Q: What are Fixed recoverable costs (FRC)?
A: Fixed recoverable costs set the amount of legal costs that the winning party can claim back from the losing party in civil litigation. They already apply in most low-value personal injury cases and have done since April 2013 (although some more limited FRC schemes were in effect even beyond then). They are now being extended.
Q: Why are they being extended and when?
A: FRC currently apply to personal injury fast track matters and are being extended from October 2023, with the introduction of a new intermediate track for cases with a value of up to £100,000.00. The government published its proposals on 6 September 2021. This followed Sir Rupert Jackson’s review of civil litigation costs in July 2017 and a consultation on extending FRC’s in civil cases in England and Wales in 2019. Amendment will be by way of an update to Part 26, Part 28 and Part 45 of the Civil Procedure Rules with associated amendments elsewhere. There have been substantial changes to Part 45 (Fixed Costs), which has been largely re-written. A new Practice Direction (PD) 45 sets out the relevant tables of costs. Changes have been made to Part 26 (Case Management – Preliminary Stage) and PD 26, as well as Part 28 (The Fast Track) and PD 28. Changes have also been made to Part 36 (Offers to Settle). Consequential changes have also been made to other Parts.
Q: What are the transitional provisions?
A: The transitional provisions apply to claims issued on or after 1 October 2023 with the exception of personal injury and disease claims; the rules applying to the former where the cause of action accrues on or after 1 October 2023 and for disease claims, where the letter of claim has not been sent prior to 1 October 2023.
Q: What type of cases will the FRC extension apply to?
A: The extension of fixed recoverable costs applies to all cases falling into the new intermediate track, that is cases valued between £25,000 to £100,000.
Q: Are there any exclusions?
A: Cases involving mesothelioma/asbestos, complex PI and professional negligence claims, actions against the police, child sexual abuse, and intellectual property claims will be excluded.
Housing claims are currently excluded. The implementation of FRC for all relevant housing claims will be delayed for two years from October 2023 pending further work. This is due to various recent developments in the housing sector including proposed legislation in respect of these claims. The specific wording of the housing exclusion is at rule 45.1. These cases will be allocated to the appropriate track (generally the fast track), as of now, but will not be subject to FRC for the duration of the delay.
In respect of clinical negligence claims, the Government’s proposals on introducing FRC for clinical negligence cases up to £25,000 is being taken forward separately by the Department of Health and Social Care (DHSC) and are not being introduced as part of this package of reforms. Following a Civil Justice Council report in October 2019, DHSC consulted on a new scheme in 2022 and will set out the way forward in due course.
Q: So, what is the new intermediate track?
A: The fast track will remain as is for claims valued up to £25,000 and where the trial is likely to last for no more than one day. There will then be a separate intermediate track for less complex claims valued between £25,000 and £100,000; this will be the normal track for claims not suitable for small claims or fast track.
In the intermediate track, there will be four bands, 1 to 4 in ascending order of complexity; costs relating to each band for each stage of the claim will be located at Table 14 in PD 45. A notice of proposed allocation in these cases will continue, and allocation will follow, where there are disputes relating to allocation – Judge’s will have discretion based on complexity to allocate elsewhere and additional fees for the relevant challenge to re-allocate will apply.
When allocating to the intermediate track, Judge’s will consider the likely lengthy of trial (not more than 3 days), expert evidence limited to no more than two experts (one per party), non-expert witness evidence does not exceed 30 pages (20 pages for expert evidence). Once allocated to the intermediate or fast track, they will then assign to a complexity band – CPR 25.16 Table 2.
Impact of the FRC Extension
Q: Will there be Part 36 consequences?
A: There has been a considerable rewriting of CPR 36 to accommodate both the new intermediate track and also do deal with the recent cases of Ho -v- Adelekun and Cartwright -v- Venduct. Essentially the position for Claimant’s now will be in FRC that where judgment against the defendant is at least as advantageous to the claimant as the claimant’s Part 36 offer, rule 36.24 provides that costs will no longer be awarded on the indemnity basis under rule 36.17(4), but will instead be an additional amount, being 35% of the costs specified and calculated in accordance with rule 36.24(5).
Q. What about Defendant’s costs?
A. Defendants can now recover the same fixed costs as a Claimant, rather than costs being capped at that amount. If a Defendant successfully defends a claim and successfully brings a counter claim, they will be entitled to their costs and the counterclaim will be treated as a claim, although there are some caveats to full recovery, including where it commences in the portal and where it is a non-personal injury claim. Of course, QOCS will still apply to PI cases where the Claimant has entered into a post 2013 CFA funding arrangement as specified by the Legal Aid, Sentencing and Punishment of Offenders Act 2013, so there may be more limited practical applicability in those cases (absent ones where there is a finding of fundamental dishonesty).
Q: What if there is more than one Claimant and/or Defendant?
A: Generally, each Claimant will be entitled to their own fixed costs, save where Claimants are jointly entitled to the remedy – see CPR 45.5 – or where the court orders that the Claimants are entitled only to 25% of the principal fixed costs sum if each Claimant’s claim arise from the same or substantially the same facts or issues. The fact that there are multiple Claimants or Defendants will not automatically exclude matters from a particular track nor will it automatically affect banding – see CPR 26.7(7).
Q: Are there any changes in so far as disbursements are concerned?
A: Disbursements are bought together at section IX, CPR45. Translation fees are now expressly recoverable in the Fast Track and there is now provision for advice from specialist legal representative, intended trial advocate or for the drafting of statement of case in both Band 4 Fast Track claims and in the Intermediate Track at various points.
There are no restrictions on disbursements in the Intermediate Track save that they must be reasonably incurred and must not relate to work for which costs are already provided for in the fixed costs calculations, an example being agency work.
Q: Are there any other key changes?
A: There is no compulsory mediation (at the moment, although such a scheme is currently under discussion by the CJC), but there is the opportunity to invoke an unreasonable behaviour clause and costs may be reduced, or increased, by up to 50% if successful. Fixed costs recoverable of £1,200.00 can be claimed for ADR in the Intermediate Track regardless of banding. There are also provisions for additional fixed costs to be awarded where either a Claimant or a witness is deemed to be vulnerable as per CPR 45.10 and PD 1A. The rule requires that the vulnerability must have resulted in additional work of a demonstrable value at least 20% of the fixed costs.
Q: Will the tables of costs be reviewed/allow for inflation?
A: The figures of FRC costs in the 2017 Jackson report, which were fixed in July 2016, have been uprated for inflation using the January 2023 Services Producer Price Index (SPPI). The MoJ propose to review the tables of costs and the extended FRC regime more generally in 3 years’ time. It is thought that the review will include uprating for inflation in line with the SPPI. Again, the CJC is clearly aware of the issues arising from the recent period if very high inflation in the UK and their minutes do show an intention to review and make appropriate changes in this regard at some point.
Q: What do you think will be the impact of FRC moving forwards?
A: Clearly these significant rule changes, arguably of greater impact (albeit across a smaller cohort of cases) will have a significant effect on costs recovery for Claimant practitioners, and therefore costs paid by Defendant insurers and public bodies. Proponents of the scheme would say they may promote quick settlement, and access to justice via the increased certainty a matrix of costs will provide in assessing risk when offers are made during that litigation. Sceptics will say that some cases which involve legally or evidentially complex issues but are of relatively low value may now be deprived of access to justice because their cases are not financially capable of attracting specialist legal representation, they will point to the substantial increase in the numbers of Litigants in Person already slowing up the wheels of the civil justice machine. The truth, as ever, may well lie somewhere between the two.
What is clear however, is that initially there is likely to be some confusion and uncertainty as the new scheme is significantly more complex than the previous FRC portal schemes and QOCS rules which were introduced in and around 2013. Those cases brought in a huge raft of satellite litigation as parties tested the boundaries and interpretations of the rules in the higher courts, up to and including the decisions in the UK Supreme Court in relation to Ho & Cartwright which set an interpretation of the rules which subsequently necessitated a rewriting of those rules themselves (which is being brough in alongside these reforms and is a rewriting that many practitioners feel still doesn’t achieve proper balance of the playing field between the parties in respect of P36 offers and will lead to further cases being taken to higher courts on points of principle).
It seems inevitable that parties will test the system with previous arguments, and new interpretations being advanced via test cases as certain sets of circumstances arise in some cases. These arguments will not just revolve principally around costs, fundamental dishonesty and offers as before but around allocation to track and other applicability of the bandings within the new Intermediate Track FRC scheme. It seems likely the good judgement and case management skills of District Judges may be tested in a way they have not been before in this regard, with initial CMC’s becoming an early battleground. Costs arguments will of course still arise especially surrounding exceptional circumstances and unreasonable behaviour. We are already seeing arguments arising around issues such as fees of Medical Agencies which were thought settled as long ago as Stringer -v- Copley all the way back in 2002! As the old Chinese proverb/curse goes “may you live in interesting times”.
They’re almost here – FRC Extension
Despite on-going concerns from practitioners and amendments to the draft rules still being awaited, alongside on-going consultation and a Judicial Review challenge against the Lord Chancellor by the APIL, everything suggests that the 1st October implementation will be going ahead.
Major concerns already in the Court?
With just under a month to go until the extension comes into force, it is unfortunate that in a recent person injury claim, a judge sought to adjourn allocation and budgeting of a claim in order to await the introduction of the extended rules on the 1 October, to allow for allocation to the intermediate track. (From Civil Litigation Brief: 10 September 2023)
This is a disappointing application of the upcoming extended rules, which are very clear on when the implementation of the transitional provisions will apply (The Civil Procedure (Amendment No. 2) Rules 2023 (2)) and with such decisions, it will only seek to delay case progression further beyond the already excessive timeframes within the Courts.
- FRC will apply to claims where proceedings are issued on or after 1 October, apart from personal injury and disease claims.
- Personal injury claims will be subject to FRC where the cause of action accrues on or after 1 October
- Disease claims will be subject to FRC where the letter of claim has not been sent to the defendant
before 1 October
The CPR amendments coming into force from 1 October 2023 can be reviewed here;
https://www.legislation.gov.uk/uksi/2023/572/pdfs/uksi_20230572_en.pdf