Fixed Recoverable Costs regime: will it apply, and should you be worried?

On 1 October 2023 the Fixed Recoverable Costs (FRC) scheme was extended to cover most civil cases up to the value of £100,000. This means that the regime now applies to the majority of cases in the fast track (ie with a value up to £25,000) and many less complex cases in the newly created intermediate track. For larger, more complex commercial litigation cases, the FRC regime will not apply.

The new intermediate track will accommodate cases with a value between £25,000 and £100,000. From a practical perspective, the creation of this distinct track should streamline proceedings and make it easier to administer the extended FRC regime. That said, not all claims within these value bands will be appropriately dealt with in this track. Some matters, such as defamation cases, may involve small monetary amounts but complex legal matters better suited to more a more sophisticated approach.

To facilitate the proper allocation of these more complex cases, the Civil Procedure Rules have specific carve outs for certain cases, including cases requiring a trial of more than three days, more than two expert witnesses per party at trial or more than two claimants or defendants. For cases that do not meet these specific criteria, there is a catch all provision allowing the court to allocate to another track if there are “additional factors” making it inappropriate for allocation to the intermediate track. Suggested examples include matters involving reputational issues or those of public importance.

Other claims which are unlikely to be allocated to the intermediate track are those involving non-monetary relief. They will only be allocated to the intermediate track if the court considers it in the interests of justice to do so. On the other hand, the court may positively determine that a claim ought to be allocated to the intermediate track on the same basis.

It is likely that many of the more complex cases will fall outside the FRC regime. For those that fall under the FRC regime, the parties may welcome the certainty of FRC and this is a fundamental reason for the system. For some cases however, if they fall under the regime, there is likely to be a shortfall in the successful party’s recoverable costs as against the actual costs they have incurred. As a result, parties may wish to pre-empt this scenario and consider contracting out of the FRC. Currently this remains possible, however for now this remains a controversial topic. At the moment though, in practice, there is nothing to prevent parties to a dispute agreeing as they see fit, including as to costs.

Parties to a claim destined to be heard under the FRC regime will want to think carefully about the cost assurances they receive from their own advisors before initiating litigation – and will need to consider the likely deficit between costs expended and costs recovered.  One would assume this is the court’s intention in the hope that this regime will encourage out of court settlement and assist in unclogging its overloaded lists.

This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.

© Farrer & Co LLP, October 2023