What is a Fixed Recoverable Cost?
Fixed recoverable costs (FRCs) set the amount of legal costs that the winning party can claim back from the losing party in civil litigation. They already apply in most low-value personal injury cases.
What are the new rules on recovering legal costs?
In a development that solicitors have been preparing in advance of for many months (but many outside the legal industry are unlikely to be aware of), from 1st October 2023, one of the biggest changes to civil litigation in recent history will come into force, with the extension of fixed recoverable costs for almost all cases valued at less than £100,000.00.
The rules apply differently depending on the case type; for Clinical Negligence or Personal Injury cases, the relevant date that you need to be aware of is the date of the injury; if you are injured before 1 October 2023 then you fall under the old costs rules. For all other cases, the date to be concerned with is the date of when the Claim is issued; if the case is issued after 1 October 2023, the new costs rules apply.
Why are these changes to FRCs happening?
The justification for the change was due to the perception that legal costs as part of litigation were too high and costs budgeting (where Courts approved the budgets for the cases) was not leading to a decrease. It brings into question why Courts were approving budgets if they did not believe the costs being requested were reasonable and proportionate, but putting the debate to one side, mitigating for the changes is the current challenge at this stage for all litigants launching litigation for less than £100,000.00, which will be the vast majority of all legal cases in England and Wales.
What costs will I be able to claim going forward?
Unless your case falls into one of the small exceptions, you will only be able to recover a fixed amount of legal costs from the other side if successful, based on a fixed fee formula and calculated on the relative complexity of the case. The more complex the case, the more you can recover but in reality, moving forward you are going to recover far less than you did previously under the old rules where you would recover all your costs, as long as they were reasonable and proportionate.
Are these changes set in stone?
In a nutshell, no.
The new rules surrounding Fixed Recoverable Costs that are due to be implemented from 1 October 2023, have been drafted with no consultation, in conflict with settled case law and indeed, against the intention of the original author of the proposals. They also appear to have the consequence that would prevent parties from ‘contracting out’ of fixed costs.
This flies in the face of the established principles that parties are free to contract how they please and would be in conflict with legislation from parliament.
In light of this late, unplanned change, the Association of Personal Injury Lawyers have launched a Judicial Review against the plans. The Judicial Review will cover a number of issues, but includes the “apparent” step of preventing parties from being able to contract out of fixed legal costs if they choose.
The Law Society also “do not support the extension of FRCs in civil litigation under the current proposals, either across the existing fast track or to intermediate cases”.
As this is an ongoing development and no decision has yet been reached, no one knows where the Court will land, or indeed whether the rules will be re-drafted if it was not the genuine intention to remove the rights of parties to contract as they please in respect of legal costs.
How can we help?
There is a window of opportunity to examine your terms and conditions so that you can avoid the fixed costs rules and insulate yourselves from the changes, should they come into play.
Our Commercial Litigation Solicitors can help you to prepare suitable clauses surrounding the contractual right to costs, while carrying out a general audit of your terms, so that you are prepared to move forward while a final decision is made.
Contact us today to make an appointment.