For decades, the English legal system has operated on the basis that the losing party generally pays the winning party’s legal costs, but the question of how much of those costs will be recovered by the winning party always remains uncertain. For commercial claims with a value up to £100,000, this is about to become a whole lot clearer – in theory at least – with the introduction of a new Intermediate Track and the extension of the Fixed Recoverable Costs (FRC) regime.
As of 1 October 2023, the FRC regime will be extended to cover all in-scope Fast Track and Intermediate Track claims up to £100,000. There will be no limits imposed on the amount legal representatives can charge, but the FRC regime aims to provide clarity and predictability as to costs that are recoverable from the unsuccessful party. The changes to the FRC regime and the new Intermediate Track will be introduced by CPR 45.
New Intermediate Track
The existing ‘Tracks’ to which the court allocates claims will remain, with the addition of a new ‘Intermediate’ Track:
- Claims with a value under £10,000 will usually be allocated to the Small Claims Track (sometimes referred to as the ‘Small Claims Court’);
- Claims with a value between £10,000 and £25,000 will usually be allocated to the Fast Track;
- Claims with a value between £25,000 and £100,000 will usually be allocated to the Intermediate Track; and
- Claims with a value over £100,000 will usually be allocated to the Multi-Track (where the FRC regime does not apply).
Judges will continue to hold discretion to allocate a particularly complex claim that has a value under £100,000 to the Multi-Track. A non-monetary claim will not be allocated to the Intermediate Track unless the court decides otherwise.
The idea of the Intermediate Track is to make claims of these values more efficient. Statements of case will be limited to 10 pages, witness statements will be limited to 30 pages, and only one expert witness will be permitted per party (unless the court directs otherwise). Expert reports are to be limited to 20 pages (excluding photographs) and oral evidence will be time limited.
Banding and Costs
The complexity of cases that fall within the Fast Track and Intermediate Track will be assessed and assigned to a ‘band’, which determines the level of costs that are recoverable. Both Tracks will have four bands, and the higher the band, the higher the level of recoverable costs. It is for the court to decide which band within a Track the claim should be allocated to.
Band 1 of the Intermediate Track will cover more simple claims with only one issue in dispute, where the trial is not expected to last more than one day. Band 2 will cover claims where there is more than one issue in dispute, including liability and quantum disputes. Band 3 of the Intermediate Track will cover cases that are more complex than Band 2, with Band 4 covering cases that are the most complex, where the trial is not expected to last more than three days.
Tables of fixed costs have been released within PD 45 (draft for early publication) detailing the amount of costs recoverable at each stage according to the Track and band of complexity of a claim. The FRC regime will also provide for recoverable pre-action costs.
Conclusion
Construction claims below £100,000 are typically difficult to pursue because of high legal costs and a lack of certainty about costs recovery. The threshold effectively moving from £25,000 to £100,000 therefore represents a considerable move forward, with lots of claims being taken out of the most complex track.
However, until the system has bedded in, it’s unlikely that construction parties will be ditching tried and tested adjudication in favour of court proceedings for claims below £100,000, even though the prospect of costs recovery is an attractive counterbalance to the speed of adjudication. We do not yet know how banding will work, and the courts remain generally overworked meaning it can take a long time to get a decision.
This article originally featured in September 2023’s edition of our Aggregate newsletter: to read the complete edition, click here.
About the author
Lucy is an Associate Solicitor, working on a mix of non-contentious and contentious construction matters. Read more about her here.
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