Navigating the expansion of the Fixed Recoverable Costs regime

By Lauren Windsor

Solicitor

31 October 2023

Article Insights

As of 1 October 2023, the Civil Courts are arguably facing the biggest change to affect the system since the introduction of the Civil Procedure Rules in 1999, the expansion of the Fixed Recoverable Costs (FRC) regime.

When a claim is commenced in the civil courts, it is allocated to a “track”, depending on the value and complexity of the of the claim. The track then determines the procedure that the case must follow in the preparations for trial.

Claims filed with the Court BEFORE 1 October 2023

Previously there were three tracks in the regime and this continue to apply to the claims filed with the Court before 1 October 2023:

• Small Claims track for claims up to the value of £10,000
• Fast Track for claims valued between £10,000-£25,000
• Multi-track for cases valued over £25,000.

The costs position in the Small Claims track and the Multi-track remain unchanged.

In summary, in the Small Claims track, the “winning” party can still only recover very limited costs, if any. By contrast, in the Multi-track, the position remains that the “winning” party’s recoverable costs are not limited and are dependent on the work carried out. The sum payable I respect of costs will either be determined by agreement between the parties or by the Court in detailed costs assessment.

Claims filed with the Court AFTER 1 October 2023

The Court has now introduced a further track called the Intermediate Track, which is positioned between the Fast track and Multi-track:

• Small Claims Track for claims up to the value of £10,000
• Fast Track for claims valued between £10,000-£25,000
• Intermediate Track for claims valued between £25,000-£100,000
• Multi-track for cases valued over £100,000.

As of 1 October 2023, almost all claims that are allocated to the Fast Track or Intermediate Track will be subject to a more extensive FRC regime.

The costs recoverable will no longer depend on the work carried by a party’s legal advisers. Instead, the amount of costs payable will be capped at a set amount, depending on the complexity of the matter, the stage of the proceedings when the matter concludes (e.g. settled between the parties or at trial) and also the outcome of the case (e.g. the amount of damages awarded/agreed between the parties).

The advantage of this scheme is that each party will have a much clearer picture as to the extent that costs may be payable to their opponent in the event that they are unsuccessful in the case. Equally, the “winning” party will have a better idea as to the amount of costs they can recover. This should allow parties to make better decisions at an earlier stage as to whether to settle the claims or to proceed.

An example of FRC in the Fast Track:

If you bring a particularly complex claim, valued at £20,000 and the matter proceeds all the way to trial, at which you are successful. Under the FRC regime, the costs recoverable would be calculated as follows:

The fixed sum of £7,900 plus an amount equivalent to 40% of the damages awarded. The total maximum recoverable costs would equate to £15,900 (£7,900 + (£20,000 x 40% = £8,000)).

Problem with FRC

There is, however, a problem with FRC which is that the parties’ actual legal costs are likely to be higher than the capped amount that they are able to recover from the “losing” party. This means that the “winning” party would reduce its net recovery.

In the Commercial Litigation Department at Taylor Walton we are identifying the cases which may fall within the Fast Track or Intermediate Track and therefore will be subject to the FRC regime. To assist clients with navigating the FRC regime, we will provide regular updates as to the cost/benefit analysis of proceeding with/defending the claim, to ensure that the legal costs incurred (which may exceed the costs recoverable) are proportionate to the desired outcome of the matter.

If you would like to make an enquiry, please contact Lauren.Windsor@taylorwalton.co.uk or any member of the Commercial Litigation team for further information.

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Please note that the contents of this article are intended solely for general information purposes and should not be considered as legal advice. We cannot be held responsible for any loss resulting from actions or inactions taken based on this article.