The draft rules for the long-awaited extension of the fixed costs regime have been published, extending fixed costs to most civil litigation up to £100,000 in value, with the Fast Track covering claims up to £25,000 and a new Intermediate Track for claims of £25,001 to £100,000. They amount to the biggest shake-up in costs and claims procedures for a decade.
Rules 26, 28, 36 and 45 and some of their accompanying practice directions have been amended. The rules and associated costs of existing “portal” MOJ and low value protocols remains unchanged for all qualifying RTA, EL and PL claims.
The implementation date is 1 October, based on (a) the date of issue for non-personal injury claims, (b) the date of the letter of claim for disease claims, and (c) the date of cause of action for personal injury.
As such, non-personal injury claims will, therefore, be first affected, then disease, then personal injury. It is likely that there will be a spike in litigated non-personal injury claims before the new regime goes live.
The new guidance is not as prescriptive as under the current rules, where some of the factors are mandatory. This may prove to generate uncertainty and require judicial discretion.
In both the Fast Track and the Intermediate Track there are four complexity bandings and the difference in recoverable costs across those bandings is significant. Both allocation and banding will be dealt with at allocation, with parties encouraged to seek consensus. It seems inevitable that decisions around allocation and assignment will become highly contentious. The bandings are set out at CPR 26.15 and 16. Certain types of claim, e.g. non-PI RTA claims and those where there is only one issue, or liability is admitted, will fall into band one. In the Fast Track, matters which have commenced in the portal will be Band 2, EL/PL claims Band 3 with Band 4 reserved for matters which are evidentially or procedurally complex. In the Intermediate Track the banding is less prescriptive in terms of types of claim and instead banding will be based more on complexity and issues.
There will be judicial discretion to allocate suitably complex claims to the multi-track even where value is up to £100,000. Once allocated, matters can be reallocated in “exceptional circumstances” or reassigned. There is a fixed amount of costs recoverable for any such application.
Rather than indemnity basis costs awards where a Part 36 offer is bettered, the new regime can apply an uplift of 35%. Early and realistic Part 36 offers will become key.
There is no compulsory mediation, which some anticipated, but there is the opportunity to invoke an unreasonable behaviour clause and costs may be reduced, or increased, by up to 50% if successful. Fixed costs recoverable of £1,200 can be claimed for ADR in the Intermediate Track regardless of banding.
There are now provisions for additional fixed costs to be awarded where either a claimant or a witness is deemed vulnerable – see CPR 45.10 and PD 1A.
The rule requires that the vulnerability must have resulted in additional work of a demonstrable value at least 20% of the fixed costs. This is open to challenge and likely to be one of many areas of uncertainty and conflict.
Defendants can now recover the same fixed costs as a claimant, rather than costs being capped at that amount. If they successfully defend a claim and successfully bring a counterclaim, they will be entitled to their costs and the counterclaim will be treated as a claim, although there are caveats to full recovery, including where it commences in the portal and where it is a non-personal injury claim. These reforms come into force at a time when QOCS has recently been amended to allow the offsetting of a defendant’s costs in personal injury claims.
As a rule, each claimant will be entitled to their own fixed costs, save where claimants are jointly entitled to the remedy (CPR 45.5); or where the court orders that claimants are entitled only to 25% of the principal fixed costs sum if each claimant’s claim arises from the same or substantially the same facts or issues.
There being multiple claimants or defendants will not automatically exclude matters from a particular track as there additional payments built in to reflect this, nor will it automatically affect banding (see 26.7(7)
Disbursements are brought together in section IX of CPR 45. Translation fees are now expressly recoverable in the Fast Track, but the position is not so clear for existing protocol claims.
There is now provision for advice from specialist legal representative, intended trial advocate or for the drafting of statement of case in both Band 4 Fast Track claims, as well in the Intermediate Track at various points. We expect to see a number of in-house “specialist” advisors emerging.
There are no restrictions on disbursements in the Intermediate Track save that they must be reasonably incurred and must not relate to work for which costs are already provided for in the fixed costs calculations, for example agency work.
Claims which are excluded from the fixed costs regime:
Claims which must be allocated to the multi-track:
The figures set out in tables 10 to 15 within the Practice Direction to CPR 45are going to require some analysis to assess their impact in terms of claims spend and how they might drive claimant behaviours. It is noted that unlike the Fast Track fixed costs, Stage 1 in the Intermediate Track has no specified pre-issue costs. The first stage covers all work up to service of the defence. The costs range from a very modest £1,600 plus 3% of damages in Band 1 up to £9,300 plus 8% of damages in Band 4. The intention is perhaps to discourage claimants from issuing proceedings and to avoid incurring the cost of same; however, new behaviours will likely emerge on both sides.
In Stage 1 on the Intermediate Track the costs figures provided act as a cap in non-personal injury claims and a fixed figure in personal injury.
By way of two worked examples, a Fast Track claim that settles for £15,000 post-allocation but pre-listing will see a range of costs allowed from £2,500 for Band 1 up to £12,400 for Band 4, with VAT and disbursements on top. An Intermediate Track claim that settles at Stage 6 (up to the PTR or 14 days before trial) for £50,000 sees a range from £13,400 to £33,000 depending on banding.
As ever, the devil is in the detail and anyone dealing with claims will be analysing these reforms in the context of their claims portfolio to assess the financial implications and how the changes will inform future behaviours and strategies. While the changes to personal injury claims lie in the future, there is an immediate impact on other claims that will require urgent consideration.
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Technical Director of Costs
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