From October 1st 2023, the new Fixed Recoverable Costs regime will be implemented in civil claims. The changes are expected to have a significant impact on litigation and legal costs. By Johanna Abrahams, Litigation Executive, Mayo Wynne Baxter
Fixed recoverable costs set the amount of legal costs that the winning party in a dispute can claim back from the losing party. The issue with fixed recoverable costs currently is that the amount that can be reclaimed by the winning party may not cover the costs of the case. As such, the intention of the new regime is to keep litigation costs proportionate to the value of the claims and to provide increased costs certainty for litigants.
The fact that litigants can rarely recover all the costs they incur even if they have a costs order in their favour is nothing new. Costs have always been subject to assessment by the court. That said, this new regime may widen the gap between those costs the client has to pay and those it can recover from the opponent even if successful.
Fixed recoverable costs will apply to all claims in the fast track up to the value of £25,000 and a new intermediate track will deal with most matters valued between £25,000 and £100,000. The intermediate track will be added between the fast track and the multi-track. The multi-track costs will not change and the fast-track cost rules will be fixed costs throughout.
The level of costs will be decided based on both the value and complexity of the claim, but the determination of costs will be the value of the claim. Non-monetary claims will not usually be allocated to the intermediate track unless the Court considers necessary in the interests of justice. Judges will continue to have discretion to allocate complex cases to the multi-track, taking them out of the fixed recoverable costs regime.
The new regime will see the Court allocating both a track and a band which takes the complexity of the case into account. To determine the applicable fixed costs, you take the value of the claim and pick the relevant part of the fixed cost schedule which will decide how much can be recovered by the winning party. The parties have the option of making an application to move both track and band.
An intermediate track case will automatically be listed for a Case Management Conference to decide Directions. Directions will only comprise disclosure, witness statements, expert evidence, pre-trial review, and listing for trial. There will be no budgeting or detailed assessment.
A case will not be allocated to the intermediate track if the trial is set to take more than three days, or if more than one expert is required for each party. In this case, the claim will be allocated to the multi-track.
There will be a new process introduced for noise-induced hearing loss claims, and fixed recoverable costs for clinical negligence claims are being considered separately. The consideration of fixed recoverable costs for all housing cases has been deferred until at least October 2025.
There is also a better chance to recover pre-issue costs as there is a set amount which is recoverable if a case settles before a claim is issued. A party can apply for costs above fixed costs if there is unreasonable behaviour by any party, which is poor conduct for which there is no reasonable explanation. Where a party has acted unreasonably, the Court can reduce the fixed costs payable by 50% or have the fixed recoverable costs uplifted by 50%.
Personal injury claims will be subject to fixed recoverable costs if the cause of action arises on or after October 1st 2023, with disease claims only being subject to fixed recoverable costs if the letter of claim is sent after that date.
Litigators should consider whether there are any pending claims valued at less than £100,000 which can be issued before the new regime is implemented as the level of fixed costs for each complexity band are less than what is recoverable under the standard basis costs regime. Although the intention is to bring predictability to costs, the regime does not deal with legal fees, meaning a winning party could still suffer a shortfall. There may also be a negative impact on smaller firms, meaning fewer people are able to access legal representation.
The Ministry of Justice has announced that it will review and extend the regime in three years.
For further information contact Johanna Abrahams, Litigation Executive, Mayo Wynne Baxter
