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The extended fixed costs regime: Confirmation that Contracting Out is permitted

The implementation of the new Fixed Recoverable Costs (FRC) regime in England and Wales on October 1 2023 marked a significant milestone in civil litigation, representing one of the most substantial changes in the legal landscape over the past decade. 

Since the extension of the regime, in most commercial claims valued at between £25,000 and £100,000 the new costs regime will apply.  

Pre-October 2023

Before the regime extension, FRCs were already in place for low-value personal injury cases related to road traffic accidents (RTAs) and employers’ liability/public liability (EL/PL) under the fast-track scheme. These established rules provided clarity and predictability for litigants.

The Intermediate Track: for claims between £25k and £100k

On October 1, 2023, a new intermediate track emerged, distinct from the fast track. Here’s how the allocation works:

  • Intermediate Track: Claims valued between £25,000 and £100,000 fall into this category.
  • Fast Track: Claims valued at less than £25,000 continue on the fast track.

Contracting Out: The approach so far

Before the extension, under the fast-track scheme, parties could contract out of fixed costs. Contracting out was permitted either before a dispute arose or during ongoing litigation, as confirmed by the Court of Appeal in the Doyle v. M&D Foundations & Building Services Limited case. 

However, the extension of the Fixed Recoverable Costs regime brought new rules into play, seemingly discounting the Doyle decision with CPR 45.1 (3) (b) confirming that “the court may only award costs in an amount that is neither more nor less than the fixed costs allowed by the applicable Section and set out in the relevant table in Practice Direction 45." This appeared to prevent even fully consenting parties from contracting out of set costs levels regardless of what they had agreed to. 

Contracting out: Clarification 

The Civil Procedures Rules Committee agreed to amend CPR 45.1 (3) (b) to incorporate the wording “unless the paying party and receiving party have each expressly agreed that this Part should not apply” in order to reflect the Doyle case judgment and protect freedom of contract. 

the updated Civil Procedure Rules come into effect on 6 April 2024, and these include this clarification that parties can agree to contract out of FRCs in proceedings.

Key Takeaway:

Whether under the fast-track or intermediate track, consenting parties can contract out of the FRC regime either prior to a dispute arising or during ongoing litigation. 

As the Fixed Recoverable Costs regime continues to evolve, this development is set to provide clarification and a potentially attractive option for parties in litigation.