In April, to somewhat muted reception, the Ministry of Justice published a note on the extension of Fixed Recoverable Costs (“FRC”). Costs have never had a reputation for being particularly head-turning (sorry costs draftsmen and women), but the application of FRC to larger value claims through the new ‘Intermediate Track’ heralds a substantial shake up.

From 1 October 2023 claims issued for:

  1. Damages valued between £25,000.00 and £100,000.00;

  2. Requiring two or less experts per party; and

  3. Which can be disposed of in a three-day trial or less

will (subject to court discretion) be allocated to the new Intermediate Track, and FRC will apply.

The FRC for any claim will be determined by reference to what I am calling, to link to the title, a new ‘Costs Matrix’. The Matrix consists of a ‘Complexity Band’ ranging from 1 – 4, with claims allocated to a band according to how complex they are. To determine the costs, the band is then cross referenced to the stage (ranked 1 – 15) in the litigation at which a claim settles or ultimately comes to trial. In addition, a sum calculated as a set % of the sum claimed (ranging from 3% - 22%) will be awarded, the size of which again depends on where it falls in the Matrix. The table can be found at Table 14 to rule 45.50.

Claims seeking non-monetary relief will not be allocated to the intermediate track unless the Court considers this to be in the interests of justice. If they do however, then the claim for non-monetary relief will be allocated a ‘claim value’ which can be added to the total monetary (if it is a mixed claim) value of a claim.

If you review the amended CPR, or even my attempt to abridge it above, you will be excused for feeling this is a complex introduction. In seeking to simplify and provide certainty on costs, the immediate certainty is that the new system doesn’t feel especially user friendly at this stage.

Likely much debate will be had when the new system comes into place about claim allocation to the various bands. When one considers that the difference in recoverable costs to trial for a Band 1 claim against a Band 2 claim is £6,600.00 against £17,000.00 (and £29,000.00 for a Band 4 claim) there is clearly enough prejudice in falling the wrong side of the banding to warrant an argument. 

For property litigation, the reach of the new track could be wide, obvious candidates to be caught are the more modest dilapidations and rent arrear claims. The real question is, will the new FRC be worse for recoverability than the current system? The answer seems to be ‘likely yes’ and certainly yes if property matters end up falling into the lower bands. In which case the question is how best to mitigate this, and some obvious points stand out:

1. Where a claim that would be caught by the new intermediate track has already crystallised but not   been acted on (possibly indeed due to current questions of proportionality) now might be the time to review it and potentially issue ahead of 1 October 2023 to make use of the current system. One point to note is to start the process soon if any pre-action protocols apply so there is no risk of being penalised on costs due to failure to comply with the same;

2. Make sure any drafting includes clear contractual provisions on costs recovery. Chaplair Limited v Kumari [2015] EWCA Civ 798 remains good law and should remain a way to side-step fixed costs; and

3. If in doubt, arbitration may present a better option than litigation…

So perhaps whilst not a ‘revolution’ more a sizeable expansion, the changes should be more firmly on the radar as there is no option here to simply take the blue pill and pretend this isn’t happening…