The New Regime
From 1 October 2023, new rules were implemented for legal costs recoverable by one party from another in civil litigation.
The amount of costs recoverable in a claim depends on the allocation of a case to a specific track. A party must indicate which track the claim should be allocated to when completing their Directions Questionnaire. The parties to a claim may agree which track and complexity band the claim should be allocated to. The complexity bands apply only to those claims which fall into the Fast Track and Intermediate Track. If parties cannot agree the track, it is important for each party to clearly set out, with as much evidence as possible, which track and band they believe the claim should be allocated to for a Judge to consider.
A claim may be allocated to one of the following tracks:
Small Claims Track
This track is for claims with a value of up to £10,000.00. Under the small claims track, only a small amount of fixed costs are recoverable.
Fast Track
This track is for claims with a value of between £10,000.00 and £25,000.00. The fixed recoverable costs regime now applies to all cases in the fast track except for cases which fall under the transitional provisions or under other identified exceptions.
Under the new regime, the fast track will be divided into four complexity bands numbered one to four with one being the least complex and four being the most complex. The costs recoverable increase in line with each band and are dependent on which stage the matter is disposed of in the proceedings.
It is important to note that there is a maximum threshold in the Fast Track for costs recoverable. For a claim that is allocated to band 4 of the Fast Track and disposed of at trial, the maximum possible amount that a successful party can recover for Solicitors fees alone, regardless of the amount claimed, is £8,155.00 +an amount equivalent to 40% of the damages agreed or awarded + £785 per extra Defendant. Therefore, it is important to consider that the cost of a claim can quickly outweigh the value of the claim itself once proceedings are issued.
Intermediate Track
This track is for claims with a value of between £25,000.00 to £100,000.00.
The Intermediate Track was introduced under the new regime. As with the fast track, there are four bands to which a claim may be allocated, however it appears that the bands in the intermediate track focus more on the number of issues within a claim, rather than the complexity of the claim.
As with the Fast Track, the costs recoverable are based on a fixed amount plus a percentage of the damages awarded. However, under the Intermediate Track, the costs recoverable are divided into 16 stages and the successful party is entitled to costs for each stage up to the point the claim is disposed of.
Multi Track
This track is for claims with a value of over £100,000.00.
Under the Multi Track, fixed recoverable costs do not apply and the amount of costs awarded will be decided by the Judge at trial.
It is important to note that claims that fall within the value of a set track may still be allocated to a different track based on various other factors such as the level of complexity and the number of experts required.
Consequences of the New Regime
Impact on Possession Claims
As it stands the fixed cost regime does not apply to residential possession claims under Civil Procedure Rule 45.1(4). It is expected, nevertheless, that the regime will soon extend to these claims following an initial two year delay from 1 October 2023. The fixed cost regime does however already extend to commercial possession claims. As a result, it is more important than ever that Solicitors include clear contractual clauses when drafting a lease. Civil Procedure Rule 45.1(3) is very clear in this regard as there must be an express agreement between the parties that the fixed costs regime under Civil Procedure Rule 45 should not apply.
Other Consequences
Under the new regime, clients will have more transparency on what costs can be recovered at the outset of a case. However, allocation is still ultimately up to the Judge’s discretion and therefore, allocation to a specific band within these two tracks cannot be guaranteed. The bands are also quite vague, making it more difficult for solicitors to advise their clients which band their claim is likely to fall in.
In addition, there are likely to be disagreements between parties as to which track the claim should be allocated to for claims which are to be allocated to the Fast Track or Intermediate Track. It is probable that parties will want to be more tactical with their approach to allocation since a Defendant is likely to request that the matter be allocated to a lower band in order to limit the liable costs, whereas the Claimant is likely to request that the matter be allocated to a higher band in order to be able to recover the maximum amount of costs.
As a result, the new regime is likely to cause further delays in the Court system due to the additional task imposed on Judges to review the evidence submitted by each party in support of the claim being allocated to a specific track and band. There is therefore more work imposed on Judges and the parties from the outset of a case.
Conclusion
It is difficult at this stage to assess how flexible the Judicial system will be in allocating a claim to a band in the Fast Track and Intermediate Track. It will also be interesting to assess how practical the new regime will be and how it will affect the progression of a case.
We would advise contacting an expert in our Dispute Resolution team to discuss any dispute you have, whether Court proceedings have been issued or not. Our experts will advise you on the options available to you, your liability and advise you on the costs recoverable.
Key Contacts
For more information about how we can help you in relation to disputes or costs recoverable in civil litigation please contact Mark Brassey on 020 7462 6027 or Monika Totman on 020 7436 5151.
