Fixed costs extension: summary and practical tips

30 August 2023

The final rules for the extension of fixed recoverable costs (FRC) have finally been published in the Civil Procedure (Amendment No 2) Rules 2023 (SI 2023/572) and the associated 156th practice direction update following Sir Rupert Jackson’s recommendations in 2017.

The extension introduces a new intermediate track for the majority of civil claims valued up to £100,000, in addition to the existing small and fast-track claims for selected claims up to £25,000.

In non-personal injury (PI) claims, the extension to FRC will apply to cases issued from 1 October 2023; in PI claims, it will apply where the cause of action accrues on or after this date, and in disease claims it will apply when the letter of claim is sent after 1 October 2023.

If a non-PI claim is capable of issue, then it would be prudent for practitioners to do so before the implementation date of 1 October 2023. However, this is caveated with the warning that claims issued spuriously may risk being struck out for abuse of process. The parties are not precluded from agreeing to contract out of the new fixed costs rules; taking a pragmatic approach could avoid significant costs of issuing a claim being incurred, that may later be paid by the losing party.

Firstly, it is worth noting that certain types of claims are exempted from the extension, including mesothelioma or asbestos claims, abuse claims, claims that could be tried by a jury or claims against the police (involving torts or a claim under Human Rights Act 1998 only).

Housing claims are also currently exempted given proposed legislation. Notably, clinical negligence claims are exempted unless both breach of duty and causation are admitted and the claim would normally be allocated to the intermediate track (CPR 26.9(10)). The draft rules do not appear to specify a deadline for such an admission, but ostensibly this would need to be obtained at a very early stage to allow parties to have certainty in the costs they would recover.

It would be arbitrary to retrospectively allocate such a claim to the intermediate track after the potentially significant cost of liability investigations had been incurred. The separate consultation on FRC in clinical negligence claims up to £25,000 is currently being taken forward by the Department of Health and Social Care, but given the likelihood of a general election, a future implementation date is uncertain.

As per the new rules, CPR 26.7(4) states that the court may order a party to provide further information when considering potential allocation, and may hold an allocation hearing if necessary (CPR 26.7(5)). In addition to the value element of £100,000 (CPR 26.9(7)(b)), the scope of claims being allocated to the new intermediate track is as follows (CPR 26.9(7)(c)-(d)):

  • The trial will not last longer than three days;
  • Oral expert evidence is likely to be limited to two experts per party;
  • The claim can be managed under the procedure in section IV of CPR part 28 (for example, a party’s total witness evidence does not exceed 30 pages and any expert report does not exceed 20 pages, excluding appendices);
  • There are no additional factors that would make the claim inappropriate for the intermediate track; and
  • There is a maximum of three parties in the litigation (that is, one claimant and up to two defendants, or two claimants and one defendant).

If the claim includes a claim for non-monetary relief, this will also not be allocated to the intermediate track unless the court considers it is in the interest of justice to do so.

Matters relevant to track allocation include the following (CPR 26.13):

  • The financial value, if any, of the claim;
  • The nature of the remedy sought;
  • The likely complexity of the facts, law or evidence;
  • The number of parties or likely parties;
  • The value of any counterclaim or additional claim and the complexity of any matters relating to it;
  • The amount of oral evidence which may be required;
  • The importance of the claim to persons who are not parties to the proceedings;
  • The views expressed by the parties; and
  • The circumstances of the parties.

It is clearly further stated in CPR 26.13(2) that it is for the court to assess the financial value of a claim, and in doing so it shall disregard any contributory negligence.

Of course, the allocation of cases to the intermediate track is likely to be highly contentious between the parties, given the multi-track is not subject to fixed costs. Therefore, practitioners must be prepared to justify the value of the claim at the allocation stage and ensure that the directions have been carefully considered.

Given the scope of the intermediate track, any direction such as the trial exceeding three days and the instruction of over two experts is likely to be disputed. The court also has discretion to allocate a claim to the multi-track if there are ‘additional factors’ that would make the claim inappropriate for allocation to the intermediate track.

The court may on application, or its own initiative reallocate a claim to a different track (CPR 26.18(1)). However, where a claim has already been allocated to the intermediate track and directions have been ordered, a claim may only be reallocated where there are ‘exceptional’ reasons for doing so (CPR 26.18(2)).

The definition of an exceptional reason is not defined, but it must be taken to be a high bar. A different complexity band may also only be assigned where there has been a change in circumstances since the previous assignment (CPR 26.18(3)); this is likely to be a threshold akin to a significant development under CPR 3.15A.

The scope for applying to escape fixed costs is limited; indeed, the new draft rules provide for uplifts in respect of vulnerability, beating a part 36 offer, unreasonable behaviour and the client and solicitor both being based in London. Much of the case law on exceptional circumstances for escaping fixed costs under CPR 45.29J is now superseded by the introduction of the intermediate track, given it encompasses such a vast breadth of different cases.

However, the lower court cases of Lloyd v 2 Sisters Poultry Ltd [2019] 1 WLUK 657 and Crompton v Meadowcroft [2021] 8 WLUK 308 demonstrate that each case will turn on its own facts. Issues such as an increase in value, a significant development in injuries and the number of experts are all relevant factors that may amount to exceptional circumstances.

With regard to claims settling before allocation, parties must be alive to the terms of any part 36 offer or consent order. As was noted by the Court of Appeal in Ho v Adelekun [2019] EWCA Civ 1988, any part 36 offer or consent order to which the fixed costs regime would apply should omit any reference to assessment ‘on the standard basis’.

The most important step to take pending the extension of FRC is for practitioners to update their funding arrangements. As set out above, FRC may even affect clinical negligence solicitors with claims worth over £25,000; the commercial favourability of FRC could result in an advent of early full admissions from defendants.

Retainers and client care documents should be considered to ensure that a shortfall of unrecovered costs is permitted, should fixed costs apply. Clients must be provided with the best possible costs information so they are able to provide informed consent to any shortfall. We may see an increase in solicitor-client assessments due to the uncertainty of case precedent surrounding informed consent, in addition to the inevitable satellite litigation resulting from the FRC extension.

This article was first published on the Thomson Reuters Dispute Resolution Blog, as part of the ACL’s regular series of articles for legal publications to raise the profession’s profile.

Amy Dunkley is a Senior Costs Lawyer at Bolt Burdon Kemp and a member of the ACL Council

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30 Aug 2023

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