The New Fixed Costs Regime: What to Know
The Fixed Recoverable Costs regime is undergoing significant changes, taking effect from 1 October 2023. Here are some key takeaways to help you understand the implications, which may change the stance your business takes with civil ligation claims.
Fixed Recoverable Costs (“FRC”) are set costs that can be recovered by the winning party in eligible legal proceedings. These costs are intended to promote cost efficiency and certainty in litigation. They typically apply to cases with a low value or of lower complexity, such as personal injury claims, professional negligence claims and other specified types of litigation. There are different set costs for each formal stage of litigation. The costs will generally cover fees incurred for drafting legal documents, research, attending court hearings and so on.
When will the new regime come into effect?
The new regime will apply to claims valued up to £100,000 that are issued on or after 1 October 2023. However, for personal injury claims, they will apply where the cause of action accrues on or after 1 October 2023. Claims falling under the new regime will be allocated to the appropriate ‘track’.
The Fast Track: Swift Resolution for Claims up to £25,000
The Fast Track (“FT”) caters to claims valued up to £25,000. The FT provides for a speedy resolution with cases typically tried in one day or less. One key change proposed under the FT relates to Civil Procedure Rule 26, which outlines that once claims are allocated to the FT, they will be assigned to a ‘complexity band’.
The bands are ranked 1 to 4 – complexity band 1 being for the simplest cases such as road traffic related claims and defended debt, and complexity band 4 being for the most complex cases ranging from employers’ liability claims to property and building disputes. It is hoped that the parties will agree to the case complexity band where possible, but it is likely that parties may disagree and require a preliminary hearing to determine the issue.
Whilst the FT will primarily cover monetary relief claims, non-monetary relief in certain cases will also be allowed on this track where fixed values have been assigned. In cases where both monetary and non-monetary relief are sought, financial recovery calculations will be determined by taking into consideration the damages awarded as well as the assigned value for non-monetary relief.
The new CPR Practice Direction 45 sets out the FRC in FT cases, which will be dependent on the stage reached by the parties and the activities undertaken by their legal representatives, summarised as follows.
Stage 1: Settlement reached in pre-litigation stages (pre-issuance of claim under Part 7)
| Value | Band 1 | Band 2 | Band 3 | Band 4 |
|---|---|---|---|---|
| Damages less than £5,000 | £Nil | Greater of £660 or £120 plus amount equal to 20% of damages | £1,100 plus amount equal to 17.5% of damages | £2,600 plus amount equal to 15% of damages plus £510 per extra defendant |
| Damages more than £5,000 but less than £10,000 | £Nil | £1,300 plus amount equal to 15% of damages over £5,000 | £2,200 plus amount equal to 12.5% of damages over £5,000 | £2,600 plus amount equal to 15% of damages plus £510 per extra defendant |
| Damages more than £10,000 | £Nil | £2,300 plus amount equal to 10% of damages over £10,000 | £3,000 plus amount equal to 10% of damages over £10,000 | £2,600 plus amount equal to 15% of damages plus £510 per extra defendant |
Stage 2: Proceedings issued under Part 7, but case settled or is discontinued prior to trial
| Band 1 | Band 2 | Band 3 | Band 4 | |
|---|---|---|---|---|
| (1) On or after the date court issues the claim, but before the date of allocation under Part 26 | £2,100 | £1,400 plus amount equal to 20% of damages | £3,200 plus amount equal to 20% of damages | £3,000 plus amount equal to 40% of damages plus £760 per extra defendant |
| (2) On or after the date the date of allocation under Part 26 | £2,500 | £2,300 plus amount equal to 20% of damages | £4,000 plus amount equal to 25% of damages | £6,400 plus amount equal to 40% of damages plus £760 per extra defendant |
| (3) On or after the date the court lists the claim for a trial but before the trial | £3,800 | £3,200 plus amount equal to 20% of damages | £5,1000 plus amount equal to 30% of damages | £7,900 plus amount equal to 40% of damages plus £760 per extra defendant |
Stage 3: Claim disposed of at trial
| Band 1 | Band 2 | Band 3 | Band 4 |
|---|---|---|---|
| £3,800 | £3,200 plus amount equal to 20% of damages agreed or awarded | £5,100 plus amount equal to 30% of damages agreed or awarded | £7,900 plus amount equal to 40% of damages agreed or awarded plus £760 per extra defendant |
Intermediate Track: Efficient Settlement for Claims up to £100,000
The Intermediate Track (“IT”) is a new track introduced under the new regime, which will offer a streamlined process where cases can be tried in three days or less. This track will allow for cases to be brought forward by a single claimant against one or two defendants or by two claimants against a single defendant.
Each party will be limited to a maximum of one expert witness providing evidence at court unless it is considered reasonable and proportionate to have two experts. Where reports are produced, they will be limited to no more than twenty pages and witness statements will be no more than thirty pages.
Monetary relief claims are the primary focus of IT, however, non-monetary relief claims may be deemed crucial in certain cases. As such, unless the court deems it to be in the interests of justice, claims seeking non-monetary relief will generally not be allocated to the IT track. The below table outlines the potential recoverable costs in the IT dependent on the stage of proceedings.
| Stages | Band 1 | Band 2 | Band 3 | Band 4 |
|---|---|---|---|---|
| S1) Pre-issue to date of service of defence | £1,600 +3% of damages | £5,000 +6% of damages | £6,400 +6% of damages | £9,300 +8% of damages |
| S2) Specialist legal advice providing post-issue advice; drafting statement of case | £2,000 | £2,000 | £2,300 or £2,500 if counsel is instructed | £2,300 or £2,500 if counsel is instructed |
| S3) Date of service of defence up to the earlier of date of CMC or directions order | £4,00 +10% of damages | £7,700 +12% of damages | £9,100 +12% of damages | £13,000 +14% of damages |
| S4) End of S3 until and including date of inspection of documents | £4,600 +12% of damages | £9,400 +14% of damages | £9,400 +14% of damages | £16,000 +16% of damages |
| S5 End of S4 until and including date for service of witness statements / expert reports | £5,200 +12% of damages | £11,000 +16% of damages | £12,000 +16% of damages | £20,000 +18% of damages |
| S6) End of S5 until and including date set for pre-trial or up to 14 days before trial (earlier of either) | £5,900 +15% of damages | £15,000 +16% of damages | £15,000 +16% of damages | £24,000 +18% of damages |
| S7) Specialist legal representative advice in in writing or in conference following filing of a defence | £1,400 | £1,700 | £2,300 | £2,900 |
| S8) End of S6 until date of trial | £6,600 +15% of damages, less £580 if party did not prepare trial bundle | £17,000 +20% of damages, less £870 if party did not prepare trial bundle | £19,000 +20% of damages, less £1,120 if party did not prepare trial bundle | £29,000 +20% of damages, less £1,400 if party did not prepare trial bundle |
| S9) Attendance of a legal representative (other than counsel) at trial 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 fee following Day 1, 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) ADR once mediation or joint settlement meeting has taken place | £1,200 | £1,200 | £1,200 | £1,200 |
| S14) Payable once for specialist legal representative attendance at a mediation or joint settlement meeting covered by S13 | £1,400 | £1,700 | £2,000 | £2,300 |
Flexibility and Complexity: Allocation and Banding
The explanatory note which accompanies the new draft rules highlights that judges will maintain the discretion to allocate more intricate cases valued at under £100,000 to the multi-track, which will remove them from the FRC.
What are the key takeaways?
Practice Direction 45 presents a comprehensive set of tables that outline the fixed costs corresponding to the various stages and actions involved in legal proceedings. It is important to note that FRC tables have adjusted in line with inflation and there is a plan to review them again in three years following their implementation. It is however difficult to ignore the fact that, in most instances, cost recovery is likely to be lower under the new regime compared to the current regime.
In both the IT and MT, the court retains the authority to permit the recovery of reasonably incurred disbursements, ensuring that no double recovery occurs. Where appropriate, VAT can be included in the recoverable costs.
It is worth noting that the court will consider claims for costs exceeding the FRC in exceptional circumstances. However, there is currently no specific guidance available on what would constitute as ‘exceptional’ and such instances are expected to be rare.
The main takeaway from this new regime is that cost exposure/recoverability will be easily predictable which will help litigants weigh up the merits of trial compared to settlement. Only time will tell how the new rules will affect the approach to litigation and this is unlikely to be the end of the changes to the rules on costs.
At Dragon Argent we understand the complexities and nuances of cost recovery and we are dedicated to assisting you in pursing the best possible outcome for your case.
For more bespoke advice on costs and litigation proceedings, please contact our specialist Margherita Barbagallo, Head of Litigation, IP & Art Law by scheduling a discovery call.