Fix up, look sharp: FRC update
What's the latest on fixed recoverable costs in professional negligence claims?
Our article "What the Fix?!", published on 15 May 2023, gave a high level overview of the new Fixed Recoverable Costs (FRC) rules published in draft by the Civil Procedure Rules Committee. We set out below the latest FRC news and our predictions and concerns regarding the new regime.
What's new?
The new rules have now been enshrined in statute as the Civil Procedure (Amendment No. 2) Rules 2023 and the 156ths update to the CPR. The rules are mostly in the same format as the drafts published in April, but notably the rule stating that the usual time between allocation and trial for fast track claims is 30 weeks has disappeared; presumably in recognition that this would simply not be achievable due to the pressure on the justice system. Statistics released by the MOJ in June 2023 indicated that the average time for fast and multi track claims to reach trial had reached an all-time high of 79.9 weeks.
We have been told by the MOJ that there is no prospect of any guidance being issued on the new rules and that any problems will be dealt with when the rules are reviewed; possibly in 3 years' time. How Courts will approach assignment of a complexity band within the intermediate track is one aspect which remains a mystery. Parties will only gain guidance on this and other aspects as the Courts grapple with the rules and decisions are reported - this may lead to satellite litigation. In the meantime, the desired certainty over costs exposure will not quite be achieved as lawyers will not yet be able to predict with confidence where a particular claim will be allocated. At best, the rules give parties maximum figures pending a decision on allocation.
The MOJ released a new consultation on the new rules on 21 July 2023, apparently in response to concerns raised by stakeholders. Of particular note is the announcement in the consultation that the sums recoverable will be increased again in line with the Services Producer Price Inflation index (SPPI) in April 2024 to reflect high rates of inflation. The figures were revised in line with SPPI earlier this year. The MOJ's consultation paper reveals that the rules will still come into force as drafted on 1 October 2023, but will be revised in April 2024 to reflect feedback from the consultation, which is open until 8 September 2023.
Issues raised in the consultation include:
- A new shortened form of costs assessment for FRC cases. There will be some circumstances where the Court's involvement will be required to settle disputes about the applicable FRC: for example, disputes over the stage the litigation has reached and whether a disbursement was reasonable. Jackson LJ proposed a shortened version of detailed assessment, decided on the papers, which the MOJ propose to implement. The plans include a new bill of costs precedent for FRC cases. Provisional assessment already exists, but it will presumably be replaced in FRC cases; although this is not mentioned in the consultation.
- Bringing Part 8 costs-only proceedings within scope of the FRC regime, as proposed by Jackson LJ.
- Providing for FRC to cover restoring a company to the register as part of an intermediate track claim.
- Permitting recoverability of advocacy fees where a claim settles late or a hearing is vacated (following representations from the Bar Council and PIBA).
- Increasing the permitted advocacy fees to reflect inflation (following representations from the Bar Council and PIBA).
The consultation also addresses concerns raised in a pre-action letter sent to the MOJ by the Association of Personal Injury Lawyers in relation to personal injury and clinical negligence claims; primarily by clarifying that clinical negligence cases can be allocated to the intermediate track only where liability has been admitted in the pre-action protocol letter of response.
Unaddressed concerns about the new rules
Disappointingly, the MOJ's recent consultation paper does not touch on a number of concerns raised by stakeholders; in particular, the lack of guidance around allocation and assignment of a complexity band, especially in the intermediate track. Not only is it unclear what "one issue" means for the purpose of the rules (i.e. is "liability" one issue, even if it has several disputed strands, such as scope of duty, breach and causation?), there is no indication of how the complexity of a claim fits with the intermediate track complexity bands. For example, "less complex" claims with one issue in dispute should be assigned complexity band 2; whereas "more complex" claims with more than one issue in dispute, but which are "unsuitable for assignment to complexity band 2" should be assigned to complexity band 3. What makes a claim unsuitable for assignment to complexity band 2? Similar language is used to define claims suitable for assignment to complexity band 4.
The complexity bands do not have any defining features beyond differing levels of FRC, so it is difficult to understand how a claim could be unsuitable for a particular band. In other words, a complexity band 2 claim must follow the same procedure as a complexity band 3 claim. There are no shortened processes or differing rules around the way that the court will deal with the claim. To be fair to the Civil Procedure Rules Committee, we anticipate that the drafting committee did the best that they could in the circumstances, but it would be useful to have some guidance or examples so that practitioners and litigants can understand how the rules are likely to be applied and it is disappointing that the MOJ have declined to provide this.
Complexity and trial length are likely to be the key factors in allocation or assignment decisions because the expert evidence criteria is likely to be of less relevance for practical reasons. A claim with 4 experts can be allocated to the fast track provided the trial will not last more than 1 day; but a trial involving oral evidence from 4 experts will almost certainly last more than one day.
Our other urgent concern is the potential for the new rules to undermine the Professional Negligence Pre-Action Protocol, which is an absolutely crucial tool for efficient resolution of disputes. Fewer pre-action settlements and more litigated claims cannot possibly be a desired effect of the new regime. However, the new rules will inevitably lead to that outcome. The Protocol encourages parties to treat the issue of proceedings as a last resort and requires parties to try to narrow the issues in correspondence, consider attempting ADR and to engage in a final stock-take before proceedings are contemplated. This FRC regime, on the other hand, motivates claimants to issue proceedings as soon as a denial of liability is received, to maximise their costs recovery. This is not a cynical observation – the costs recoverable for the pre-action phase do not provide sufficient funding for claimants to engage in a meaningful effort to exchange information and narrow the issues in dispute. Why should a claimant continue to engage in protocol correspondence beyond the point where they will be able to recover the costs of doing so from the defendant?
Similarly, the rules do not, in our view, contain sufficient provision to deal with claims where the quantum is exaggerated or unrealistic. It is common for claimants to seek unrealistic sums in damages and we are often able to achieve settlements well below the headline quantum figure. As the rules currently stand, there is scope for such claims to be allocated to the intermediate or multi track and/or a higher complexity band based on the headline quantum figure, only for a settlement later to be achieved well below this sum. One idea to discourage claimants from inflating the value of claims would be to introduce more thresholds for increased issue fees - e.g. if a claimant had to pay a higher issue fee to claim more than £100,000, in order to avoid FRC, that may discourage them.
We continue to prepare for the implementation of the FRC regime and would be delighted to answer any questions on the new regime. Clients should contact their client relationship partner or Will Sefton in the first instance.