Fixed recoverable costs in civil claims valued at less than £100,000 planned for next year

06 Sep 2021

The idea of FRC in civil litigation was aired nearly 25 years ago in the Woolf reports and was implemented to a limited extent - for fast track mainstream personal injury cases - in 2013, following strong support in Jackson LJ’s first report. His second, in 2017, recommended introducing separate FRCs for the remainder of the fast track and for all claims of less than £100,000 in value. This was well received by government and the Ministry of Justice consulted on the matter in 2019 with a firm view to implementation. Work towards implementation then paused because of the pandemic, but today the MoJ has very clearly spelled out that it intends to extend FRCs next year, broadly along the lines already proposed.

Key points of today’s MoJ response to consultation (available here)

  • The government has accepted the arguments in favour of extending FRCs and is committed to implementation
  • Fast track FRCs will be extended ‘horizontally’ so that all civil claims under £25,000 are caught, subject to certain excluded areas such as: mesothelioma and asbestos-related claims, clinical negligence claims, actions against the police, and child sexual abuse claims
  • This will see four bands for FRCs in the fast track, catering for cases of differing complexity within this track (there are already three: for RTA, EL and PL claims respectively)
  • Separate FRCs and procedures will be introduced for fast track noise-induced hearing loss (NIHL) claims
  • The extension ‘vertically’ of FRCs will see a different style of FRCs (allowing modular add-ons for necessary procedural steps, in addition to featuring value and resolution stage elements as in the fast track) being introduced in lower value multi track cases of up to £100,00 in value
  • There will also be four costs bands for intermediate value FRCs
  • The figures proposed in the earlier consultation will be increased in line with the Services Producer Price Index (SPPI) as part of implementation
  • The new FRC regimes will be introduced for claims in which the cause of action arises on or after the date of implementation (or , in disease claims, if no letter of claim has been issued before implementation)
  • As at present, there will be an ‘escape’ mechanism in order to allow for ‘exceptional circumstances’ to be argued in order to revert to costs at large (ie hourly rates & budgets)

What does this mean for you?

Obviously, it is too early to provide any detailed commentary but experience suggests that there is likely to be litigation around the margins of the FRC schemes, focusing on (i) getting out of them, ie scrutiny of excluded case types and of the ‘escape’ clauses and (ii) maximising costs if within FRCs, ie disputes about case bandings and resolution stages.

Aside from such satellite litigation, experience also suggests that paying parties will be better able to predict the costs of litigation within the FRC schemes and therefore to resolve claims more efficiently. This will be especially relevant to significant repeat players such as insurers, local authorities and corporate defendants.

It is also worth noting some technical aspects which the MoJ’s publication has clarified. In the fast track: (i) banding - credit hire will come within band 1 (lowest complexity, lowest costs) and holiday sickness claims will come within band 2; (ii) behavioural uplifts -  unreasonable litigation conduct will trigger a 50% uplift of FRCs and in respect of part 36 offers a 35% uplift will be applied as opposed to reverting to indemnity costs; (iii) case-related uplifts - will include 12.5% by way of London weighting and 25% for additional claimants in the same cause of action.

Conclusion

Although the MoJ’s response document published today states that progress “has been delayed, principally due to the COVID-19 pandemic”, it represents the resumption of work towards extending FRCs very much along the lines proposed in 2017 and 2019. The government will be working with the Civil Procedure Rule Committee on the detail of the rule changes needed and with MoJ officials and others to finalise the SPPI inflation-based increases to the figures proposed before the pandemic.

There is a very significant amount of work involved to bring forward the final package of Civil Procedure Rules (CPR) and costs tables. While implementation by secondary legislation to amend the CPR is a good deal quicker than primary legislation, it seems to us that the necessary activity here is unlikely to be completed in the six or so months before next April. But these reforms are very definitely coming and absent any clear indication otherwise, it may be realistic to plan for implementation in autumn 2022.

Finally, for a reminder of the costs structures, case bandings and procedural modules which underpin the FRC schemes in both the fast track and in intermediate value cases, please refer to our alert about the initial consultation in 2019 (here) which provides all of the detailed elements which will now be taken forward in drafting the new rules and in inflating the individual elements of costs.

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Disclaimer: This document does not present a complete or comprehensive statement of the law, nor does it constitute legal advice. It is intended only to highlight issues that may be of interest to customers of BLM. Specialist legal advice should always be sought in any particular case.

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Alistair Kinley

Alistair Kinley

Director of Policy & Government Affairs,
London


Paul Wainwright

Paul Wainwright

Partner (FCILEx) and Head of Costs Practice Group,
Manchester


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