The Draft Rules have recently been published for what amounts to one of the most significant reforms to the procedural rules governing disputes in a generation. It introduces a Fixed Cost Regime to almost all claims where there is between £10,000 - £100,000 in dispute.
Other than in personal injury claims, the new rules will apply to relevant claims issued at Court on or after 1 October 2023. Under the new rules, the amount of legal costs the winning party can recover from the losing party will be strictly fixed depending on various criteria including (amongst others) complexity, value, and when in the process the dispute is concluded.
Under the current rules, cost recovery is the subject of assessment by the Court which can result in a very granular analysis of the costs often on an item by item basis with a Cost Judge making a decision, long after those costs were incurred, on how much the winning party is entitled to recover.
Financial Directors and those controlling budgets may well rejoice as the new rules gives the parties much greater certainty. In theory, with some well informed assumptions about the course of the litigation, a party to a dispute will, at the outset, be able to fairly reliably predict precisely how much in costs they will be entitled to if they win and what their cost exposure will be if they were to lose.
Litigants will be able to protect their cost position further by well placed offers to settle which could, in certain circumstances lead to a 35% increase on the recoverable costs.
There is never a good time to be involved in a dispute but businesses are now in a short period of flux before the new rules come into effect. During this time anyone involved in a dispute (or even a potential dispute) will need to weigh up whether or not to get on an deal with trying to resolve it now, in the hope of avoiding the Fixed Cost Regime if Court proceedings become necessary, or to wait it out for the added certainty the Fixed Cost Regime brings.
Liam Tolen is a Senior Associate in our Commercial Disputes team and will be heading up a team of specialist lawyers to deal with Fixed Recoverable Cost disputes. If you have any questions, do not hesitate to contact Liam.
