The Extension of Fixed Recoverable Costs (FRC) is coming

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07 October, 2021

We have long been waiting for the Government's response to their Consultation on the extension of FRC in civil cases in England and Wales, following Sir Rupert Jackson's 2017 recommendations. He and the Government have expressed their desire to expand the application of FRC in order to control litigation costs as a way to promote access to justice. As Sir Rupert remarked in his Report on Fixed Recoverable Costs in 2017:

"If the costs are too high, people cannot afford lawyers. If the costs are too low, there will not be any lawyers doing the work."

Whilst there is no implementation date as yet, the Government have now published their response indicating their desire to press on with introducing Sir Rupert's recommendations including:

  1. The extension of FRC to all civil claims across the fast track beyond personal injury claims FRC.
  2. A new process and separate grid of costs for noise induced hearing loss (NIHL) claims valued below £25,000;
  3. The introduction of new intermediate cases and corresponding FRC for less complex claims from £25,000-£100,000. (the idea of a new "intermediate track" to add to the small claims, fast and multi tracks has been rejected on the basis that it would add another unnecessary level of complexity).

The report talks about providing increased access to justice by having certain and proportionate costs allowing parties to decide in a more informed way whether and how to litigate. Opponents say it will allow those with deep pockets to force opponents into lengthy litigation.

One of its stated intentions is to encourage greater discipline in litigation if parties know the costs that will apply when certain stages of litigation are reached, as well as reducing costs so far as is possible, and to restrict recoverable costs to that which is proportionate.

The Government considers that the existing Personal Injury FRC regime backed by Qualified One Way Costs Shifting that has been in place for several years now has promoted access to justice for both claimants and defendants. For claimants in that at first sight the playing field is tilted against them when facing a sophisticated insurance company as the opponent. And for defendants by enabling them to defend a claim on its merits, rather than settle for fear of high costs.

The new regime will place a claim in one of 4 fast track or intermediate claims bands, mainly based on the value of damages recovered, but will also have the facility to identify more important or complex cases and allow higher FRC by placing them in a higher band than would otherwise be the case. There will be separate banding for Noise Induced Hearing Loss claims.

The new FRC will apply to accidents or causes of action that arise after the implementation date, or in NIHL claims to those claims where no letter of claim has been sent before the implementation date.

The Fast Track

All fast track cases will be allocated to one of the four bands of complexity. These are:

Band 1 - RTA non-PI claims (i.e. 'bent metal' or damage to vehicles only) and credit hire, defended debt claims;

Band 2 - RTA PI claims (within the Pre-Action Protocol (PAP));

Band 3 - RTA PI claims (outside the PAP), EL Accident, PL, tracked possession claims, housing disrepair, other money claims;

Band 4 - EL Disease (excluding noise induced hearing loss (NIHL)), particularly complex tracked possession claims or housing disrepair claims, property disputes, professional negligence claims and other claims at the top end of the fast track.

An unsuccessful band challenge will incur a costs liability of £150 (to be kept under review).

A party can exit FRC only in exceptional circumstances,

The government will not give further guidance or changes to the rules to reinforce the role of judicial discretion in band allocation but will welcome the views of the Civil Procedure Rules Committee as to if that is necessary.

On successful Part 36 offers, an uplift of 35% of FRC will apply to those stages after the Part 36 offer.

The penalty for unreasonable behaviour during litigation is a percentage uplift on FRC of 50%.

There will be a 25% FRC uplift for each additional claimant, in claims that arise from the same set of

facts.

There will be a London weighting of a 12.5% uplift on fixed costs payable to a party who lives in the London area and instructs a legal representative who practices in the London area.

NIHL

There will be a new process and separate grid of FRC for NIHL claims in the fast track valued below £25,000 in damages.

In relation to pre-litigation process and draft letters of claim, there will be a requirement for certain mandatory actions to be taken by both claimants and defendants in NIHL letters of claim and response.

The Government sees the merit in standard direction but thinks that this is something that should be taken up by the industry.

Intermediate Cases

Whilst largely accepting Sir Rupert Jackson's report, the government has decided against creating a new "Intermediate track" as it did not want to complicate the Civil Procedure Rules unnecessarily. Instead, there will be intermediate cases within an expanded fast track up to £100 000 in value to which the FRC regime will apply. Simpler "intermediate" cases will be allocated to the fast track where appropriate.

Court fees under the existing multi-track will be retained but kept under review.

The Government confirmed that mesothelioma/asbestos, complex PI

and professional negligence, actions against the police, child sexual abuse, and

intellectual property will be excluded from intermediate cases.

There will be four-band structure for intermediate cases:

Band 1: - the simplest claims that are just over the current fast track limit, where there is only one issue and the trial will likely take a day or less, e.g. debt claims.

Band 2: along with Band 3 will be the 'normal' band for intermediate cases, with the more complex claims going into Band 3.

Band 3: along with Band 2 will be the 'normal' band for intermediate cases, with the less complex claims going into Band 2.

Band 4: the most complex, with claims such as business disputes and EL Disease claims where the trial is likely to last three days and there are serious issues of fact/law to be considered

It will be the role of judges to exercise their discretion and ensure that intermediate cases are appropriately allocated. No intermediate case is to be allowed to exit from the proposed FRC regime unless there are exceptional circumstances. But the Government agrees that there will be cases, of whatever category, which are particularly complex and, while for under £100,000 in damages, do not, therefore, comply with the criteria for intermediate cases such as trial lasting no more than 3 days, no more than 2 experts for each side giving oral evidence, no wider factors such as reputation or public importance at play making it unsuitable. Judicial discretion will be used accordingly.

However, in a move clearly designed to reduce changes to the allocation to a Band, a challenge to allocation will incur a costs liability of £300, and challenging band allocation (or resisting a challenge) without sufficient basis could amount to unreasonable behaviour, incurring further costs penalties.

Vulnerabilities

Some respondents to the consultation suggested that acting for vulnerable claimants would produce additional costs and that this will need accounting for. The government accepts that there may be grounds to make limited exceptions to FRC for specific vulnerabilities.

Forbes Comment

This report will no doubt be welcomed by defendants, their insurers and lawyers, as bringing certainty to the cost of litigation, helping them reserve more accurately and enabling them to make better informed decisions about the cost of defending proceedings. There will no doubt be challenges despite the best efforts of the authors of the report to discourage that with the built in costs penalties, and we will have to wait for some cases to go through that process to see what the courts make of what "exceptional circumstances" are such that it will fall outside this regime.

For more information contact Siobhan Hardy in our Insurance department via email or phone on 0113 386 2686. Alternatively send any question through to Forbes Solicitors via our online Contact Form.

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