Legal Costs Recoverable From an Opponent to Change

New rules on the legal costs recoverable from an opponent will affect how much the ‘winning party’ can recover from the ‘losing party’
Fri 25th Aug 2023

New fixed recoverable costs rules, which come into effect from 1 October 2023, will mean that a successful party is likely to recover less from their opponent than they can at present.

The new rules will apply to all claims up to a value of £100,000 issued on or after 1 October 2023, except for personal injury claims if the cause of action occurred before 1 October 2023, and disease claims if the letter of claim is sent before 1 October 2023.

Some limited exceptions will also enable cases to fall outside of the fixed costs regime. These are:

  • mesothelioma and asbestos disease claims,
  • clinical negligence (unless liability and causation are admitted),
  • child or vulnerable adult abuse claims, 
  • where a jury trail is required,
  • claims against the police, and
  • housing claims.

Navigating the ‘complexity bands’

The changes are not straightforward. Both fast track and intermediate track claims will be allocated to a complexity band. 

There are 4 complexity bands, 1 being the least complex. So, for example a relatively simple fast track debt claim will be allocated to band 1 and a complex professional negligence claim will be allocated to band 4.

For fast track claims, the rules set out which claims fall into which bands. The guidance for the intermediate track is less prescriptive and takes a more general approach to assessing the complexity of a claim. 

It is likely that the band allocation will be a point of contention for lawyers, and that it will be used strategically by parties depending on whether they anticipate paying or receiving a payment of costs. Parties are required to set out which complexity band they think their claim falls into in the directions questionnaire. This can be agreed between the parties. If the parties cannot agree, the issue will be determined by the judge at an allocation or complexity assignment hearing.

As you would expect the amount of recoverable costs increases depending on the value of the claim and the level of complexity. There is very little guidance on how complexity bands will be allocated and only time will tell how the courts will approach this.

Parties can avoid falling under the fixed costs regime by arguing that their claim is so complex that it must be allocated to the multi-track. Another avenue open to parties is to argue that their opponent has been so unreasonable, that there should be an increase or reduction in the amount of costs paid. The maximum amount of any increase or reduction is 50%.

Limited court powers

The court will have very limited powers and cannot depart from the fixed costs regime unless the claim is reallocated. Also, it is only in exceptional circumstances that the court can:

  • consider awarding costs beyond what is allowed under the rules; or
  • reallocate the claim to a different track; or
  • reassign the claim to a different complexity band (which only a change in circumstances can justify).

Whilst the new rules are relatively complex it will mean that there is no longer a requirement to prepare a costs budget which is a time consuming and costly process.

Overall, the new rules are unlikely to change the amount it will cost to litigate, but they will provide the parties with more certainty about how much they will receive or have to pay at the conclusion of the case.

Should you issue proceedings sooner or later?

Some claimants may wish to consider issuing proceedings ahead of the new rules coming into force, to benefit from the current approach, provided that all pre-action protocols requirements are satisfied. In which case claimants should weigh up the likely prospects of success as part of that decision. Parties with a case that is considered to be of higher risk, may prefer the certainty of the new fixed costs regime post 1 October 2023.

If you would like more information about the fixed costs rules or have a claim that you need to discuss, please contact Tracy Lacey-Smith by calling 01727 798016, or completing the contact form below.

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Every care is taken in the preparation of our articles. However, no responsibility can be accepted to any person who acts on the basis of information contained in them alone. You are recommended to obtain specific advice in respect of individual cases.