Fixed Recoverable Costs is upon us

William Ellerton

Partner

DAS Law

So, it is almost upon us – or possibly, depending on when you read this article, it is already upon us.  1 October 2023 is the magic date – the introduction of Fixed Recoverable Costs (FRC) for legal cases within the Fast and new Intermediate track. 

Many commentators hail this as the biggest change for a decade. That might be an understatement – for those litigators old enough to remember, the date of 1 October 2023 may well become emblazoned on our minds in the same way the 26 April 1999 did.

Don’t recall that date? It was the introduction of the new Civil Procedure Rules which hailed “all change” in the litigation world.

What’s the story?

So, what is in store at the start of October? What will change?

The short answer is “a lot”, but this has been brewing for a while. After 1 October the recoverable costs in most Fast Track and Intermediate Track cases will be fixed. This is an idea that has its genesis in the Britpop era of the 1990’s. Finally, some 25 years later – when coincidentally most Britpop bands (apart from Oasis) are making their comebacks – it is finally upon us. 

The thinking behind FRC is truly revolutionary for those cases to which it applies.  Prior to FRC, a profitable case was a difficult case that required a substantial time input from a senior lawyer.  Now the opposite is true.  The most profitable case will be one that can be resolved with the minimum time input and at the most junior level. The costs recovery is the same regardless of time spent and lawyer seniority.

What are the implications?

First and foremost, the new regime rewards efficiency and lower cost. If a firm can use a paralegal where it previously used a solicitor, it will do so. Firms will invest in more sophisticated case management and possibly, as it evolves, AI (though that is a topic for another day).  

Settlement of litigation will become more tactical. The amount of costs that can be recovered will be governed by the stage at which the case settles and the complexity band that the case sits in (1-4).

A claimant lawyer may look to settle at the point a case tips into the next stage, where more costs are available – the defendant lawyer will look to do the opposite. The claimant lawyer will argue for a high level of complexity – the defendant lawyer will argue for the opposite. Not all of this will be capable of agreement, and we should expect a truck load of satellite litigation in the coming years to establish the parameters.  What exactly is a Band 4 complexity case? The short answer is we don’t really know.

How are clients affected?

What about the impact on clients? Will FRC help them? Here too, there is some doubt. The underlying idea is to make litigation costs predictable and cheaper. Certainly for some cases, that will happen. However, there is nothing to stop lawyers looking to their clients to “top up” the costs they will no longer recover from their opponent. Will that increase access to justice? It could easily do the opposite. 

And what about the future?

The arrival of FRC has been met with some trepidation. Legal challenges are afoot around some parts of the new rules. However, the prevailing message is that these changes are here to stay and will be extended over time. It is not unrealistic to think that in some five years’ time the FRC regime will cover cases up to £250k.

Time will tell whether FRC was a good idea. In all likelihood, it will be a mixed bag – some good, some bad. Some marginal cases that would have been pursued under the old rules will not be pursued. Some clients will pay less. Some clients however will pay more when they are asked to pick up the tab for the FRC shortfall. Efficiency will increase. Lawyers will rightly look to get the job done at the most junior level appropriate.

When all is said and done, the balance that needs to be drawn is the one that Dominic Regan drew attention to, quoting Sir Rupert Jackson – “If the costs are too high, people cannot afford lawyers.  If the costs are too low, there will not be any lawyers doing the work”.  FRC is touted as the solution to this.  The coming years will tell us whether that will be the case.