A new fixed recoverable costs regime is now in effect for court claims in England and Wales for £100,000 or less (with some limited exceptions). In practice, the new rules mean that the amount of legal costs that a winning party will be able to claim back from the losing party will be fixed and calculated by reference to the amount claimed and the stage the case concluded, not the amount of costs incurred. Our previous article explains how the regime works in practice.
The aim of the regime is to make sure that the costs payable by the losing party are proportionate to the amount in dispute, and the fixed recoverable costs figures have been set accordingly. However parties still need to be able to properly present their case and will still need to incur the costs involved in doing so. Some attempt has been made to limit the work involved in such claims, but this is likely to have minimal effect. It has also caused criticism, for example the length of an expert report is limited to 20 pages, but the Expert Witness Institute has expressed concern that experts may not be able to meet their full court obligations within this page limit. This means that even if a party to litigation succeeds at trial, the costs it is entitled to recover are likely to be considerably less than the costs incurred in bringing or defending such claims. In light of this, companies may wish to consider introducing new contractual terms into their agreements to increase costs recovery in the event of a dispute subject to the fixed costs regime, or the inclusion of arbitration or other alternative dispute resolution mechanisms.
Another hope of the new regime was that increasing the predictability of costs would facilitate earlier and more frequent settlement. There is, however, a possibility that this could backfire. Often, the fear of unknown cost consequences drives parties to settle prior to trial. Knowing that costs are fixed at a certain level may actually give parties the confidence to pursue claims all the way to trial, safe in the knowledge that (provided they have acted reasonably throughout the proceedings) even if they lose, their costs are unlikely to exceed a fixed amount.
It is likely that the new regime shows the direction of travel for how the English courts will approach costs recovery, and it is anticipated that it will be extended in the future to higher value claims.
Laura Beagrie