Fixed recoverable costs 2023: Is your firm prepared?

fixed costs 2023

In November 2022, Lord Bellamy announced that the Ministry of Justice had, again, postponed plans for the implementation of the fixed recoverable costs extension until October 2023, as opposed to April 2023, to allow the legal sector more time to adjust to the plans.

The plans to extend fixed costs regimes to a wider range of civil cases, including certain types of personal injury, noise induced hearing loss claims, and clinical negligence claims have been met with a high level of frustration from solicitors.

The goal of the proposal is to reduce the overall costs of litigation and provide more certainty and predictability for parties involved in a legal case. However, there are concerns regarding these new plans and how they will impact firms of solicitors and of course consumers.

The expected impact of the fixed recoverable costs 2023 extension

In addition to limiting access to justice for claimants; it is clear that the extension of fixed recoverable costs will have negative consequences for the vast majority of firms offering services affected by these changes. The most obvious impact of the fixed costs 2023 extension will be that solicitors will be restricted in the level of costs they can recover from the paying party; thus, reducing profits and limiting cash flow.

Fortunately, there are a number of changes your firm can make in preparation for the fixed costs extension.

An overview of the upcoming changes

The Civil Procedure Rules Committee has released the draft rules that will control the expansion of fixed recoverable costs starting this October.

The extension of the fixed recoverable costs (FRC) regime will implement a number of changes in relation to civil litigation cases.

These changes will be implemented at different stages for different types of claims.

  • In personal injury claims, the new rules will apply only where the cause of action accrues on or after 1st October 2023.
  • In disease claims, the new rules will be implemented where a letter of claim has not been sent before 1st October 2023.
  • In general civil claims, these new rules apply to claims where proceedings are issued on or after 1st October 2023.

One of the main changes being brought into effect is the introduction of the new intermediate track. Solicitors will be expected to allocate more complex cases that are not suitable for the small claims track or the existing fast track, to the new intermediate track.

It’s important to highlight that judges will retain discretion to allocate more complex cases valued below £100,000 to the multi-track, ensuring that complex cases won’t be wrongly affected by the extended fixed recoverable costs system in any situation.

Cases which require no more than two expert witnesses, and can be resolved within a three-day trial or less, will be allocated to the intermediate track. More complex cases will be allocated to the multi-track.

The small claims track is for claims with a value of up to £10,000, while the fast track is for claims with a value of up to £25,000. Claims will be assigned to the new intermediate track if they have a value between £25,000 and £100,000. 

New rules in relation to allocation and assignment will be found under Part 26 of the Civil Procedure rules. Draft changes can be found on the Government’s website and the draft rules under CPR 26.14 state the following:

“(1) When a claim is allocated to the fast track or the intermediate track, the court must also assign the claim to a complexity band, unless it is one to which Section VIII of Part 45 applies.

(2) In both Table 1 and Table 2, below, the complexity bands numbered 1 to 4 provide an ascending scale of allowable costs commensurate with the complexity of the claim.

(3) The complexity band to which a claim is assigned shall determine the costs that are to be allowed under Table 12 or Table 14 in Practice Direction 45.

(4) Subject to paragraph (5), the parties may agree the complexity band to which a claim is assigned. (5) The court may direct that a claim be assigned to a different complexity band than that agreed by the parties, but shall have regard to the factors set out in rule 26.13(1).

(6) A party must state on their directions questionnaire—

(a) the agreed complexity band; or

(b) where the parties disagree, the complexity band considered appropriate by that party”

There have also been changes made in relation to Part 36 offers in claims that apply to the fixed recoverable costs regime.

 

Uplift for vulnerable parties

 

The MOJ has recently confirmed that an uplift in fixed costs is possible for cases in which a vulnerable party or vulnerable witness is involved. The uplift is likely to be made available only in circumstances where the vulnerability of the party has led to a requirement for additional work to be undertaken.

Preparing your firm for fixed recoverable costs 2023

 

Exit specific markets – It is unsurprising that some law firms will make the strategic decision to exit practice areas impacted by the fixed costs extension to allow them to focus on more profitable markets. With the help of Recovery First, you can ensure a smooth, compliant exit from any market, placing files with the most suitable firms from our panel of solicitors, allowing you to preserve the value of your locked-up WIP.

Free up value locked in your WIP – If you decide to exit a market due to the fixed costs extension, you could opt to transfer your existing files to an alternative firm of solicitors. Using the Recovery First method will ensure you recover the maximum value locked in your work in progress, helping to improve cash flow whilst your firm adjusts to profiting in new areas of law.

Consider a merger or acquisition – It has become clear in recent years that larger firms have more power to compete in such a competitive legal market. Due to this, the number of mergers and acquisitions has increased substantially. In some circumstances, the merging or acquiring firm may not wish to continue in a specific legal market. If this is the case, Recovery First can assist firms in leaving an unsuitable market and placing files with a suitable firm on our panel.

All options ensure that the focus is always on protecting the interests of the client whilst preserving the value of your WIP

Staying in the market – If you wish to continue operating in areas affected by the fixed recoverable costs extension, you may wish to cut costs in other areas of operation. You should review your outgoings and make decisions on which expenses can be cut to help reduce costs and increase profits for your firm. Get advice as early as possible to ensure you make the best decisions for your firm.

 

How can Recovery First assist?

 

If you are concerned about the impact of the fixed costs 2023 extension on your business and you wish to discuss your options, please do not hesitate to contact us at Recovery First for a confidential chat.

We offer a positive solution to any law firm by helping them exit any legal market whilst remaining solvent, maintaining cash flow, and ensuring they get the most out of their files.

We will provide you with all the advice and support you need, and we guarantee 100% confidentiality for all clients.

If you would like to find out more about Recovery First’s process, feel free to get in touch with our Managing Directors on a confidential basis: David Johnstone at david.johnstone@recoveryfirst.co.uk, or 01357 440140, or Sally Dunscombe at sally.dunscombe@recoveryfirst.co.uk or 01357 440140.

 

It's never too late to speak to Recovery First. Contact us now in the strictest confidence

Sally Dunscombe:

sally.dunscombe@recoveryfirst.co.uk

David Johnstone:

david.johnstone@recoveryfirst.co.uk

Telephone:

01357 440140

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