Litigation fixed costs: what are they and how will it affect your dispute?

On 6 September 2021 The Ministry of Justice confirmed that it intended to implement proposals for fixed recoverable costs for ‘fast-track cases’ and in most money claims worth up to £100,000. How will that impact on claims in the civil courts?

Since the 2021 announcement progress in implementing the new costs regime has been slow but it now seems likely that fixed costs for most claims worth up to £100,000 will be coming next year and some commentators predicting that the fixed costs regime will be extended to cover cases up to a value of £250,000, possibly within the next 5 years.

What are fixed costs? The proposals are intended to ‘fix’ the amount of costs that a successful party can recover from a losing party.

Historically a successful party awarded their costs nearly always suffered a shortfall in the costs awarded to it of approximately one third of its costs bill. In 2013 costs budgeting was introduced for all ‘multi track’ cases i.e. certain complex cases and most claims of over £25,000. Costs budgeting forces the party to provide a costs budget of the costs it expected to incur throughout the litigation process and, once that budget is approved by the court, recoverable costs are limited to the amount of the approved costs.

The new fixed costs proposal are intended to replace the existing costs regime for ‘intermediate cases’ of between £25,000 and £100,000 so that the recoverable costs will be fixed at the outset based on case value and complexity.

The intention behind the proposal is that it will force change in how litigation is conducted. The parties to litigation will know before they embark on court proceedings the amount of costs they can recover at different stages of the litigation and this should in theory force parties to adopt a more ‘proportionate’ approach to their dispute. If parties still wish to adopt an “at any cost” approach to their dispute they can expect to be left out of pocket at the end of the day.

The intention is for the rules to be approved by a date in December 2022 so that the reforms can be implemented in April 2023.

For any help and advice contact Johanne Spittle on York 01904 716000, Wetherby 01937 583210 or Malton 01653 692247 or email johanne.spittle@warekay.co.uk.