Fixed recoverable costs: Questions must be answered

From 1 October 2023, the government extended fixed recoverable costs (FRC) to apply to most civil litigation claims with a value of up to £100,000 across the fast track and in a new intermediate track.

This intermediate track will include lower complexity cases in the £25,000 - £100,000 bracket and will significantly increase the number of cases where FRCs apply.

Cases that are more complex or have a value of more than £100,000 will continue to be allocated to the multi-track and will not be subjected to the FRC rules.

The reforms follow seven years of exploration by the government on how to improve civil litigation costs.

FRCs give certainty in advance about the maximum amount that the losing party will have to pay. However, this means that the amount that can be recovered may not cover the actual costs of the case, which can be hard to predict.

The latest reforms leave too many unanswered questions around how the regime will work in practice. We therefore urge the government to provide further guidance in support of the rules, especially around definitions, and track and banding allocations.

The amount of costs that can be recovered will be set at fixed figures which will be determined by the track and band to which a case is allocated. This may affect which types of cases remain viable for solicitors to take on – or for clients to pursue, if solicitors cannot conduct cases effectively within the constraints of the recoverable costs.

FRCs can be used for low-value and straightforward cases. However, the extension of the regime will now include virtually all areas of civil law.

Previously, only lower value personal injury claims were subjected to FRCs. But from 1 October a greater range of personal injury cases will be covered. This includes some clinical negligence cases and a multitude of other areas such as debt recovery, business disputes and other lower value commercial cases.

It is encouraging that there are certain exemptions to the new regime, most notably for housing cases for the next two years. This shows that one size does not fit all. The limited data collected several years ago does not adequately reflect the wide range of cases that our members take on, and the work required to conduct them to an acceptable professional standard.

The recent announcement from the Department of Health and Social Care that a bespoke regime of FRCs in clinical negligence cases below £25,000 will be implemented from April 2024 adds further complexity to the overall picture.

Fixed recoverable costs are not the same as fixed costs. Recoverable costs must be set at levels which accurately reflect the broad spectrum of civil litigation work. They should take into account the different ways of working. This includes the greater use of online tools for delivering legal services, new types of evidence such as digital and video and changes in approaches to litigation which demand more consideration of non-court dispute resolution and front-loading of costs through pre-action protocols.

There is a high risk that recoverable costs for some cases will not be sufficient to cover those costs necessarily incurred.

We urge our members engaged in this type of legislation to thoroughly review their fee agreements with their clients and ensure that the consequences of the regime are being considered.

Clients should be given as much information as possible at an early stage concerning their own costs risk to avoid any potential challenges at a later date.

The ongoing impact on solicitors and their clients needs to be closely monitored to assess the extent to which access to justice is being impacted by the changes.

We call on the government to ensure there are processes in place to quickly remedy any immediate and important issues that emerge. We would also strongly caution against extending the regime any further until robust evidence of its impact has been gathered and analysed.

Lubna Shuja is president of the Law Society of England and Wales