Will I get my costs back if I win: Countdown to 1 October 2023
This is our latest update as we draw near to the introduction of a “fixed costs” regime for most civil court disputes (including those involving businesses), where the amount at stake is over £10,000 up to £100,000.
Previous articles can be found here:
When is the fixed costs regime coming in?
On 1 October 2023, only weeks away. The changes had been in the pipeline for several years but the draft court rules have now been published.
What are the main changes?
To recap, the court “fast track” currently covers claims valued between £10,000 and £25,000. Anything less than that is usually a “small claim” with a few specific exceptions.
The current general rule in the fast track (also with limited exceptions) is that a party that wins at trial can recover costs from their opponent, to be assessed by the court. There is a good deal of flexibility in the assessment process although the costs awarded generally have to be reasonable and proportionate.
As originally proposed there will after all be a new “intermediate track” for cases valued at over £25,000 and up to £100,000, but both this and the fast track will be subject to the fixed costs regime.
What about cost recovery?
The previous proposals are to be implemented for both the fast track and intermediate track. In either case, claims will be allocated to one of 4 bands based on their complexity, and there will be a “costs grid” originally drafted in 2017 and since adjusted for inflation. For each band of claim there will be 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 – since many cases settle before trial. In most cases that will be the limit of their entitlement to costs; again there will be some exceptions to this rule.
The amount of the claim will also be a relevant factor. A percentage of the claim can be recovered, in addition to fixed amounts, in all but the simplest fast track cases.
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.
Will it be cost effective to take legal action?
On the whole the changes will work to the disadvantage of a business with a seemingly strong case, who will stand to recover less by way of costs than previously.
Any business owner tempted to “plunge” into litigation for a sum from £10,000 (the small claims limit) to £100,000 should not do so without planning and – we suggest – legal advice as to the implications – especially anywhere near the lower end.
Can I do anything before the rules change?
The new regime is set to cover cases where the court proceedings are issued on or after 1 October 2023.
In the short term (well before 1 October) anyone thinking of starting a claim within the above financial limits should consider doing so before the rules change!
There may also be other steps businesses can take to protect or enhance their position, whether in the short or the long term or both, and whether generally or in specific cases or both.
Alternatives to litigation?
It will be increasingly important to consider alternative ways to bring and resolve claims quickly, including arbitration, mediation and other forms of dispute resolution.
Can a robot hear my case instead?
Not yet (although the time may well come!) but there are online options available to SMEs including, in particular, the “Online Civil Money Claims” (OCMC) pilot scheme, which involves a streamlined process for certain types and values of claim. Although this is a pilot scheme, it is likely to become permanent and the scope of the OCMC scheme may be broadened to include larger value claims than the current limit of £25,000, which currently only applies where the parties are both legally represented.
There will be very limited, if any, costs recovery for a successful party in the OCMC but it may represent a more cost-effective option, in cases which are covered, than old-style litigation under the fixed costs regime. It is always wise to seek initial legal advice on the options that are available in any given case.
Any business deciding whether to bring, or to defend, a potential claim of anywhere between £10,000 and £100,000 is recommended to take legal advice at an early stage (and, for now, well before 1 October!), since the forthcoming changes will impact on their ability to recover costs.
It may be vital to issue any claim before the 1 October deadline but there may need to be preparatory steps taken before this is done, so any potential claims should be considered and actioned as soon as possible.
We will issue a further update in the near future.