Just days after our article last week, the detail of the rules, practice directions and tables of costs figures that will bring the new FRC regime to life were published in draft. This whole package has yet to be approved by Parliament (as secondary legislation), something which we expect to happen during the next couple of months. The clearly stated reason for this unusual, pre-parliamentary, publication is “so that stakeholders have advance notice and more time to familiarise themselves with the new regime”. The new FRC regime will take effect from 1 October 2023.

Given that it has taken more than six years from the second Jackson report to reach this stage, it seems unlikely that the actual FRC regime implemented in the autumn is going to vary a great deal, if at all, from the recently published materials. So what can we take, at first sight and in addition to the issues set out in our earlier commentary, from the detail of the overall package of reforms?

1. A uniform approach to inflation

The published figures in both the extended FRC regime for the new ‘intermediate’ track (cases valued between £25,000* and £100,000*) and in the fast track reflect the general application of Services Producer Price Inflation over the periods from 2017 and 2013 respectively. The levels of increase are of the order of 15% and 18%. [*The levels of these case tracks remain unchanged despite the adjustment for inflation in the costs figures.]

The figures themselves may be found in the new practice direction (PD) to part 45, at table 12 for fast track claims and table 14 for intermediate track claims. Putting the figures in the new PD should mean that they could be altered more readily following any future review of the scheme – which it is claimed will take place 3 years after implementation.

2. But not for ‘portal’ stages

The costs for claims within stages 1, 2 and 3 of the RTA and EL PL Pre-Action Protocols and Portals do not appear to have been increased. It is difficult to reconcile this with the overall approach above and policymakers may come under some pressure as a consequence.

3. Case complexity and settlement timing are the key drivers of FRC levels

This is hardly a new point, but it is reinforced in the rules and practice directions. As expected, both case tracks will be subject to four bands of case complexity and to a staged or phased approach to costs (as is already the case in fast track injury claims). What this means is, unsurprisingly, that harder claims that resolve at later stages will be more expensive, as shown below (nb: the labels used for the stages in this chart are for illustrative purposes only).

x axis label = complexity increases from bands 1 - 4
y axis label = stage case resolves

As is currently the case for fast track injury claims - in which the case type (RTA, EL or PL) might be thought of as equivalent to its complexity band - each cell in the FRC matrix is associated with a fixed amount of costs and with a percentage of damages. The fixed amount and the percentage level both generally increase across bands and over time, so the further to the right and the further down the chart a claim resolves the more costly it will be. It obviously follows from this that the allocation of a claim to a particular band at the outset will be a critical element as will - as ever - close control of the lifecycle of the claim.

It should be a priority to place a case in the most appropriate band as early as possible. The draft rules provide for banding, if in dispute, to be considered at allocation. In directions questionnaires parties may agree on banding or, if not, state their preference. We expect early skirmishes on banding once the regime is in place.

The bands in the fast track are largely governed by case type. Table 1 below (which is copied from the new rule 26:15) sets out the bands in which claims of the types described “will normally be assigned”. The meaning of “normally” in this context may be likely to be tested.

Banding in the intermediate track is a rather more nuanced topic, with table 2 (below, from rule 26.16) also referring to claims being “normally assigned” to bands but providing greater flexibility based on the particular attributes of the case. This flexibility looks likely to mean some uncertainty in the early development of the intermediate track. 

4. Noises off

It is worth reminding ourselves that claims for noise-induced hearing loss will fall entirely outside the general fast track and intermediate track FRCs and will be subject their own FRC regime, something which we will analyse at a later date.

5. Additional claimants

The rules as drafted allow a solicitor who acts for multiple claimants in the same set of proceedings to recover FRC in full (based on, as explained above, on banding, damages and stage of resolution) in respect of one claimant plus an additional 25% per extra claimant. The key point is that this restriction applies only where the additional claimants are in the same set of proceedings. Much like the existing FRC rules (for fast track injury claims), there does not appear to be any express prohibition (other than common sense) on multiple separate claim forms being issued in order to claim FRC in full for each claimant.

6. Unsuitable, exceptional and vulnerability

The proposed rules now allow three separate avenues of ‘escape’ from the FRC regime in claims otherwise in scope.

• There already exist escape routes for claims which are exceptional, but the courts have generally applied a robust and narrow approach to attempts to escape from FRC and limited any wider application. It remains to be seen whether the introduction of the intermediate track, bringing an increase in value (and complexity) of claims subject to FRC, means that attempts to ‘escape’ FRC might be made more frequently.
• The explanatory notes to the draft rules make it clear that the rules are not meant to be a straitjacket for judges and claims in scope may nevertheless be allocated to the multi-track. The first CMC is very likely to be a contentious hearing at which a claimant’s solicitors may seek an early ruling akin to exceptionality (as above) and hence an escape from FRC.
• Vulnerability is a new exception and if the claimant’s solicitor can show their client suffers from a vulnerability (as set out in Practice Direction 1A) and that vulnerability caused at least 20% in additional costs to be incurred, the claimant can then escape FRC. Paying parties such as insurers may be particularly concerned at the risk of the rules becoming something of a vicious circle here, in which when claimant solicitors obtain evidence to support the contention of vulnerability the very act of obtaining this expert evidence leads to an ‘escape’ and as a result at least 20% in additional costs.

There will of course be cases in which (1) the claimant is vulnerable but is unable to establish that the vulnerability caused additional costs, (2) an application is made by the claimant to allocate the case to the multi-track which fails, (3) an argument that the claim is exceptional and should be removed from FRC also fails. But even if all* these arguments are raised and all fail, at face value the singular fact of the claimant having these three* bites of the ‘escape’ cherry, perhaps before three separate District Judges, would seem to increase the chances of successful escape from FRC. [*It is worth stating that success on any of these arguments will likely remove the whole claim from the FRC regime.] 

Introducing fixed recoverable costs for all civil cases (save for some defined exceptions) in the fast and intermediate tracks, moving beyond the personal injury sphere for the first time, is a very significant development. Costs in these claims will be based on outputs – damages recovered, the stage at which the case is resolved and in which band – rather than on the inputs of hourly rate billing. And it should not be forgotten that costs budgeting will no longer apply to intermediate track claims.

We remain of the view that these significant changes will lead to greater efficiency and predictability in litigation costs, if not necessarily to step-changes in the level of costs paid and recovered in those claims in which sums of less than £100,000 are at stake.

Yes, it is inevitable that there will be satellite litigation to test both the scope and the detail of the new regime. But the publication of the rules and figures some five and half months before their introduction should allow us to anticipate and plan for those challenges as well time to design and refine our approaches to handling clients’ claims in the new FRC regime.