7,700 + an amount equivalent to 12% of the damages | £9,100 + an amount equivalent to 12% of the damages | £13,000 + an amount equivalent to 14% of the damages |
| S4 From the end of Stage 3 up to and including the date set by the court for inspection of documents | £4,600 + an amount equivalent to 12% of the damages | £9,400 + an amount equivalent to 14% of the damages | £11,000 + an amount equivalent to 14% of the damages | £16,000 + an amount equivalent to 16% of the damages |
| S5 From the end of Stage 4 up to and including the later of the dates set by the court for service of witness statements or expert reports | £5,200 + an amount equivalent to 12% of the damages | £11,000 + an amount equivalent to 16% of the damages | £12,000 + an amount equivalent to 16% of the damages | £20,000 + an amount equivalent to 18% of the damages |
| S6 From the end of Stage 5 up to and including the date set for the pre-trial review or up to 14 days before the trial date, whichever is earlier | £5,900 + an amount equivalent to 15% of the damages | £15,000 + an amount equivalent to 16% of the damages | £16,000 + an amount equivalent to 16% of the damages | £24,000 + an amount equivalent to 18% of the damages |
| S7 Specialist legal representative advising in writing or in conference following the filing of a defence | £1,400 | £1,700 | £2,300 | £2,900 |
| S8 From the end of Stage 6 up to the date of the trial | £6,600 + an amount equivalent to 15% of the damages, less £580 if that party did not prepare the trial bundle | £17,000 + an amount equivalent to 20% of the damages, less £870 if that party did not prepare the trial bundle | £19,000 + an amount equivalent to 20% of the damages, less £1,120 if that party did not prepare the trial bundle | £29,000 + an amount equivalent to 22% of the damages, less £1,400 if that party did not prepare the trial bundle |
| S9 Attendance of a legal representative (other than the trial advocate) at trial per day, less an amount equivalent to 50% per day where, on any day, the trial lasts no more than half a day | £580 | £870 | £1,200 | £1,400 |
| S10 Advocacy fee: day 1 | £3,200 | £3,500 | £4,000 | £5,800 |
| S11 Advocacy fees for subsequent days, less an amount equivalent to 50% per day where, on any subsequent day, the trial lasts no more than half a day | £1,400 | £1,700 | £2,000 | £2,900 |
| S12 Handing down of a reserved judgment and consequential matters, where dealt with separately from the trial | £580 | £580 | £580 | £580 |
| S13 Alternative Dispute Resolution: additional fee payable once only where a mediation or joint settlement meeting takes place | £1,200 | £1,200 | £1,200 | £1,200 |
| S14 Alternative Dispute Resolution: additional fee payable once only for specialist legal representative attendance at a mediation or joint settlement meeting covered by S13 | £1,400 | £1,700 | £2,000 | £2,300 |
| S15 Approval of settlement for child, unless the settlement is approved at trial | £1,200 | £1,400 | £1,700 | £2,000 |
Additional categories of costs that can be recovered separately include:
- Fees for counsel or specialist lawyers involved in drafting statements of the case.
- Fees for counsel or specialist lawyers providing written or conference-based advice after the service of the defence.
- Costs associated with the attendance of a solicitor at the trial.
- Expenses related to the handing down of judgment and its consequential matters.
- The intermediate track does not include a pre-issue stage; instead, these expenses will be set at an agreed maximum amount. Parties can choose to settle at the fixed cost level to expedite the resolution process.
There isn’t specific guidance for resolving disputes when a claim settles before allocation or band assignment. Parties should attempt to reach an agreement on the appropriate band and track, but if no consensus is reached, the court will step in to make the determination.
Regarding offers, there will be amendments to the part 36 rules for both tracks.
Where a claimant beats their part 36 offer, they may receive a 35% uplift on the fixed costs, to the stages from the date of the expiry of the part 36 offer to trial. We will consider the relationship between Part 36 and the fixed costs regime in a follow-up article.
Case Studies and Practical Implications of the Fixed Recoverable Costs
To illustrate the practical application of the FRC system, let’s consider a couple of case studies:
- A medium-complexity property dispute valued at £35,000 falls under the Intermediate Track, Band 2. Here, the legal costs would be capped, offering both parties a clear understanding of the financial implications from the start.
- In another scenario, a straightforward personal injury claim valued at £15,000 in the Fast Track, Band 2, benefits from a streamlined cost structure, allowing for a more efficient resolution process.
These case studies highlight the impact of the FRC regime on litigation strategy, particularly how cases are prepared and presented. The cost implications at every stage necessitate a thorough re-evaluation of litigation strategies, ensuring that the legal representation provided is both cost-effective and robust.
Strategic Implications and Legal Practice Adaptations
With the introduction of the FRC, legal professionals are required to change their case management strategies. This adaptation involves comprehensive planning and strategic decision-making throughout the litigation process. The new regime necessitates a deep understanding of the cost implications from the outset, ensuring that cases are managed efficiently and effectively within the set cost structures.
The rationale behind extending the FRC regime is multifaceted. Primarily, it aims to control litigation expenses, reduce the unpredictability often associated with civil Court claims, and enhance access to justice.
By standardising costs, in theory, the legal system could become more accessible and manageable for all parties. However, in our view, it could actually have the opposite effective as (i) law firms may consider it would not be profitable to take on such cases, and (ii) it may increase assessments from clients challenging fees if the fees charged exceed the recoverable costs under the FCR. There is an obligation on the law firm to explain that any fees charged above the FCR will not be recoverable.
Alternatively, claimants (and those acting for such claimants) may attempt to push the value of their claims over the £100,000 threshold to avoid the FRC regime applying (however this works both ways and unless properly advised could pose adverse cost risks). This approach could open to client to significant adverse costs and it is a risky approach.
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