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Extending the Fixed Recoverable Costs Regime
On 28 March 2019 the MoJ released a consultation on the extension of Fixed Recoverable Costs (FRC) in Civil Cases and this consultation process closed on 06 June 2019.
Keoghs have already engaged in roundtable discussions with clients and the MoJ, and submitted a response on the consultation.
In this article we aim to raise awareness of what the proposals are, their possible effects and some potential concerns.
What is the Fixed Recoverable Costs Regime?
The FRC regime is a way of controlling legal costs claimed from a losing party in civil litigation by giving certainty in advance (by reference to a table of costs). The FRC regime currently operates in most low value personal injury cases including RTA, EL and PL matters. It was first introduced into litigated claims following Sir Rupert Jackson’s major report in 2010 which looked more widely at civil costs which led to significant reforms- including the “no win, no fee” reforms in the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (LASPO).
In November 2016 Sir Rupert Jackson was then commissioned to develop proposals for extending the FRC and his report was published in July 2017.
What are the proposals?
The main points of the consultation were:
- Extending the FRC regime to all other cases in the Fast Track up to £25,000 (in damages);
- A new process and FRC for Noise Induced Hearing Loss (NIHL) claims;
- Expanding the Fast Track to include simple “intermediate” cases valued between £25,000 and £100,000 (in damages) and apply FRC.
The regime works by reference to tables which allocate cases to one of four “bands” based mainly upon the value of the claim, albeit other factors can also be taken into consideration, particularly in claims valued between £25,000 and £100,000 where the “complexity” of a claim is given a lot of consideration.
The “stages” of a claim are then broadly separated out for example “pre-issue”, “Post-issue, Pre-allocation”, “Post-allocation, Pre-listing” and as such the “stage” that a claim is in at the time of settlement will determine the amount of fixed costs that can be claimed. It should be noted that this figure is exclusive of Court fees and disbursements, albeit there are some fixed fees in relation to certain drafting, advocacy and expert reports.
The fact that the proposals look to extend this regime to claims valued between £25,000 and £100,000 (in damages) brings with it some further complexities and indeed when this was first proposed by Sir Rupert Jackson he actually recommended establishing a new and separate “Intermediate Track” for these claims.
However, the government decided against the forming of the new Track, especially given the associated costs and complexities that this would entail. This then gave rise to the proposal of an expanded Fast Track to which “intermediate” value cases would be allocated.
Within the proposals there is a prescriptive list of rules for an “intermediate” case, for example- statements of case no longer than 10 pages; oral evidence limited to one expert witness per party (two, if reasonably required and proportionate); oral evidence will be time-limited and directed to the matters identified at the CMC.
The consideration for which one of the four bands a case would be suited to is slightly murkier in intermediate cases than that of claims below £25,000 in that the “complexity” of the case will have more weight. The more complex a matter is, the higher the band it would be allocated to and as such, the higher the potential costs will be, with band four being reserved for the most complex cases where there are serious issues of fact and law to be considered and any trial is likely to be listed for three days.
Other consequential proposals
The main consequential proposal here is the role of Part 36 offers and how they would interact with the extended FRC. The MOJ’s current recommendation prior to the outcome of the consultation is that there would be a 35% uplift on the FRC from the stage that the matter reached at the expiry of the Part 36.
The preference of a percentage rather than indemnity costs is the certainty that it provides when parties are assessing the risks/ rewards in consideration of a Part 36. The certainty of a percentage also sits nicely with the overall aim of the FRC by giving an easily calculated level of costs. While Keoghs is in favour of a percentage rather than indemnity costs, it is felt that the proposed percentage at 35% is too high.
Concerns & Issues
Level of Costs
The current levels of costs included in the proposed tables of FRC are based upon the analysis of a sample of closed cases and have been “adjusted” to take account of the likely efficiency savings from the use of fixed costs. There are however, some concerns with the data analysed as there was no data for professional negligence or property dispute matters, only limited data for housing disrepair claims and potentially distorted data for EL disease claims.
There is also concern that some of the proposed figures may have already taken into account actions such as drafting or advocacy but the MOJ have then also allocated a separate fixed fee of these, essentially meaning that there would be a double recovery on costs.
As discussed above, in intermediate claims, the complexity of a claim as well as the value can be used in proposing the “band” that a claim is best suited to. It is feared that defining the suitability of cases for a band by complexity rather than by the type case will lead to claimant “gaming”. There is no current definition of the level of “complexity” of the issues that would allow cases to be pushed into the more lucrative band four or taken out of the FRC regime entirely and thus there will likely be a push by claimants to state that claims contain “serious issues of fact and law”.
The extension could mean that on claims that would normally be resolved pre-issue, claimants will attempt to issue matters and push them towards allocation where the costs are greater.
Previously the FRC regime triggered a host of “satellite” litigation and claimant “gaming” due to a lack of clarity and certainty provided by the rules, particularly regarding the definitions of terms and their practicable application. It remains to be seen whether lessons will be learnt from the previous roll outs of the regime.
Use of “value” in allocation
It is suggested that in “intermediate” cases the parties are to comment at Letter of Claim / Letter of Response stage as to the potential allocation to band for the claim. In practical terms this would mean that the key consideration available at that point would be to the value of the claim and this can only be done accurately with a fully particularised schedule of loss from the claimant. In reality, for a variety of reasons, a fully particularised schedule of loss may not be provided or available.
It is unclear when the MoJ will respond following the consultation but the target date for the implementation of this extension is April 2020; however it should also be noted that if the extension discussed here is successful that in the future we will see proposals to extend the FRC regime to cases up to a value of £250,000 (in damages).
We are working hard at Keoghs to ensure that we have the right strategies in place for when these proposals are implemented to ensure that insurers of professionals can maximise the benefits and not be caught out by the pitfalls.
As the Government’s intentions become clearer we will provide further insight and guidance.