Long-awaited clarity provided on Fixed Recoverable Costs

In perhaps one of the most significant decisions involving the Fixed Recoverable Cost (FRC) regime, the High Court (the Court) has held that an acceptance of a Part 36 offer does not automatically contract out of the FRC regime. The decision in  this case provides early and authoritative guidance on how the courts will approach the interaction between Part 36 settlements and costs-only proceedings, as well as the scope of fixed costs.

Although the substantive claim itself never reached trial, the dispute over costs raised crucial questions about when the FRC regime applies and when parties remain entitled to recover costs on the standard basis.

Background to the dispute

The claim arose from the destruction of firearms and ammunition belonging to Mr Kenneth Collins following his arrest and conviction. The substantive dispute was resolved by acceptance of a Part 36 offer in February 2023 (eight months before the FRC came into force). However, the parties were unable to agree costs. In December 2024, after the expansion of the FRC regime to most civil claims up to £100,000, the executors of the Estate of Kenneth Collins (the Claimant) issued Part 8 costs-only proceedings. The key question for the Court to consider was whether those costs proceedings were governed by FRC under CPR Part 45, or whether the Claimant could seek costs on the standard basis.

The issue to be considered 

Three arguments were advanced by the Claimant in support of excluding the claim from the FRC regime.

1. The underlying causes of action included an intentional tort, which would have required multi-track allocation and therefore fell outside the scope of FRC
2. Because the substantive dispute had settled before the FRC regime came into force and no proceedings had been issued, the regime should not apply to subsequent costs-only proceedings
3. The acceptance of the Part 36 offer created a contractual entitlement to costs outside the fixed costs framework.

The decision

The Court agreed with the Claimant in respect of point one above, but rejected the second and third arguments.

The Court agreed that the causes of action included an intentional or reckless tort. That meant the claim would have been allocated to the multi-track if proceedings had been issued, excluding it under CPR 26.9(10). As a result, the FRC regime did not apply, and the Claimant was entitled to seek costs assessed on the standard basis.

However, the Court rejected the suggestion that the FRC regime was automatically disapplied simply because the substantive dispute had settled before October 2023. Equally, the argument that acceptance of a Part 36 offer amounted to a contractual agreement to disapply fixed recoverable costs, was rejected. Part 36 was characterised as a procedural mechanism, not a contractual one, and incapable in itself of ousting the statutory costs regime.

Practical implications

The judgment has important consequences for parties litigating in the ‘new’ FRC world.

Substance over procedure

The decision confirms that whether FRC will apply depends primarily on the nature of the underlying claim, not on the form or timing of the costs proceedings. The mere fact that costs are pursued through Part 8 proceedings after October 2023 does not, of itself, bring a case within the FRC regime.

Part 36 does not “contract out” of FRC

Part 36 settlements do not automatically disapply fixed costs. If parties wish to avoid the FRC regime, this must be done expressly and clearly, either through a specific costs order or a properly drafted agreement. Assumptions that standard wording in Part 36 offers will achieve this, will lead to unhappy Claimants.

Comment

The decision is an important ruling in the development of the FRC regime. It confirms that the regime is not automatically triggered by timing or procedure, but that the nature of the underlying claim remains central to the costs analysis.

At the same time, it provides much needed certainty that Part 36 settlements will mean cases avoid the FRC regime.  This reinforces the need for clarity and precision in settlement drafting. For lawyers, the message is clear: costs strategy cannot be an afterthought at settlement.

Kennedys acted on behalf of the Defendant in this matter.