Fixed recoverable costs (FRC) are the set amount that the winning party is entitled to recover from the losing party in litigation in England and Wales. They aim to bring predictability to costs exposure/recovery and encourage parties to deal with cases proportionately.
You may know that there are four case management “tracks” in litigation in England and Wales. These are the small claims track (the usual track for claims with a financial value of no more than £10K), the fast track (claims valued between £10K and £25K), the intermediate track (claims valued between £25K and £100K), and the multi-track (for complex intermediate track claims or for claims over £100K). The intermediate track is new from 1 October 2023, and was designed to provide a quicker, simpler procedure to the multi-track for less complex cases which do not require more detailed preparation and a lengthy trial.
FRCs now apply to most cases in the fast track, and to most cases that fall within the new intermediate track. Accordingly, given the increased reach of the FRC regime, you need to bear in mind the following points when bringing a claim destined for the intermediate track:
- Understand the limitations with respect to cost recovery. The amount of recoverable costs will depend on the “complexity band” to which the claim is assigned, which is not always easy to determine at first sight. We will work with you to identify which band your claim falls within, and to determine the limit on your recoverable costs. There are four complexity bands and the value of recoverable costs depends on which band your claim falls within. This might give you a new perspective on whether it is commercially sensible to issue proceedings or defend a certain claim, considering the degree of costs recovery.
- The heightened importance of early settlement. Due to the potential for irrecoverable costs as a result of the FRC, you (and your opponent) will feel the pressure to settle the case. This pressure to settle results from an explicit aim of the new regime to try to curtail litigation and should be kept in the front and centre of the parties’ minds.
- Ensure you have clarity over your legal costs. We will always set out our costs for advising you in a clear and transparent fashion, so you can consider, in light of the new FCR regime, whether it is worth pursuing court action in the context of your dispute.
- Understand your potential liability for costs even if a claim is never issued. Under the new FCR regime, you will have liability for the other side’s legal costs even if the claim is never issued. Therefore, we will work with you to consider the prospects of your claim to ensure that you only decide to litigate over meritorious claims.
- Consider contractual mechanisms in future commercial contracts to increase costs recovery in the event of litigation. Or, even better, consider including mandatory alternative dispute resolution or arbitration clauses. This will help you, if you are a business, side-step the impact of this new FRC regime and recover increased costs from your counterparty in the event of a dispute.
In summary, whilst it has always been important to keep on top of your legal costs and consider early settlement in disputes, following the recent sweeping changes to the FCR regime it is even more important to work closely with your legal advisor to form a suitable strategy. We will be your strategic partner in helping you form an appropriate approach to resolve your legal issue in the post proportionate and positive way possible.
For specific advice and assistance, and to help you form a tailored approach, get in contact with Commercial Litigation Team today.
