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Extension of litigation fixed costs regime

In recent years the Government has applied a great deal of focus to the whole question of the funding of the civil litigation system and the ability of litigating parties to recover costs against opponents.

The policy in relation to the funding of the civil courts has essentially been to shift responsibility for their funding from the state to the court user, and for obvious reasons the focus has fallen on business users as those best able to pay. The result has been an enormous increase in court fees, not just for the issue of a claim but for all stages up to and including the trial of an action, with the result that the number of business disputes resulting in a court claim being issued has diminished significantly.

As far as the ability of a litigating party to recover costs is concerned, it is worth remembering that whilst in England the principal has always been that in general terms the successful party would recover most of its legal costs against a defeated opponent, that is not the position in all foreign jurisdictions, for example in the USA the general principle is that litigating parties each absorb their own costs, subject to limited exceptions.

The Government has now confirmed that as from 1 October 2023 it has implemented a very significant extension of a fixed costs regime.

In very general terms:

  • claims up to £10k are treated as “small claims” with a very informal procedure, and very few costs are recoverable apart from court fees;
  • claims between £10k and £100k are now to be subject to a fixed cost regime.

Fixed costs claims will be allocated to one of 4 bands based on their complexity, and there will be a “costs grid” with a set of figures which the winning party in a case can recover by way of costs from the losing party for each phase of the case up to trial.

A percentage of the claim can be recovered, in addition to fixed amounts, in all but the simplest cases. The amount of the claim will also be a relevant factor.

However, as a general rule the amount of work done on the case will no longer be a relevant factor in awarding costs as between the winning and the losing party.

The grid will only determine how much the winning party can recover – not the amount they will have to pay their own legal team, which remains a matter to be agreed between the client and the lawyer.

More detail can be found here.