Fixed recoverable costs regime extended

On 21 July 2023, a new consultation was published by the Ministry of Justice (MoJ), closing on 08 September 2023.  I have taken this opportunity to look at the history of fixed recoverable costs and consider the potential impact of the extension of this regime, alongside the new proposed consultation.

A brief history of fixed recoverable costs

In 2009, Sir Rupert Jackson, Lord Justice of Appeal (now retired), reviewed the funding of civil litigation and the civil procedural rules.  The reforms he recommended were introduced in 2013.  He was asked to propose further reforms; his supplementary report was produced in 2017, based on data from hundreds of cases over more than 7 different practice areas.

Part of these recommendations relate to fixed recoverable costs (“FRC”).  This regime currently applies to claims with a damages (compensation) value of up to £25,000 (Fast Track), however, from 1 October 2023, FRC will also apply to claims with a value up to £100,000 (Intermediate Track).

Why bring in this fixed recoverable cost regime?

The Jackson Reforms are based on five strategic objectives: 

  1. Amending rules of procedure, to streamline the litigation process and cut out unnecessary work.
  2. Amending funding rules, so that (a) no method of funding generates increased costs and (b) there are as many different funding options as possible.
  3. Facilitating and incentivising early settlement of disputes.
  4. Limiting recoverable costs to proportionate levels and streamlining the process of assessment.
  5. Controlling the amount of recoverable costs in advance.

High litigation costs inhibit access to justice. They are a problem not only for individual litigants, but also for public justice generally. If people cannot afford to use the courts, they may go elsewhere with possibly dubious results. If costs prevent access to justice, this undermines the rule of law.

Lord Justice Jackson

What the extended fixed costs regime will mean

Any case with a value between £25,000 and £100,000 will be assigned to one of four complexity bands; fixed costs will ascend with the level of complexity of the case.  Unless there is a specific exemption, a solicitor can only recover a fixed amount of costs incurred rather than the amount of time spent on a file.

These rules apply to claims where proceedings are issued on or after 1 October 2023, apart from in personal injury and disease claims.  FRC will apply to personal injury claims where the cause of action is after 1 October and disease claims when the letter of claim is sent to the defendants after 1 October.

What does the recoverable costs consultation deal with

This new consultation has come quite unexpectedly and somewhat close to the anticipated changes coming into force.  It deals with the following specific issues:

  • Whether to fix the costs of costs assessment.
  • Whether to fix the costs for CPR 8 (costs only) proceedings.
  • The recoverability of, on a separate basis, inquest costs and restoration proceedings, and how the CPR should deal with this.
  • The recoverability of advocates’ preparation costs where cases are settled late (within two working days of the trial) or are vacated by the court.
  • Whether the fixed trial advocacy fees, set out in CPR PD 45, should be further uprated for inflation, and by how much.
  • Whether to make it explicit in CPR 26.9(10)(b) in respect of clinical negligence claims, that an early admission of liability must be made in the pre-action protocol letter of response.

These issues need to be resolved to ensure there are no gaps in the extended FRC regime.  Generally, the MoJ aims to discourage parties using the courts more than is absolutely necessary, to take some of the strain off the administrative staff and judges.

The MoJ also need to ensure that there are costs available for solicitors to fully investigate and bring a claim successfully.  The MoJ are trying to balance solicitors being able to recover a reasonable level of cost, but also discourage claims being “dragged out” rather than pushed towards a conclusion.

Whilst inflation remains high, there will be an uprating to the FRC figures. The impact of inflation up to January 2023 will be considered in the October changes, whilst further increases since January 2023 will not be implemented until April 2024.  The FRC figures will then be reviewed in 3 years’ time, although the scope of that review is not yet clear.

What the changes to fixed recoverable costs mean

Within the new FRC regime, the figure to be considered in calculating costs is net of any liability apportionment.  For example, if the Claimant’s claim is worth £200,000 but they are found 50% responsible, their case will fall within the FRC remit.  This will therefore include claims where serious injuries have been sustained.

These changes are based around the ethos that “High litigation costs inhibit access to justice.”  This may be the case if parties are privately funding their own litigation.  However, “no win no fee” agreements are used in the majority across law firms.  This type of agreement accompanied by a legal cost insurance policy (whether this be before or after the event insurance) ensure individuals are not prevented from accessing justice in personal injury claims.

Limiting the costs available to solicitors will result in less firms taking on this level of work, and some firms may not survive the new regime.  The MoJ will have to keep the FRC figures under careful review to ensure firms are able to continue representing clients with claims at this level.

How Moore Barlow can help

Moore Barlow strive to settle claims for clients at the appropriate time, without incurring additional unnecessary costs.  We will continue to provide a high level of service to clients in all cases, whether under the fixed costs regime or not. Please contact the Major trauma team if you have any questions about fixed recoverable costs in relation to your major trauma compensation claim.