Will I still get my costs back if I win? – Fixed costs, 2 years on

Andrew Koffman

This is the latest in a series of articles on the “fixed recoverable costs” regime introduced in the civil courts in October 2023.  The most recent articles before this one can be found here: 

Bermans Will I get my costs back if I win? | Bermans 

Bermans Will I still get my costs back if I win: The Final Countdown to 1 October | Bermans 

For defended civil claims of over £10,000 and up to £100,000 in value, with few exceptions, the costs recoverable by the successful party from their opponent are now determined by reading off the relevant figures on a table annexed to a court Practice Direction, rather than by the process of “detailed assessment” or “summary assessment” by a judge.  The costs are not strictly “fixed” in anything but the very simplest cases (the amount claimed or recovered is also a relevant factor) but the costs in affected cases are now easily calculated and more transparent, if – in most cases – less generous to the successful party. 

Looking back and re-reading the previous articles, and other commentaries, after 2 years of the new regime, what has changed for small and medium-sized businesses involved in litigation? 

When the new regime was introduced, much debate was expected about the various “complexity bands” into which cases are now to be divided.  However the differences in costs entitlement between (for example) two adjacent bands are rarely sufficient to make it worth incurring significant further costs in challenging, in court, the complexity band chosen by the judge at an early stage without a hearing.  

For an SME business involved in litigation, typically in a dispute over a contract within the above range of values, the cost-effectiveness of litigation as a remedy may depend on whether there is a more generous entitlement to costs, than fixed costs, written into their contracts. 

Also relevant is the court’s new power to compel litigating parties to mediate: Bermans Do I have to take my dispute to mediation? | Bermans

In short, and assuming no enhanced right to recover costs under the contract, if there is a claim of over £30,000 to 40,000, which appears to have good prospects of success, it may still be worth litigating, with some caution.  However every effort needs to be made to resolve the case without going all the way to trial.  A formal “Part 36” offer to settle is a tactic that can sometimes assist here, which can improve the costs recovery by 35% for part or all of the duration of the case. 

For any lesser sum, there is a real risk of the costs of litigation becoming disproportionate, with the limited recoverable costs available; even in the event of a successful outcome.  The risks of an unsuccessful outcome also need to be factored in. 

The fixed costs regime is likely to be broadened in time to cover higher value cases.  Back in 2016 it was suggested that all cases of up to £250,000 would be covered eventually and at some stage that will probably come – although seemingly not yet. 

There is a review of the fixed costs regime due in 2026 and an interim “stocktake” this month. 

In the event of an SME finding that there is any dispute or potential dispute involving any sum of money owed, or any other claim that may well be defended (e.g. for professional negligence against an adviser) we would recommend the following: 

• Obtain legal advice at the earliest opportunity. 

• Make an early offer of settlement, and/or of mediation, if you can, again consulting with your lawyers. 

• Finally; prevention is better than cure!  Consider the following possible strategies: 

• Include, if it is commercially possible, a provision entitling you to claim an indemnity for costs (assessed rather than fixed costs) in your contract documentation.  Again, legal advice should be taken. 

• Include a provision for compulsory mediation of disputes.  Arbitration could be considered as an alternative to litigation but that comes with its own risks. 

For further information regarding the changes, please contact Andrew Koffman or a member of our Litigation and Dispute Resolution team.