What is the FRC?
The basic position in claims in England and Wales is that the “loser” pays the costs of the “winner”. That is only a basic position and can be influenced by a number of factors but it’s the starting point for most costs decisions made by a Court. The FRC is a new initiative to limit the amount of costs which can be awarded to a party in a claim, even if they “win”. It will apply to claims worth up to £100,000 since October 2023 and, broadly speaking, fixes the amounts that the winning party in civil litigation is entitled to recover from the losing party. The term ‘costs’ typically includes solicitor’s fees, court fees, expert witness fees and certain other disbursements.
The new regime is designed to bring predictability to claims that fall within its remit and encourage parties to deal with cases at proportionate cost.
The New Intermediate Track
The FRC has introduced a new “intermediate track” for simple claims between £25,000 – £100,000.
There are now a total of 4 tracks and generally apply for cases which are issued at court. These are as follows:
Small Claims Track: for claims with a value up to £10,000. The general rule in small claims track cases is that no costs may be awarded against the losing party, except for the fixed costs which the successful party has had to pay for issuing the claim and other court fees. Recoverable costs are therefore very limited and for this reason litigants often choose to represent themselves.
Fast Track: for claims with a value of between £10,000 to £25,000 where (i) the trial is likely to last for no longer than one day (ii) oral expert evidence is likely to be limited to one expert per party per field and (iii) expert evidence is likely to be limited to two fields. This track is subject to some fixed costs rules.
Intermediate Track: for claims with a value between £25,000 to £100,000 where (i) the trial is not likely to exceed three days (ii) oral expert evidence is likely to be limited to two experts per party and (iii) the claim is brought by one claimant against up to two defendants or by two claimants against one defendant. If a claim is for a remedy other than for money, it is unlikely to be allocated to this track unless the court considers it necessary.
Multi-track: for claims in excess of £100,000 (usually dealt with in the High Court). Complex claims with a value of under £100,000.00 may be allocated to the multi-track. FRC will not apply to multi-track cases, but the current costs-budgeting process may apply.
Complexity Bands
Both the fast track and the intermediate track will have four complexity bands which a case can be assigned to (1 to 4 in ascending order of complexity). The higher the band, the greater the fixed costs which can be potentially recovered.
In deciding the band into which the dispute falls, consideration will be given to the nature of the claim, the amount in dispute, the legal complexity, the number of parties, and the expected duration of the hearing. The parties can seek to agree a complexity band although the ultimate decision rests with the Court.
How much will be will recovered under the FRC?
A series of tables in new Practice Direction 45 sets out a menu of fixed costs which apply depending on the stage reached in the litigation. The highest fixed costs will therefore be recoverable if the claim goes to trial.
While there is a limit to the amount of costs that a successful party may recover from its opponent, it is important to note that the FRC does not restrict the fees that a litigant’s solicitors can charge. The downside to this is that a successful party could be out of pocket in that the actual costs that they pay their solicitor may exceed the fixed costs that are recoverable from the unsuccessful party.
Cases which are not subject to FRC
There are exceptions to the FRC including:
- Complex cases allocated to the multi-track;
- If a party is a ‘protected party’ (i.e. a child or someone who lacks capacity);
- Personal injury claims where the cause of action accrues before 1 October 2023; and
- Residential housing claims.
The amount of costs to be paid in a case not subject to the FRC will be assessed by the court if the parties cannot agree the amount. This means that the amount of costs will be decided by a judge in accordance with assessment principles and guidance.
What does the FRC mean for litigants?
The FRC will result in greater predictability of recoverable costs from an unsuccessful party. However, it will also likely result in a successful party facing a shortfall in the costs they can recover from the opponent compared to the actual costs that they have incurred in pursuing their claim. It also seems that track and band allocation will be a contentious issue as the claimant will want to ensure greater cost recovery from the opponent, and therefore a higher track allocation. Likewise, a defendant will want to ensure an allocation to a lower track.
It is also important to note that under the FRC, there will be liability for costs even if the claim is not issued. This means that costs are fixed if a claimant settles the matter before issuing a claim; but a claimant who intimates a claim, but does not then go ahead with it, is also liable for the defendant’s costs. In general, we would expect the new FRC regime to make it less commercially viable to pursue some claims under £100,000, or to result in claimants dealing with such claims themselves in order to avoid incurred legal costs which they may not be able to recover.
TWM has a specialist Dispute Resolution team who are highly experienced in providing bespoke advice. If you decide to instruct TWM in relation to any dispute, we will assess whether we believe the FRC is likely to apply at the outset of our instruction and, if it does, engage in honest and practical discussions with you about how to pursue the claim in your best interests.