5 June 2024 by Jessica Egan

The impact of fixed recoverable costs regime

The second instalment of the ‘Jackson reforms’, which changed the way litigation works in this country, came into effect on 1 October 2023.  Among the latest changes is the new ‘fixed recoverable costs’ regime.

Under the new regime, the costs capable of being recovered by one party in a legal dispute from their opponent will be limited. The limit will be on a sliding scale and will vary dependent on the stage the claim has reached and the complexity of the claim.

Within the directions questionnaire, parties are able to propose a level of complexity to the claim. However, ultimately it will be for the court to decide, as it also has capacity to supersede the allocated complexity level if it deems this necessary.

This regime applies to the existing fast track and a newly implemented intermediate track. There are a select few matters to which the fixed recoverable costs regime does not apply yet, including housing claims and clinical negligence claims amongst others.

The new intermediate track has been introduced to cover claims valued from £25,000 to £100,000, providing a track for claims that are considered less complex than those in the multitrack but more complex than those on the fast track.

The intention behind the new fixed recoverable costs regime is to foster greater certainty and transparency for legal costs, as parties are able to determine (to a greater extent) the likely costs they can recover throughout their claim.  Having a clearer view on costs will hopefully ensure that solicitors and clients alike will give greater consideration to costs accruing. Clients can improve their position, by keeping their own costs to a minimum, entertaining positive settlement conversations and considering alternative dispute resolution (which is not bound by the fixed costs regime).

In a further effort to encourage claimants to settle before they reach trial, changes have also been made to the rules governing offers to settle a dispute. Where a defendant fails to accept a Part 36 offer made by the claimant and the defendant later loses at trial, the claimant is able to recover their fixed recoverable costs plus an additional 35% on top.

Critics, however, have suggested that the picture on costs can lack transparency. The fixed recoverable costs are limited and may not be representative of the final costs incurred. This is especially true for particularly complex matters. This ‘one-size-fits-all’ approach means that parties will be liable to cover any excess costs incurred. This could potentially deter parties from pursing legitimate claims and essentially create a barrier to justice for some.

Finally, parties to a dispute are still able to contract out of the fixed recoverable costs regime if expressly agreed between them. The new fixed recoverable costs regime is still very much in its infancy and solicitors will have to adapt to the new regime and await further guidance on its intricacies as and when case law filters through.

At Bolt Burdon we are committed to providing our clients with brave, bespoke and brilliant legal advice. Although we will inevitably be bound to adopt the fixed recoverable costs regime, we have an innovative view on costs already. Unlike most law firms that operate a 6-minute, unit-based charging system, we only charge for the actual time spent working on your matter. We adopt this system as we believe this a candid and more equitable approach for our clients.

If you have any questions about the issues raised in this article, please contact our expert Real Estate Disputes team.

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