The intermediate track was introduced to assist with the general streamlining of the civil courts. Whether they have achieved this remains an open question. It is largely too early to tell, after all even today only 2% of cases receive an allocation to the intermediate track[1].
In practice, what the intermediate track has done is caused a headache for legal representatives with a new, complex and seemingly highly restrictive, costs regime. Intermediate track matters can address intricate and challenging matters, meaning the danger that a successful party recovers only a fraction of their actual costs is now acute.
This was brought clearly into my mind recently when following a successful trial, a Claimant brought a schedule of costs which far outstripped their fairly modest litigation. Having seemingly forgotten that the fixed costs applied, they proceeded to argue a wholly wrong interpretation of the scheme and ultimately were left with an incurred/recovered costs deficit, which far outstripped their claim.
Too many advocates think of costs as an afterthought, but, in fixed cost litigation they are too important to ignore. This can catch even senior counsel out, particularly as complex litigation normally heads off for detailed assessment. Routinely though this is being simply assessed at trial under the perhaps misguided principle that there is a simple fixed system making such matters uncontentious.
The principle of fixed costs is of course meant to provide clarity, but in reality, the rules are full of traps and the hard work to win a claim can be undone by simple mistakes at assessment. From forgetting VAT to misunderstanding the new Part 36 consequences, the reality is any counsel appearing on these cases must be well equipped to ensure mistakes are avoided.
The below are just a few examples encountered where advocates, solicitors and the Court have seemingly struggled to grapple the new regime, always to the detriment of a paying party.
The difficulty of escaping the regime
The first common mistake is believing that the fixed costs don’t apply at all. While some of this is transitional as parties get up to speed, even now nearly two years after allocations began, parties are still attending trial with standard costs schedules. These are not just a waste of costs themselves, but they are a clear give away that a party may be unprepared to argue the fixed costs regime.
The Court has no routine power to depart from fixed costs. Traditionally a successfully utilised Part 36 offer or arguments of conduct, have provided escape hatches from fixed costs schemes, but these are now closed off. There appears to be no broad discretion for a Court to depart from the fixed costs and any party embarking on intermediate track litigation should be clear as to that or be very well armed to argue otherwise.
Finally, it doesn’t matter whether the claim has been allocated or not. CPR 45.50 makes clear that any case which would “normally be allocated” to the intermediate track incurs fixed costs. Therefore, while it may still be appropriate to make a pre-allocation application to strike out, this is not a means of escaping the fixed costs regime.
Fundamentally, if your claim was issued after 1st October 2023 you are stuck with the regime. So, the question becomes how best to ensure your client places themselves in the best recovery position possible.
Getting the band right
An intermediate track allocation alone is not the end of the matter, as the new complexity band system is arguably even more important. The ultimate costs recovery between a band 1 and band 4 claim is comfortably five figures and it can be fatal to a party’s prospects to receive too low a banding.
The complexity bands themselves provide very little guidance on allocation beyond dividing the bands by value. This is very different to the fast track where claim types are referenced. This leaves the court only with the fall back of an approximation based on the claim’s value.
However, this should be studied carefully. A simple debt claim may justify a complexity band 1 point despite its £80,000 value, while a complex international contract dispute may justify a higher band despite a trivial sum in issue. Critically a party must ensure they are ready to push for the appropriate band particularly if limited costs recovery would fatally undermine their prospects.
Of course, allocation cuts both ways and increasing your own potential recovery means raising your liability. This can lead parties, particularly those with deep pockets where actual cost recovery is not essential, to push for lower banding. The importance of getting this question right can therefore be pivotal.
There is a surprisingly low number of appeals being taken on this point, but contested hearings regarding allocation are undoubtedly increasing as parties grapple with the consequences of a low banding. The allocation stage should be approached with the same solemnity as any element of the claim, because it can ultimately prove just as critical.
Unreasonable conduct
The “unreasonable conduct” principle has been brought into the intermediate track seemingly mirroring the provisions of the small claims track (CPR 27.14(2)(g). However, there is a crucial difference. While under the small claims track system costs return to an at large process here, CPR 45.17 permits the fixed costs can only be varied by 50% where such conduct is found.
The key question is what constitutes “unreasonable conduct”. The ‘permits no reasonable explanation’ test, as espoused in Dammermann v Lanyon Bowdler LLP[2], and appears in the commentary to the small claims rule, now appears explicitly within the rule itself. However, this has remained subject to very limited judicial discussion and remains a ‘you know it when you see it’ approach, which can lead to extraordinarily inconsistent applications.
As an example, one such quirk is whether the rule requires a party accused of poor conduct to produce a reason, or whether it is enough for the Court to hypothesise a reason. The former seems to be a more workable standard, but the wording of the test implies the latter. Having seen both approaches applied, it is safe to say there is very little consistency on these questions.
If this is an argument that you wish to run, then make sure you are well armed with evidence. Even seemingly obvious acts of poor conduct such as failing to attend hearings or material disclosure failures can fail to persuade a court that this high standard is met. This exercise should be approached carefully, recognising that success on this point can mean many thousands of pounds in further recovery. Further, a successful party faced with a charge of unreasonable conduct should be alive to the possibility of seeing their hard work undone by a restriction of their costs.
An odd coda to this section, is that the 50% penalty is fixed rather than a cap. The party having their costs altered will only see them altered by 50% and no other sum (although this does not affect disbursements). This means that the advocate merely has to prove that unreasonable conduct has occurred, not what costs it caused specifically as small claims judges sometimes require. That being said in practice the court is likely to want to understand what practical impact the unreasonable conduct had.
Taking advantage of allowances
While the fixed costs can be particularly tight in some regards, they do provide mechanisms for some further recovery, if costs can be shown to be justified for a particular purpose. These must be considered carefully to ensure that a party is in the best possible position, and to ensure that critical support is not lost out of a fear of the regime.
Take the example of a statement of case. If this is drafted in house by a party’s solicitor it receives no additional recovery, although presumably represents a significant actual cost to the paying client. However, if it is prepared by a “specialist legal representative” which is widely interpreted as meaning appropriate counsel, a sum of over £2,000 becomes recoverable.
This is just one example in the regime where taking advice of one form or another is separately recoverable. This in theory is subject to the court determining that the same is reasonable but there is a limit to how much scrutiny the Court can place upon this. Advice is of course privileged, and it would be a very high bar for a paying party to successfully argue such advice should be disapplied for any reason other than proportionality.
Proportionality has of course been the reason historically that such advice is not sought, as the higher costs to a client may have been hard to justify. However, now faced with a situation where these costs may ultimately only be recoverable if specialist advice is taken, parties should not be afraid to take advantage of these options.
There is also an uplift permissible where costs have been incurred because a party is vulnerable. This can be interpreted widely as I saw a successful application of this section where a client had essentially developed paranoia about the proceedings and required significantly more contact with their solicitors than would ordinarily be justified. The Court was sympathetic here and awarded a significant uplift to their costs.
Some pitfalls persist in this provision. Firstly, there is a de minimis threshold to clear of 20%, i.e. you must have spent more than 20% than the fixed costs because of the vulnerability. Likewise, that spending must be because of the vulnerability. It is not sufficient to simply say that a vulnerability is present, and therefore costs are higher.
While this would require careful documentation, it is a clear way in which parties should not be afraid to push for a departure from the ordinary rules where their circumstances justify it. The Court is understandably sympathetic to litigants who are vulnerable, and a firm should not be wary of the additional cost this can produce given this allowance.
Exceptional circumstances
So far, the view here has been fairly straightforward that fixed costs are the reality. However, there is a slight discretion retained by the Court which is to uplift costs in exceptional circumstances. CPR45.9 provides a provision for providing a standard basis assessment of costs where there are exceptional circumstances.
This is likely to become an increasingly litigated point as it seems to provide the clearest route for recovery above and beyond. Unsurprisingly there is no guidance at all as to what might constitute exceptional circumstances. While there is no guidance a few points can be gleamed as to when this might be appropriate.
Conduct which is otherwise covered by the rules is very unlikely to be sufficient. This means litigation conduct or a parties’ vulnerabilities are almost certainly not going to be enough to permit an uplift. Likewise, the complexity of the litigation would likely not justify the uplift given that this would speak to an incorrect banding or allocation rather than something intrinsic to the litigation.
Conclusion
These are just a few areas in which the fixed costs can cause challenges at trial. The importance of ensuring that a party is well armed to respond to any issues thrown up by the regime is critical to ensure that a successful party does not reduce a great outcome to a pyrrhic victory, because of a last-minute mistake on costs.
[1] MoJ Quarterly Justice Statistics April to June 2025 (Civil Justice Statistics Quarterly: April to June 2025 - GOV.UK)
[2] [2017] EWCA Civ 269