To claim or not to claim? – extended fixed recoverable costs and the price of recovering a debt through the courts

Background

With the recent case of On the Beach Ltd (OTB) v Ryanair confirming the right to seek redress from suppliers under Regulation 29 of the Package Travel Regulations, package organisers may be considering the merits of pursuing similar claims through the courts.

Whilst the OTB case concerned cancellation of flights, the implications of the decision are much wider. In light of the judgment, Regulation 29 can be used to bring claims against any responsible third party including suppliers of accommodation, excursions or other transport providers on the basis that they contributed to the cancellation of, or significant change to, a package holiday.

If you are unable to come to an agreement to recover an outstanding debt, either in the above circumstances or on an alternative basis, then you may consider recourse to the courts to force payment. If you are considering making a claim you will undoubtedly want to be fully aware of the potential costs implications to do so as the rules have undergone a recent overhaul.

Fixed Costs Regime

Fixed recoverable costs have been in place for some time in most low-value personal injury claims, however from 1 October 2023 this has now been extended to cover most civil cases with a value of up to £100,000. Claims valued over £100,000 are not affected. These rules have been established under a new fixed costs regime (‘FCR’).

Whilst principally the losing party is liable to pay the successful party’s legal costs associated with the claim, the new FCR places a cap on how much the successful party can claim back. The cap ultimately depends upon the value and complexity of the matter and at what stage the claim was settled or determined at trial. The FCR is intended to enable parties to predict their costs exposure and recoverable costs at each stage of litigation.

Allocation of claims

All defended claims are allocated to a ‘track’, typically based on the value of the claim. From 1 October 2023, claims valued up to £100,000 are now allocated into one of the following:

  • Small claims track – straightforward claims valued up to £10,000
  • Fast track – claims valued up to £25,000 with the trial lasting no more than 1 day
  • Intermediate track – less complex claims valued between £25,000 and £100,000 with a limit of 2 experts and the trial lasting no more than 3 days

The FCR primarily affects cases in the fast and intermediate tracks, with limited exceptions. On allocation, the claim is also assigned one of four complexity bands in ascending scale depending on the issues in dispute. Claims will be considered on a case by case basis, but as an example straightforward debt claims with only one issue in dispute typically fall within the lowest band (complexity band 1), which means that costs recoverable are limited.

Recoverable Costs

Depending on the allocated track, complexity band and stage the proceedings are at, parties can now easily calculate costs exposure and recoverable costs. For the most part, this will be a set amount plus a percentage of the damages as set out in various tables at the following link:

https://www.justice.gov.uk/courts/procedure-rules/civil/rules/part45-fixed-costs/practice-direction-45-fixed-costs

Fixed recoverable costs are set out in Table 12 (fast track) and Table 14 (intermediate track).

Should a party obtain specialist legal advice or incur counsel fees at trial, fixed costs for these are recoverable in line with the value and complexity band. In the intermediate track, fixed costs for attendance at mediation or a joint settlement meeting can also be recovered in line with the complexity band.

Any costs higher than those set out in the fixed costs tables will only be granted in exceptional circumstances.

In addition to the fixed costs tables, any disbursements that have been reasonably incurred (i.e. court fees) can be recovered.

Things to consider

Whilst many claims are ultimately resolved following a letter of claim and correspondence between the parties without having to issue, things are not always as straightforward. Making a claim should be a matter of last resort but may ultimately resolve the matter faster than continuing negotiations that are going nowhere. Think carefully about the risks and benefits before issuing as the FCR means that the costs recoverable may not fully cover the actual costs that are likely to be incurred, which can inevitably be hard to predict.

There are however various ways that the cap on recoverable costs can be increased. Arguments can be made to allocate the claim to a higher complexity band or even different track depending on the facts of the case, as there is scope for complex or unusual cases to be exempt from the FCR.

Depending on the value of the claim it may well be worth pursuing in any event. A benefit of the FCR is that it can assist defendants to know their total exposure if they are contemplating settlement and it may encourage early settlement as the earlier the claim is settled the less costs they will be liable to pay.

As these rules have only just come into force, it remains to be seen how the courts will deal with allocations and complexity bands. On the positive, if you intend to issue a claim, or find yourself on the receiving end of one, you will have certainty at the earliest stage about the costs recoverable or potentially payable.

Think carefully about your options at the earliest stage in order to maximise any costs recovery and minimise potential costs exposure. If you are not sure about your position seek advice before taking action.

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If you have any queries about anything in this article please contact Katie Spencer (katie.spencer@mb-law.co.uk).

Please note this information is for general guidance only and is not intended to be a substitute for specific legal advice.

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