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Fixed recoverable costs (FRC): The Good, The Bad and The Government Reforms

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The Government has recently announced its plans to reform and extend the FRC regime. Their intention is to ensure that more people have access justice in a predictable and cost efficient way. However, these reforms could have the reverse effect, leaving the general public in the lurch. In this article we explore the FRC regime, the Governments proposals and their implications.

What is the FRC regime?
The FRC regime does what it says on the tin. It sets out the amount of legal costs that a successful party can recover during litigation. These costs include things like solicitors’ fees or court fees and they arise at various points in the litigation process; anywhere from pre-issue to trial. The regime introduced in 2010 for cases involving road traffic accidents up to £10,000 and has since been expanded to include most fast-track personal injury, public liability and employer’s liability claims. The aim of the regime is to avoid deterring parties from exploring litigation because of the potential for heavy costs.

The Government consultation and response.
In 2019, the Government announced that it was going to hold a consultation on whether there should be an extension of FRCs in civil cases. This consultation came in response to a 2017 report produced by Sir Rupert Jackson (then Lord Justice Jackson). In this report, LJ Jackson aimed at reforming the fast-track (i.e. claims valued between £10,000 and £25,000) to make it a “system in which the actual costs of each party are a modest fraction of the sum in issue, and the winner recovers those modest costs from the loser.”

On 6 September 2021, the Government published their long awaited response to the consultation, ‘Extending Fixed Recoverable Costs in Civil Cases: The Government Response’. In this response the Government has confirmed their plans to:

  1. Extend the FRC regime to include all fast-track cases up to £25,000;
  2. Expand the fast-track to include more straightforward cases valued between £25,000 and £100.000; and
  3. Implement a four-band system for allocating claims, based on their level of complexity.

The effect of reform.
Generally speaking, under the law of England and Wales, a successful party to a litigation can recover the majority of their costs from the other side. In the absence of FRC, there is an incentive for litigants to heavily invest in legal advice, which drive up costs. By fixing the amount of costs that the successful party can recover the government’s reforms should successfully prevent bloated and unnecessary costs. Furthermore, the expansion of FRCs should enable solicitors to provide more accurate estimates of costs; empowering future litigants with more certainty and freeing them from disproportionate costs.

Critics have voiced concern that the proposals are somewhat idealistic. They do not account for scenarios where there is a vulnerable or aggressive party who is unwilling or unable to assist in the smooth running of an otherwise simple case. That is, it could result in scenarios where valid costs cannot be recovered. This raises the question of where those costs will fall, and whether solicitors will take on such cases.

Written by Tom Spratley – Trainee Solicitor

If you have an enquiry regarding matters discussed in this article, please contact a member of our litigation department.

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