The Civil Procedure Rule Committee’s decision to refuse to admit they made a drafting error in relation to the transitional provisions concerning Fixed Recoverable Costs for non-personal injury claims is regrettable. Not only is it likely to generate unnecessary satellite litigation due to the uncertainty it has created, it is also likely to generate unnecessary satellite litigation even if they are correct.
To recap on the problem, the transitional provisions for non-personal injury cases state that the new rules “only apply to a claim where proceedings are issued on or after 1st October 2023”. On the face of it, if a claim settles pre-issue it will not be subject to Fixed Recoverable Costs regardless of whether the claim commenced pre-1st October 2023 or many years from now.
The intention was clearly that Fixed Recoverable Costs would apply unless proceedings had been issued before 1st October 2023, but that is now how the rule was drafted.
This issue was brought to the attention of the Civil Procedure Rule Committee (CPRC) and the Minutes from the Civil Procedure Rules Committee dealt with the issue thus:
“It was NOTED that a recent article had given rise to a concern in relation to the transitional provisions within the amending statutory instrument (SI) and the application of FRC in (i) non-personal injury (PI) cases (ii) which arise before 1st October 2023, (iii) where proceedings are never issued but (iv) which settle after 1st October 2023. The Chair made some initial comments and the matter was discussed. HHJ Bird emphasised the importance of costs only proceedings, in contrast to a costs application, namely that, for costs only, an application is considered proceedings and this was AGREED. The CPRC further observed that:
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- the new FRC regime comes into force on 1st October 2023;
- absent transitional provisions, the FRC regime would apply from 1st October to any proceedings within its scope;
- for non-PI claims, the transitional provision in rule 2, paragraph (1) of the SI, provides that the new FRC regime does not apply where proceedings have been issued before 1stOctober;
- parties may expressly agree to costs on a non-FRC basis and there will be an amendment to rule 45.1(3) to clarify this;
- where proceedings have not already been issued on or after 1st October and the parties do not expressly agree to costs on a non-FRC basis, but they agree on the incidence, but not the amount, of costs, then they may issue costs only proceedings for the determination of those costs (in respect of FRC, costs only proceedings under rule 46.14 amount to proceedings);
- if those proceedings are issued on or after 1st October, FRC would apply to all costs in respect of that claim, irrespective of whether they were incurred before or after 1st October.”
This needs unpacking.
The CPRC seems to be saying that if such a case settles without proceedings being issued then the receiving party would be perfectly correct to seek their costs on the standard (i.e. non-Fixed Recoverable Costs) basis as proceedings had not been issued on or after 1st October 2023. However, if the paying party refuses to pay those costs on the standard basis the receiving party will need to issue costs-only proceedings. At that stage proceedings will have been issued on or after 1st October 2023 and the receiving party will lose their entitlement to costs on the standard basis and will be restricted to Fixed Recoverable Costs.
It is not obvious that encouraging paying parties to force the receiving party to issue proceedings (so as to restrict their costs recovery) is part of the overriding objective.
Indeed, is this not unreasonable behaviour on the party of the paying party?
CPR 45.13(2) provides:
“Where, in a claim to which Section VI, Section VII or Section VIII of this Part applies, an order for costs is made against a party whom the court considers has behaved unreasonably, the other party may apply for an order that those costs be increased by an amount equivalent to 50% of the fixed recoverable costs which would otherwise be payable.”
The wording of the rule does not limit the unreasonable behaviour to before the claim settles. There is no obvious reason why the unreasonable behaviour may not occur during the claim for costs, particularly given the CPRC appears to have conflated proceedings in relation to the underlying claim with proceedings in relation to costs. Might a court penalise a paying party for refusing to agree costs on the standard basis by awarding the receiving party a 50% uplift on the Fixed Recoverable Costs?
If the paying party were prepared to pay the costs on the standard basis, but quantum could not be agreed, how would this be resolved? Would the paying party have to expressly agree to contracting out of Fixed Recoverable Costs for the purposes of the issuing of the costs-only proceedings?
On the other hand, given the CPRC appears to be happy with the idea that costs-only proceedings lead to Fixed Recoverable Costs, how is it unreasonable for a paying party to decline to agree to pay standard basis costs? The problem is as a consequence of poor drafting, not unreasonable behaviour.
A simple error could have been easily corrected if the CPRC was not doubling down on its position that there is nothing wrong with the wording of the rules.
