29/09/2023
The remit of Fixed Recoverable Costs (“FRC”) are due to be significantly expanded as of 1 October 2023 with the creation of the Intermediate Track, which is applicable to most claims valued between £25,000 and £100,000.
Within the intermediate track there are four different complexity bands, which are independent of the claim value.
FRC will apply to claims where the ‘key event’ occurs on or after 1 October 2023. The ‘key event’ is different for different classes of claim. In personal injury claims the key event is the accrual of the cause of action, namely the date of injury. In disease claims it is the date of the Letter of Claim, and for all other claims (including property damage and non-injury RTA’s) it is the date on which proceedings are issued.
As a result, there will be a transitional period where claims are being handled concurrently under two different cost regimes.
For non-injury claims, we expect to see a flood of claims being issued where that step might otherwise have been considered premature. There is a clear incentive for Claimants to issue proceedings prior to 1 October 2023 so that the new fixed cost regime does not apply.
Where Claimants have issued prematurely, for example before the pre-action protocol period expires, there may be an argument that there has been an abuse of process and that cost sanctions should apply.
We expect that significantly more claims will have been issued in August and September than would otherwise have been the case. Insurers and self-insured bodies must therefore be ready to deal with an increased number of served claims.
It is expected that the expanded FRC regime will result in lower costs in the majority of claims. It will also increase certainty, as costs can be calculated and predicted at various key lifecycle stages (including pre-litigation). Commercial decisions can be made to resolve claims taking into account the full claim cost (or recovery) at various points in proceedings, and risk/reward decisions will be better informed.
Well-timed Part 36 offers are likely to remain a significant litigation tactic, as both sides will be able to clearly determine the cost risk.
A new consideration will be the complexity banding within the intermediate track. By way of illustration, a band 4 intermediate track claim settling the day before trial for £99,000 will attract base costs of £50,780 plus VAT (plus 12.5% for London weighting if appropriate). Counsel’s fees are also subject to FRC and can be incurred at set points in the litigation. Expert fees will also be payable. Budgeted costs in such a claim would likely be significantly higher.
However, a band 3 claim would recover only £38,800, a reduction of nearly £12,000. Limited guidance is currently available as to how the band determination will be made, but judicial guidance will be keenly awaited.
The expansion of FRC to the majority of claims up to £100,000 is a significant development, and the actual impact is hard to predict. Insurers and self-insured bodies need to keep abreast of the changes, as they will likely impact the strategy and tactics of Claimant solicitors, as they manoeuvre themselves through a regime that will significantly reduce their billing potential.
If you wish to discuss this further, please get in touch with Matthew Anderson, Solicitor.
