On 1 October 2023, the new Fixed Recoverable Costs (FRC) rules came into force. Fixed costs already applied to claims under £25,000, but the rules will now impact a greater proportion of claims, including those valued at between £25,000 and £100,000 which are issued on or after this date.

What does FRC mean?

The newly amended FRC rules now limit exactly how much a successful party to a claim can recover in legal fees from the opposing party, depending on at what stage of the matter the claim settles, and the matter’s complexity.

FRC will apply to the majority of claims valued at up to £100,000, although there are some exceptions, including:

Mesothelioma and related diseases
Abuse claims
Housing disrepair and possession claims
Clinical negligence claims (unless breach of duty and causation have been admitted)

All claims not falling within one of the exceptions will be heard on the fast track (for claims up to £25,000) or on the new intermediate track (for claims between £25,000 and £100,000). On both tracks, claims will be allocated to one of 4 complexity bands, which will determine the costs which will be recoverable on completion of the matter (band 1 being for the simplest matters, and band 4 being for the most complex). Judges will maintain a discretion to allocate complex matters which, despite being valued at £100,000 or less, they consider do not belong in the fast or intermediate track, to the multitrack where FRC will not apply.

What are the costs that can be recovered under FRC?

The recoverable costs for each stage and complexity band are set out in the Civil Procedure Rules. Below are a few examples from the intermediate track to demonstrate how different costs will be capped per band and per stage.

Stage	Band 1	Band 2	Band 3	Band 4
S1 – From pre-issue up to and including the date of service of the defence	£1,600 + an amount equivalent to 3% of the damages	£5,000 + an amount equivalent to 6% of the damages	£6,400 + an amount equivalent to 6% of the damages	£9,300 + an amount equivalent to 8% of the damages
S3 – From the date of service of the defence up to the date set for CMC or the order giving directions	£4,000 + an amount equivalent to 10% of the damages	£7,700 + an amount equivalent to 12% of the damages	£9,100 + an amount equivalent to 12% of the damages	£13,000 + an amount equivalent to 14% of the damagBan es
S4 – from the end of Stage 3 up to and including disclosure of documents	£4,600 + an amount equivalent to 12% of the damages	£9,400 + an amount equivalent to 14% of the damages	£11,000 + an amount equivalent to 14% of the damages	£16,000 + an amount equivalent to 16% of the damages
S5 – from the end of stage 4 up to and including exchange of witness statements or expert reports (whichever is later)	£5,200 + an amount equivalent to 12% of the damages	£11,000 + an amount equivalent to 16% of the damages	£12,000 + an amount equivalent to 16% of the damages	£20,000 + an amount equivalent to 18% of the damages
S6 – from the end of stage 5 up to and including the pre-trial review or 14 days before the trial date, whichever is earlier	£5,900 + an amount equivalent to 15% of the damages	£15,000 + an amount equivalent to 16% of the damages	£16,000 + an amount equivalent to 16% of the damages	£24,000 + an amount equivalent to 18% of the damages

In exceptional circumstances, the Judge will be able to vary the amount of costs parties are ordered to pay, if for example one of the parties has acted unreasonably in the conduct of the claim. However, such orders are expected to be rare.

Emma Butcher

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Shauna Jones

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However, it is important to note that FRC only affects the amount of legal costs which are able to be recovered from the opposing party.

What does this mean for me?

The introduction of FRC and the new intermediate track will not drastically change litigating claims for most businesses. However, it is important to note that FRC only affects the amount of legal costs which are able to be recovered from the opposing party. There may be a shortfall between the costs recoverable on success, and the total legal costs actually incurred.

The key aim of FRC is to ensure that costs are proportionate to the matter involved, and that they are clear and transparent to parties at the outset of the claim. Being aware of the maximum costs you would be ordered to pay your opponent in the event of being unsuccessful is beneficial, as it will allow prospective litigants to better assess their risks, and to budget and plan appropriately. The changes may also help parties to reach early agreement, if they know that the sums payable under FRC will mean the that continuing to pursue a claim may be disproportionate to the outcome sought. FRC may therefore result in parties being encouraged to settle disputes at an earlier stage, through alternative routes such as mediation, avoiding the need for lengthy, expensive proceedings.

Please contact our litigation team if you would like further advice on the implementation of FRC and how this may impact on future claims.

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About this article

Subject

Fixed Recoverable Costs: 1 October 2023 Changes
Author

Emma Butcher
Expertise

Litigation and dispute resolution
Published

06 November 2023

Disclaimer
This information is for guidance purposes only and should not be regarded as a substitute for taking legal advice. Please refer to the full General Notices on our website.