Fixed recoverable costs regime: what is changing?

An overview of the upcoming fixed recoverable costs regime

The legal landscape is about to undergo a significant transformation with the implementation of the new fixed recoverable costs regime in civil claims. These changes, set to take effect from 1 October 2023, are expected to profoundly impact litigation and legal costs. Here's a comprehensive overview to help you prepare for the upcoming alterations. 

fixed recoverable costs are predetermined amounts that the winning party can recover from the losing party in civil litigation; they aim to bring predictability to costs exposure and encourage proportionate handling of cases. The forthcoming regime seeks to extend FRC to most civil claims valued up to £100,000. 

The Civil Procedure Rules Committee (CPRC) has released draft changes to the Civil Procedure Rules (CPR) to implement the new regime. While these changes have received approval in principle from the CPRC, formal approval is still pending. The early release allows practitioners and litigants time to prepare, although further adjustments are expected later this year.

The primary changes will be found in CPR 26, CPR 28, Part 36, and particularly CPR 45, accompanied by the relevant practice directions. These modifications address case management, the fast and intermediate tracks, offers to settle, and the fixed costs themselves. 

Starting 1 October 2023, the new fixed recoverable costs regime will generally apply to claims where proceedings are initiated. However, there is an anticipation of a surge in claims filed before the deadline to preserve costs recovery under the current rates. Personal injury claims will be subject to fixed recoverable costs if the cause of action arises on or after 1 October 2023, while disease claims will only be subject to fixed recoverable costs if the letter of claim is sent after that date. 

Fixed recoverable costs will typically apply to cases allocated to the fast track and the newly introduced intermediate track, with some exceptions. The fast track will remain unchanged, covering claims up to £25,000 that can be resolved within a day or less with limited expert evidence. The intermediate track, designed for claims up to £100,000, allows a three-day trial with a maximum of two expert witnesses per side. However, claims seeking non-monetary relief will not usually be allocated to the intermediate track unless the court deems it justifiable in the interests of justice. Judges will retain discretion to allocate more complex cases to the multi-track, exempting them from the fixed recoverable costs regime. 

Each case will be assigned to a complexity band ranging from 1 to 4 within the fast and intermediate tracks, with higher bands entailing higher fixed costs. Allocation to a track and complexity band will significantly impact the recoverable and payable costs, making it crucial for parties to express their views on allocation and assignment, subject to the court's ultimate decision.

New Practice Direction 45 provides tables outlining the fixed costs applicable at various stages of the proceedings. Parties must carefully navigate these tables to ensure comprehensive cost recovery. The fixed recoverable costs tables have been adjusted for inflation since their introduction by Sir Rupert Jackson in 2017, and the Ministry of Justice plans to review them again three years after the launch. However, costs recovery is expected to be lower than the current regime. Nevertheless, costs assessment proceedings and associated costs will be significantly reduced for these types of cases. 

It is essential to note that the fixed recoverable costs regime determines costs recoverability but does not dictate the fees that legal representatives can charge. The actual costs incurred may exceed the recoverable fixed costs, resulting in a shortfall for the receiving party to pay their lawyers. 

While the new regime aims to bring predictability and proportionality to costs, there are concerns about potential access to justice issues for smaller firms that serve smaller clients. These firms may find the fixed fee structure financially challenging, potentially impacting access to legal representation. 

As the implementation of the new fixed recoverable costs regime approaches, practitioners and litigants must prepare and familiarise themselves with the rules to navigate the upcoming changes effectively. The new regime offers predictability in costs exposure and recoverability, benefiting defendants weighing whether to go to trial or to settle and claimants seeking clarity on costs exposure. However, there may be an initial period of uncertainty and potential satellite litigation as the rules are implemented. The ultimate impact on access to justice and the legal industry remains to be seen.

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