Fixed Costs and the Intermediate Track – One Year On…

Posted By: on 17th October 2024 | Category: Advice, Blog, Commercial Dispute Resolution, Dispute Resolution

It has long been understood that the costs of litigation can be high, and this can act as a barrier to access to justice. To quote Sir Rupert Jackson in his 2017 report: “If the costs are too high, people cannot afford lawyers. If the costs are too low, there will not be any lawyers doing the work.”

A series of measures devised by Sir Rupert Jackson have, therefore, been introduced since 2010 in an effort to control costs and promote access to justice. The latest major reform was the introduction of fixed costs and the creation of the new Intermediate Track from 1 October 2023.

The Problem of Spiralling Costs

A claim will be allocated to a track once it is defended. There were previously three tracks:

  1. Small Claims Track for claims of not more than £10,000;
  2. Fast Track for claims up to £25,000; and
  3. Multi Track for claims in excess of £25,000.

For Multi Track claims, the usual rule is that the winning party can claim a proportion of its costs from the losing party once the claim has been determined by the court.

In the past, the winning party would notify the losing party of its costs by drawing up a Bill of Costs at the end and the costs would be subject to assessment by the court (if not agreed).

This could create a situation where a party would rack up excessive and disproportionate costs during the course of the litigation and only be held to account for it at the end.

Costs Budgeting

In order to combat the issue of spiralling costs, parties on the Multi Track are now required to carry out a costs budgeting exercise at the allocation stage and adhere to a costs budget for each stage of the litigation.

Fixed Costs and the Intermediate Track

The introduction of a fixed costs regime and the creation of the new Intermediate Track on 1 October 2023 intended to further control costs. The changes included:

  1. A New Track – the Intermediate Track will generally apply to claims between £25,000 and £100,000. This means that the Multi Track will now only apply to claims in excess of £100,000.
  2. Complexity Bands – claims on the Intermediate Track will be allocated to a Complexity Band. There are four Complexity Bands, with Band 1 for the most straightforward cases and Band 4 for more complex cases.
  3. Fixed Costs & Table 14 – costs on the Intermediate Track are recoverable by reference to Table 14 in Practice Direction 45 of the Civil Procedure Rules. Table 14 sets out the fixed costs which will be recoverable for each Complexity Band by reference to stages of the litigation. The court has the power to award costs in excess of the fixed costs in Table 14 but only in exceptional circumstances and in reality this will not be applicable to the vast majority of cases. It is, however, worth noting that lawyers may seek to recover sums in excess of the fixed recoverable costs from their own client by way of a separate agreement to that effect.

One Year On…

Since the reforms were introduced, further guidance was issued in April 2024 to clarify the new rules. However, one year on, we are still waiting to see how the courts will apply the new regime as the first cases subject to the fixed costs regime on the Intermediate Track are decided.

The impact of the reforms, therefore, remains to be seen, although this is undeniably a significant departure from the previous rules on costs recovery.

If you would like to discuss this issue with us in further detail, please contact Liane Simmonds in our Dispute Resolution Team.

 

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