Get ready for fixed costs

10 May 2023

October’s reforms will see an extra claims track added to the rules

What is set out below is a summary of the general framework of changes to be expected in October 2023 based on the draft rules published on 20 April 2023. Obviously, there will be no substitute for referring to the specific rules when they are in final form.

Tracks and case management

There will be four tracks: small claims, fast, intermediate and multi. The filing of the defence will trigger a notice of proposed allocation. Claims under £10,000 (save for some landlord and tenant cases) and personal injury claims (generally) less than £5,000 remain the reserve of the small claims track. Some road traffic accident and personal injury claims, including certain claims made by protected parties, are excluded from the small claims track.

If the proposed track is other than the small claims track, the parties will then be obliged to file proposed directions. Save for road traffic, personal injury and housing disrepair claims, if the parties agree, the claim will be referred to the mediation service. Otherwise, the case will be allocated to track.

The fast-track and intermediate track will have complexity bands (1-4), with 4 being the more complex. Decisions about track will be ‘allocation’ decisions, and decisions about band ‘assignment’ decisions. The directions questionnaire will ask the parties to suggest both track and band (the rules set out tables in part 26 to offer some guidance on assignment).

The fast-track will be the reserve for claims where monetary relief does not exceed £25,000, but subject always to the court considering that the trial will not last longer than one day and oral expert evidence will be limited to one expert per party per expert field, limited to two expert fields.

It is difficult to understand how a trial could be conducted in a single day if it is to include evidence of fact from at least one witness (which seems inevitable) as well as hearing from potentially four expert witnesses followed by submissions and judgment.

Case management judges will need to strike a fair balance between managing and controlling cost through allocation and being realistic (and fair to the recovery of preparation costs) about track allocation when the factor of trial time estimate alone would suggest more than one day is required.

The intermediate track will be the reserve for claims where monetary relief does not exceed £100,000, subject to the court considering that the trial will not last longer than three days and oral expert evidence will likely be limited to two experts per party. It is to be the normal track where the claim is brought by or against one or two claimant(s)/defendant(s).

If there is an additional non-monetary element, it will only be allocated to the intermediate track if the court also considers it to be in the interests of justice to do so.

Case management conferences will be listed, and pre-trial reviews may be listed, in intermediate track cases. Witness statements will be limited to 30 pages and expert reports (excluding attachment) to 20 pages.

It is not clear why there is an additional consideration in relation to claims of monetary and non-monetary relief if the criteria is met in all other already stated respects.

The multi-track will be the track for all other claims. It will also be the track for claims including mesothelioma, asbestos lung disease claims, clinical negligence (unless both breach of duty and causation have been admitted), harm, abuse or neglect of or by children or vulnerable adults, some claims against the police and claims which could be tried by jury.

We can expect to see hearings listed to deal with either or both, and an expectation of a greater importance being attached to, allocation and now assignment as each will result in different recoverable costs on a given scale (currently marked at tables 12 and 14 of PD 45).

Reallocation, whether by application or on the court’s own motion, will be limited to exceptional reasons justifying the same. Reassignment will be limited to a change of circumstances justifying reassignment.

Fixed costs

Many of the features of fixed recoverable costs (FRCs) are preserved and thus expanded across the broader width of cases to which these provisions will apply. Litigants in person are restricted to two-thirds of the fixed recoverable costs which would otherwise have been recoverable.

There are provisions for multiple claimants, defendants’ costs and counterclaims which will require specific examination when relevant. Importantly, claims for costs in excess of FRCs remain subject to the ‘exceptional circumstances’ threshold, with no further clarification of what that might or should mean, save that vulnerability requiring additional work in excess of 20% of the FRCs is a mandatory set of circumstances for the court to consider (as distinct from granting) a claim for costs in excess of the FRCs.

If excess costs are permitted and come to be assessed, if the excess is no greater than 20%, the court will award the lesser of either the FRCs or the assessed costs. If excess costs are claimed but not permitted, the court can make ‘no order’ as to the costs-only proceedings or detailed assessment or make an order for some or all of such costs to be paid by the party making the claim.

A new weapon of ‘unreasonable behaviour’ is being introduced as an application for either party to consider. It is defined as conduct for which there is no reasonable explanation.

If a receiving party is found to have behaved unreasonably, their claim for costs can be reduced by an amount equivalent to 50% of the FRCs otherwise payable. Conversely, if a paying party is found to have behaved unreasonably, the amount of payable FRCs can be increased by an amount equivalent to 50%.

Interestingly, the language chosen does not suggest a scale or discretion ‘up to’ 50% – it seems to be intended to be a blunt weapon. Moreover, there are no equivalent provisions for punitive costs if such an application is made but fails, which might suggest this provision could become a weapon of choice more routinely.

The draft rules make clear that where there is reallocation to a different track or complexity band, the applicable costs which may be allowed are those to which the claim is reallocated, as if it had been allocated to that track at the outset. Whilst this will be welcome in upwardly mobile claims, this is an immensely dangerous retrospective guillotine in downwardly mobile claims that may have been overexaggerated in terms of value or complexity in the early stages of the proceedings.

The importance of a measured, balanced and realistic approach to case management by the parties cannot be overstated.

In relation to the fast- and intermediate tracks, the applicable FRCs depend on the complexity band, and in cases which include (or comprise entirely of) non-monetary value, the band designation prescribes an amount to the non-monetary value so that fixed costs can be calculated.

In the intermediate track, costs are allocated to each stage of the proceedings coded through 15 different stages, S1 to S15, with a different applicable fee depending on the band.

Whilst these are sweeping changes to be implemented from 1 October 2023, there are two triggering exceptions:

  • In personal injury claims, the new FRCs apply only to causes of action accruing after 1 October 2023; and
  • In disease claims, the new FRC will apply only where the letter of claim is sent after 1 October 2023.

Moreover, FRCs will not (yet) apply to housing claims (a two-year delay to implementation is expected) and low-value clinical negligence claims (see above as to multi-track).

We are told that the FRCs have been adjusted for inflation and there appears to be an intention to review them every three years in the future. However, what is clear is that the rates in place at the date when the claim is issued are to be the rates to be utilised for the duration of the case.

This seems like a half-hearted attempt to address inflation at all, and, if one assumes three years pass from date of issue to trial, chances are that rates recovered will be at least three years out of date.
Part 45 just got longer!

Shaman Kapoor is a barrister at 39 Essex

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10 May 2023

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