Civil Litigation Fixed Recoverable Costs: A new regime

The Fast Track (CPR 28)

FRCs cover the fast track, which is suitable for claims worth from £10,000 to £25,000, and which include trials lasting no longer than one day and expert evidence limited to one expert per party and two experts per field.

The Intermediate Track (CPR 28)

The new intermediate track will apply to less complex cases with a value up to £100,000 which would otherwise be allocated to the multi-track, with trials lasting three days or less, no more than three parties involved (i.e., no more than two claimants and one defendant or one claimant and two defendants) and expert evidence is limited to two experts per party.

The intermediate track is intended to strike a balance between efficient case management and standard procedures. Potential claims in this track are likely to involve commercial arrears, terminal dilapidation claims or boundary disputes.

The Three Stages

There are three stages now involved in allocating a new case which we consider in further detail below.

Stage One – Allocating the case to the appropriate track (Fast / Intermediate) (CPR 26.13)

When deciding the track, the court shall have regard to several factors including: the financial value of the claim; the nature of the remedy sought; the likely complexity of the facts, law or evidence; the number of parties involved; the value and complexity of any counterclaims; and the views and circumstances of the parties. The court shall disregard any amount not in dispute, as well as interest and costs.

Stage Two – Assigning the matter to the appropriate complexity band (Bands 1 to 4) (CPR 26.14 – 26.16)

Within the fast and intermediate tracks, claims will now be assigned to one of four complexity bands (four for each track) which will provide an ascending scale of fixed costs increasing as complexity does.

The parties may agree to the complexity band and must state the agreed or claimed for band in their directions questionnaire, although the court can reassign the matter to a different band if appropriate.

Although it is expected that most cases in the intermediate track will be assigned to band two or band three, as the less complex cases are assigned to band one, it is anticipated that assignment to a complexity band may be a battleground for parties for tactical reasons addressed further below.

Stage Three – Grid of costs (PD 45)

The FRCs applicable to each track will be set by a grid of costs and will depend on:

1. the case’s complexity band; and
2. the stage the claim has reached.

The amount of FRCs in the fast track are set out in table 12 (PD 45.44) and in the intermediate track in table 14 (PD 45.50).

The figures in many of the stages are cumulative totals for the costs incurred up to and including that stage, although some stages are free-standing.

Exemptions (CPR 45.1)

There are several exemptions available on FRCs, with four of these applying to commercial and residential properties:

1. If any part is a protected party i.e., a person who lacks capacity to manage and control any money recovered by or on their behalf or for their benefit in the proceedings (CPR 45.1(6));
2. Residential Housing Claims (may apply post October 2025, once relevant legislation has been implemented) (CPR 45.1(4));
3. Part eight claims, which are dealt with on the multi-track; and
4. Non-monetary relief, which may likewise often be multi-track matters.

Tactics: Overstating / Understating the value

To avoid Fixed Recoverable Costs, it is anticipated that a claimant may argue more issues in its pleadings to inflate the quantum of their claim and push their claim out of the intermediate track to the multi-track. Likewise, a defendant may seek to allocate a case to a lower track. However, if parties overstate the value of a claim in order to go up in banding, and a judge does not agree with the complexity set out, the claim may be reallocated by the judge.

In Williams v The Secretary of State for Business, Energy & Industrial Strategy [2018] EWCA Civ 852, the Court of Appeal held that CPR 44 enabled a court to order that a Claimant is confined to fixed portal costs when there is unreasonable failure to use Protocol.

The fundamental risk to a claimant in inflating its claim to manipulate track allocation is that such behaviour may be deemed an abuse of process. In Lewis v Ward Hadaway [2016] W.L.R. 6, the judge held that the claimant’s solicitor’s conduct in this regard was an abuse of process and there was a risk of the case being struck out on the basis that the ‘appropriate fee’ was not paid before the limitation date.

It is therefore important to note, a party may be punished for overstating its claim whilst the other party may be awarded its costs on the basis of the overstated value.

Final Word

Fixed Recoverable Costs offer parties significant benefits when bringing or defending claims that, while relatively small, still involve substantial sums of money. To maximise costs recovery and minimise adverse costs exposure, parties involved in relevant litigation should give careful thought to these new rules, with expert help, at the very outset of the claim and at each stage of the litigation.

For more information on the topics discussed in this article, reach out to author Nadine Obayda.