Civil Litigation Solicitors

A new regime of Fixed Recoverable Costs (FRCs) will apply or cases issued on or after October 1st 2023, extending the regime from low-value personal injury cases to almost all civil litigation areas.

What are Fixed Recoverable Costs?

FRCs refer simply to the amount of legal costs a successful claimant can claim from the other party, with limitations being added with the intention of increasing the costs transparency, fairness, and certainty.

These extensions follow government proposals set out in September 2021, which in themselves follow a consultation on extending FRCs in civil cases from 2019 and Sir Rupert Jackson’s review of civil litigation costs from July 2017.

The FRCs extension will apply to most civil cases valued up to £100,000, including personal injury cases. Cases valued up to £25,000 will be allocated to the original fast track, whereas cases valued above this – but not above £100,000 – will be allocated to a newly devised ‘intermediate’ track.

Whether fixed costs are applicable to a case will be further subdivided by complexity bands – numbered 1 through 4 – which the claim will be allocated to. (Band 1 being the lowest complexity, Band 4 being the highest.) Finally, the stage in which the claim is settled, discontinued, or proceeds to trial will further dictate recoverable costs, naturally increasing in line with the stage in proceedings. The highest fixed costs will be recoverable should the claim go to trial. Cases allocated to the original fast track will find the same four complexity bands and costs increasing with each stage.

What is the Purpose of FRCs?

This extension of FRCs intends to make the costs of litigation fairer and more transparent by providing greater certainty in relation to costs. It hopes to improve the litigation process by providing an efficient costing guideline, with a predictable outcome of costs available to all parties. Cases valued above £25,000 to which the FRC regime applies will not be subject to costs budgeting. This accompanies changes to Part 36 offers, enabling claimants to recover a 35% additional amount on their fixed costs should they obtain a judgment which is at least as advantageous as their own Part 36 offer. (This will not apply to defendants.)

This expansion is not without flexibility, however. There is potential for parties to contract out of FRCs in some scenarios, as seen in Solomon v Cromwell Group plc; Oliver v Doughty[2011] EWCA Civ 1584, [2011] All ER (D) 148 (Dec). Solicitors will need to keep one eye on developing case law with regards to this, to assess the extent and effectiveness of clauses to this effect as they are explored. However, if the ability to bypass FRCs becomes a reality, it will address client concerns in complex commercial areas. This should maintain the ability of parties to place faith in their own contracts and agreements, rather than worrying about additional hurdles FRCs might produce.

Exceptional Circumstances to FRCs

Courts will consider claims for an amount of costs exceeding FRCs (excluding disbursements) should there be exceptional circumstances which make it appropriate to do so. In such a scenario, the Court can summarily assess the costs or make an order for the costs to be assessed in further detail. Parties with overly complex and lengthy cases can argue for their own relief where FRCs would not appropriately cover their costs upon success.

Legal professionals are likewise comforted by the lack of heavy repercussions for any party that unsuccessfully makes a claim for more than the FRCs allow; solicitors remain in a position to reach for the best financial result for their client, without having to factor in a heavy penalty for rejection. Case law in respect of this issue will not be far behind the litigation cases arising after October 1st.

But clients’ greatest concern will be the shortfall; who makes up for any legal costs that exceed the FRCs for their case?

A claimant’s damages will be the first source of funds to make up this potential shortfall. To avoid issues of informed client consent in respect of costs being deducted from their damages, solicitors will need to be transparent and forthcoming with the details of what will happen in the event of shortfall. This can all be discussed and agreed prior to the case progressing, however.

Solicitors will need to pay particular attention to the new complexity ‘bands’ that dictate a case’s FRCs; complexity can be subjective and difficult to quantify in comparison to monetary value. Agreeing a band with the opposing party will be crucial, to avoid satellite litigation that will cost the client and extend the length of the litigation. It is hoped that guidelines will accompany the new extension of the FRC regime to minimise arguments over which band – or even track – a case should be allocated to.

Conclusion

After twice delaying the date of extension, the Ministry of Justice remains committed to extending the FRCs regime this October. This is not without modification; extension of FRCs to housing cases were initially devised, by were delayed once it was made clear by solicitors that housing was an area in which FRCs of this nature would negatively impact clients, particularly in reducing access to justice. In response, the Ministry of Justice chose to announce a two-year delay in the extension of the FRCs regime to legally aided housing possession cases.

To clients and solicitors alike, the additional certainty of Fixed Recoverable Costs is an attractive one, whilst new complexity assessments and negotiations regarding potential shortfalls will require a new approach to cases arising from October 1st 2023.

Our litigation team has extensive experience in acting for both claimants and defendants, representing individuals, companies, charities or those involved in group litigation, in complex and high value civil / commercial litigation matters.

About the Authors

Profile

Edward Holmes is a Caseworker in the Civil Litigation department at Duncan Lewis Solicitors. His work covers the full range of litigation matters, including corporate, insolvency, and debt recovery. Edward works under Director Anthony Okumah

Anthony Okumah is a director of our civil litigation team at Duncan Lewis Solicitors. He is recognised by Legal 500 UK 2022 edition as a specialist in his field throughout London and South East for his debt recovery, professional negligence and commercial litigation work.

For advice and assistance on any civil litigation matter, contact Anthony via email at AnthonyO@duncanlewis.com or via telephone on 02031141227.