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Upcoming changes to Fixed Recoverable Costs

By April 21, 2023Litigation

The government has plans to extend the scope of fixed recoverable costs (FRCS) from October 2023. This follows postponed plans for the same set of reforms in October 2022 and April 2023.

FRCs set the amount of legal costs which are recoverable by the winning party from the losing party in civil litigation. This provides certainty to both parties about the maximum the losing party will have to pay, but means that the amount that can be reclaimed may not cover the actual costs of the case.

The current proposals are –

  1. Extend FRCs to all civil cases in the fast track (covering those valued up to £25,000 in damages that will last no longer than a day, except housing)
  2. Create a new “intermediate” track to include simple cases valued between £25k and £100k
  3. Introduce a new process and FRCs for noise-induced hearing loss claims

FRCs will be subject to a number of uplifts determined by the facts of the case and conduct of the parties. This will include an uplift of 25% where a party fails to beat an opponent’s Part 36 offer and 50% where the court feels a party has behaved unreasonably. There will additionally be a 25% uplift for each additional claimant in claims arising from the same set of facts, and a London weighting of 12.5%.

Supporters of the proposals have argued that this will increase access to justice. This is argued on the basis that parties will be more certain when they undertake a claim of the cost ceiling, and therefore more likely to enter into a case as it decreases the risk even if they lose.

There have been some criticisms of the proposals…

However, the Law Society have argued that the proposals actually pose a “substantial risk” to access to justice. Their argument is that the limit to recoverable costs may affect which cases solicitors are able to take on – which means that even if parties are willing to take the risk, it may limit their ability to obtain representation.

The Law Society and other critics have a number of issues, namely concerns with the data used for the proposals, and whether it is representative of the current legal landscape. The consultation began in 2019, before large developments like the pandemic and Brexit had truly taken hold, and clients and solicitors’ needs have changed since then. Moreover, the government have neglected to take into account other legal reforms – including the HM Courts and Tribunals Service (HMCTS) reform program, which has majorly changed the procedures in many areas of the law. There are further concerns about classifying cases – the Law Society argues that it will be very difficult upfront to decide which bands cases should be in, particularly due to the evolving nature of litigation, and the ease with which a simple case can become complicated.

Regardless of criticisms, it is thought that we will see fixed recoverable costs go ahead for most claims under £100,000 this year, in efforts by the government to promote certainty and proportionality. It is just hoped that the government, in keeping with the desire for certainty, will set out some more extensive and transparent rules on how cases will be classified and dealt with, as well as how to resolve issues in a cost-effective manner to keep costs down.

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Natalya McPartland

Author Natalya McPartland

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