Changes to Fixed Recoverable Costs
6th June, 2023
Changes to Fixed Recoverable Costs are in the pipeline, but how will these changes affect debt claims?
What Are Fixed Recoverable Costs?
Fixed Recoverable Costs (“FRC”) are the fixed amount of legal costs which the successful party is able to recover from the unsuccessful party in court proceedings. FRC are currently most prominent in claims which are allocated to the the Small Claims’ Track (generally any claims under £10,000), undisputed actions and low value personal injury claims.
The proposed changes to FRC
The Government has proposed making changes to FRC which will be implemented from 1 October 2023. The changes will apply to any proceedings which are issued after 1 October 2023 with the exception of personal injury claims. The changes will mean that FCR is extended to Fast Track Claims (generally claims between £10,000 to £25,000 where the trial should take no longer than a day). There are also plans to introduce a new Intermediate Track for simpler cases which will sit between the Fast Track and Multi-Track.
There have also been substantial changes to Part 45 of the Civil Procedure Rules 1998, which governs fixed costs and FRC, and a new Practice Direction 45 (“PD 45”) has been introduced. PD 45 will set out a relevant table of costs that apply to FRC. There shall be 4 complexity bands where a grid will set out the FRC costs for each stage of the claim in that relevant track. The costs bands have yet to be decided.
The Intermediate Track will be an extension of the Fast Track for claims over £25,000 and is intended for less complex Multi-Track claims under £100,000.
What do these changes mean for debt claims?
It is inevitable that some debt claims will be defended by the debtor. You will therefore, from time-to-time, be impacted by the existing or newly proposed FRC regime. You therefore need to be aware of and understand the proposed changes.
There will be conflicting views on whether the changes to the FRC regime will be beneficial to you.
You may welcome the change, as it will bring more certainty as to what they are able to recover from the debtor in a defended matter. The changes will also remove the huge uncertainty at the end of a case when a Judge summarily assesses costs and often reduces the costs incurred. Ultimately, the award is purely down to the discretion of the Judge (often a Judge will discount the costs you claim by around 30 to 45%). I believe that if your legal representative provides accurate costs estimates for claims, this means you can properly budget and calculate your potential losses over litigating a claim with more certainty.
If you are a creditor you may not approve of the changes. You will continue to incur the same level of costs but will only be able to recover a fixed percentage. Whilst there are no details available at this stage as to what the fixed amounts will be, the concern is that you will be left recovering a reduced amount of the costs you incur. I think that this may discourage you from commencing litigation, but it may also stop unscrupulous parties from racking up unnecessary and disproportionate costs. You may see that the FRC regime will be most unjust where the debtor is purely trying to frustrate proceedings and their alleged defence holds no merit whatsoever. On the other hand, however, I believe that there will be a reduced risk (or at least more certainty) when it comes to costs in litigation.
When these changes come into force from October 2023, our team intend to work closely with its clients to establish cost effective ways to deal with litigation in light of legislative changes. Should you wish to discuss your position, and how to ensure that debt recovery remains commercially viable for you, please contact Mark Wilkinson or another of our expert debtor recovery solicitors.
Please note that this briefing is designed to be informative, not advisory and represents our understanding of English law and practice as at the date indicated. We would always recommend that you should seek specific guidance on any particular legal issue.
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