Fixed costs are coming soon!

Ian Cunningham, CEO at Affiniti Finance, looks at the changing costs landscape and the implications of the proposed new cap.


After a long wait since Lord Justice Jackson first proposed the extension of the fixed recoverable costs (FRC) cap in 2017, the government have now set the wheels in motion.  Most cases worth up to £100,000 will be within the scheme as proposed by Jackson, which was originally suggesting fixed costs for all claims up to £250,000, but this idea was subsequently scaled back.

Knowing how much you will recover in costs if successful will have a massive impact on law firms but on a plus side also means that the uncertainty surrounding adverse costs, which currently exists will vanish. I know from having spoken to many lawyers that they have clients who are fearful of adverse costs and consequently, solid claims are not pursued.

Solicitors will obviously be affected by the move to fixed costs meaning they will need to plan from the outset how to deliver a result within budget. Spending more than you can recover is a recipe for failure so this financial discipline is of great use to law firms. In addition to this there will be the knock-on effect of cash flow being restricted due to, in some cases, lower recoverable solicitor fees, which will result in law firms needing to secure funding of disbursements from alternate sources such as practice funding, off balance sheet lending direct to the claimant or from the claimant direct.

On a positive note, they will not need to deliver a budget at the beginning nor undergo detailed assessment at the end. The indemnity principle will not apply so they will recover the relevant amount of costs regardless of how much or how little work they have actually undertaken. Costs will be calculated at the point of settlement so there will not be a protracted wait for payment.

Whilst some have expressed concern over the extension of FRC I believe and expect this development to encourage meritorious claims to be pursued with Affiniti perfectly placed and determined to help finance such actions on behalf of claimants.

Law firms are becoming more financially sophisticated, Solicitor partners are understanding that without the right financial partners their growth and even sustainability maybe outside their control.

The news for myself and the Affiniti team is a positive one as having that clarity around costs allows us to provide clear alternative funding options to law firms and their claimants, and persevere with our company mantra of supporting access to justice.

Fixed costs may feel like a daunting prospect but we believe, when properly managed, there is nothing to fear.

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