How Does The Fixed Recoverable Costs Regime (FRC) Work In Litigation Now, Given The Recent Changes Made To The Rules On 1 October 2023?
Please note that this article assumes you have a general understanding of the litigation process in the UK, and we have produced a comprehensive article on this topic here and a detailed costs article here. We also strongly recommend that you read our related article pertaining to the new ‘Intermediate Track’ which came into existence on 1st October 2023, available here.
There are a number of changes which have been made relating to civil claims, such changes started on 1 October 2023, and one of those changes is an extension of the fixed recoverable costs regime (“FRC Regime”), which will affect claims with a value of up to £100,000.
What is the FRC Regime?
The FRC specifies amounts that the winning party in civil litigation can recover from the losing party and applies at various stages of the litigation process, from pre-issue to the trial. In general, costs encompass solicitors’ fees, court fees, expert witness fees, and various other costs and disbursements. It is important to note that all amounts specified under the FRC Regime are exclusive of VAT.
Although the precise benefits of having the FRC Regime are currently unclear, and it is certainly envisaged that in its early days, various teething troubles will need to be ‘ironed out’, it is likely that the traditionally time-consuming process of recovery of costs and extensive negotiations thereto will not be required under the new FRC Regime. The detailed assessment process will not be necessary and the winning party will not be able to recover all of their costs and the kitchen sink from the losing party.
Changes to the FRC Regime from 1 October 2023
Once a claim is started in court and the defendant has filed their defence, the claim will be allocated to a track. Before 1 October 2023, there were three tracks, namely: the Small Claims Track, the Fast Track, and the Multi-Track. Please read our detailed article on this topic here.
Before 1 October 2023, the FRC Regime applied to only those claims which were allocated to the small claims track.
From 1 October 2023, there has been a new ‘Intermediate Track’ brought into existence and we have produced a detailed article on this topic which you can peruse here. Ultimately, the court will allocate the case to a suitable track at its discretion and the allocation will depend on the amount in dispute and complexity of the case. For most cases, the new FRC Regime will be extended to claims (if proceedings are issued on or after 1 October 2023) allocated to the new Intermediate Track or the Fast Track.
The trial of claims in the Immediate Track will last for no more than three days, and each party will be allowed by the court to have two expert witnesses (at most) and there will be strict page limits for expert reports and witness statements. Once a claim is allocated to the Immediate Track, it will be assigned to one of four complexity bands, as summarised in the table below:
|Band 1||For simple claims (including debt claims) where there is only one issue in dispute and where a trial is anticipated to take one day or less.|
|Band 2||For claims where there is more than one issue in dispute, but where the claim is not relatively complex.|
|Band 3||For claims where there is more than one issue in dispute, but where the claim is more complex.|
|Band 4||For claims with the most complexity, and where serious issues of fact and/or law need to be considered, and where a trial is expected to take three days.|
The table below sets out how the FRC Regime will work, depending on the value of the claim. Remember that all amounts are exclusive of VAT and certain disbursements may also be recoverable. There are also exceptional circumstances in which the parties in both the Fast Track and new Intermediate Track can escape the usual fixed costs regime and the allocation of the ‘bands’ can also be challenged.
|Claims up to a value of £25,000||By way of example, a defended debt claim (with a value of up to £25,000 in damages) would most likely be allocated to the Fast Track as a ‘band 1’ case (there are to be four bands, with band 1 being the most straightforward type of case and band 4 being the most complex). The FRC Regime allows for recovery of specified sums which are allocated to stages of the litigation process. For a Fast Track band 1 case, the maximum proposed fixed recoverable costs available are expected to be £3,800 (excluding a trial advocacy fee of between £580 and £2,000 depending on the value of the claim).|
|Claims valued between £25,000 and £100,000||Less complex cases that are valued between £25,000 and £100,000 in damages will most likely be allocated to the new Intermediate Track. By way of example, a simple debt claim may be most appropriate for allocation to the Intermediate Track. There will be a specific FRC Regime for claims on the Intermediate Track and such cases will also be allocated to one of four bands depending on its complexity. Using our simple debt claim example, this would most likely fall into band 1, given that it is straightforward. Mirroring the rules for Fast Track cases, the recoverable amounts will be set as fixed sums for defined stages of the litigation process and these may be subject to an additional fixed amount (depending on the level of damages).|
How might the fixed recoverable sums be increased or decreased?
The FRC Regime applicable to each track will depend on the stage of claim and relevant complexity band the claim has been allocated to by the court. It goes without saying that claims assigned a higher complexity band and/or are closer towards trial will often have greater cost recovery, and claims which have been assigned a lower complexity band and/or are further away from trial will have less cost recovery.
There are certain circumstances in which the fixed recoverable sums can be increased or decreased, and we set out some examples below:
- If a party to litigation behaves unreasonably, then a potential penalty is a 50% increase (or reduction) of fixed recoverable costs (depending on who the paying party is and who the unreasonably behaved party is);
- If a party lives in the London area and instructs a legal representative who practises in the London area (the London area being defined in rule 45.3(1) of the Civil Procedure Rules (“CPR”) as the areas served by the County Court hearing centres at Barnet, Brentford, Central London, Clerkenwell and Shoreditch, Edmonton, Ilford, Mayors and City of London, Romford, Wandsworth and Willesden)*, a 12.5% uplift can be imposed on the fixed costs which are payable to this party; and
- A 35% uplift on the fixed recoverable costs can be received by a claimant who matches or beats their own Part 36 settlement offer at trial. Where a claimant has beaten their own offer and, normally, an award for indemnity costs would be ordered, the claimant will be entitled to an additional 35% in costs under this new rule.
Can I get all my costs back if I win my case against the other side?
In short, it may not be possible to recover all of your costs, even if you win. However, it does depend on the amount of legal costs incurred. Under these new rules, the amount of recoverable costs you can recover (for various stages of the proceedings) are capped at fixed levels. It is important to note that there are also capped amounts recoverable in relation to barristers’ fees.
Does the court have discretion to award a greater amount?
The rule under CPR rule 45.9 provides the court a power to order sums greater than the FRC Regime in “exceptional circumstances”. Unfortunately, there is no definition of such exceptional circumstances and there is a danger that, if costs are assessed, if the assessed sum is less than 20% greater than the fixed recoverable sums then the court shall make an order that the successful party will receive only the lesser of the fixed recoverable costs or the assessed costs. By way of example, if there is an assessment and the successful party recovers costs that are, say 19% more than FRC Regime, the successful party will still only recover the fixed recoverable costs.
In accordance with rule 45.10 of the CPR, if a party or witness to a case is vulnerable, the court may consider recovery of a greater amount of costs, although it must be the vulnerability itself which has required the additional work to be undertaken and the amount claimed for that additional work must be at least 20% greater than the fixed recoverable costs.
How we can help
Costs in litigation can quickly become expensive and out of proportion, and although the new FRC Regime seeks to impose some limitations and controls on cost recovery, it is imperative that you seek competent legal advice at the outset so as to ensure your case has the best possible chance of settlement out of court. If you require assistance to resolve a dispute or the matter is heading towards litigation, we would be more than happy to advise and guide you. As always, we will ensure that your matter is dealt with efficiently, diligently and effectively.
*Note that the County Court hearing centres at Bromley, Croydon, Dartford, Gravesend and Uxbridge are considered to be outside of London for the purposes of the definition of ‘London’ in relation to cost recovery and rule 45.3(1) of the CPR.
This article is intended for general information only, applies to the law at the time of publication, is not specific to the facts of your case and is not intended to be a replacement for legal advice. It is recommended that specific professional advice is sought before relying on any of the information given. © Jonathan Lea Limited 2023.