Fixed Recoverable Costs in Professional Negligence Claims: Making Earlier Calls

By Tom Watkins, Senior Underwriter

Estimate read time 3 minutes 2 seconds

The extension of fixed recoverable costs has altered the way professional negligence claims need to be assessed at the outset. For claimant solicitors, the margin for exploratory investigation is narrower and early funding decisions carry greater weight. The emphasis is now on disciplined evaluation, realistic modelling and timely risk management.

What FRC Means for Professional Negligence Files

Professional negligence claims have always required careful early analysis of duty, breach, causation and loss. Under a fixed costs regime, that early stage can be commercially decisive.

• In many claims, breach can appear arguable on a first review of the retainer and advice given. The more difficult questions often lie in causation and quantum. Counterfactual analysis (what would have happened but for the alleged negligence) is frequently determinative. Under FRC, there is less scope to allow those issues to develop gradually through extended pleadings or iterative expert evidence.
• This increases the importance of tightly scoped preliminary expert input. A focused desktop opinion addressing breach and causation, with clear assumptions, is often more valuable than broader exploratory reporting. Where that early opinion exposes material weaknesses, the economics of the claim can change quickly.
• Quantum discipline is equally important. A headline loss figure may not survive scrutiny once mitigation, contributory negligence or market factors are considered. Modelling realistic net recovery at an early stage, taking into account capped recoverable costs and irrecoverable own time, is now central to file strategy.

Earlier ‘Go or No-Go’ Decisions

One consequence of FRC is that decisions to discontinue may need to be made sooner.

• Consider a claim arising from allegedly negligent tax advice. An initial review suggests a substantial loss. However, early expert input identifies a viable mitigation route and raises contributory negligence concerns. The revised loss figure, when assessed against likely irrecoverable work and fixed inter partes recovery, may no longer justify continued litigation. A prompt decision to stop avoids months of cost that the regime will not return.
• Similarly, in a negligent valuation or conveyancing claim, breach may appear stronger than causation. If counterfactual evidence indicates that the same commercial outcome would likely have occurred in any event, the claim’s prospects narrow significantly. Under FRC, there is limited room to continue simply to test that position.

In both scenarios, the issue is not failure, but discipline. The risk lies in deferring the difficult decision until the claim has absorbed disbursements and fee earner time that cannot be recovered.

Funding Implications Under FRC

Funding structures remain viable but require closer scrutiny at the outset.

For conditional fee agreements, the damages-to-costs ratio must be realistic. Where the likely net recovery is modest, the success fee may not adequately compensate for the compressed investigative phase.

Disbursement exposure is often more acute. Professional negligence claims frequently depend on expert evidence. Early reports on breach, causation or quantum may be decisive, yet they represent a material outlay before liability is established.

Although adverse costs are capped under FRC, they are not insignificant. In cases where prospects are developing or causation remains contested, that exposure still requires careful consideration and discussion with the client.

The Temple Perspective

In short, FRC reinforces the value of early engagement and structured risk assessment.

Reviewing core documentation and preliminary expert views at an early stage allows funding decisions to be taken with greater clarity. Where appropriate, Temple’s ATE policies can provide cover for adverse costs together with funding for own disbursements such as expert fees and court fees. In a regime where early expert evidence is often decisive, access to that funding can be critical.

Underwriting scrutiny also serves a practical function. An early indication of support – or a more cautious response – can assist solicitors in testing their own analysis of breach, causation and quantum. Used in this way, ATE is not simply a protective measure but part of a disciplined case selection process. 

Conclusion

Fixed recoverable costs do not remove the viability of professional negligence claims. They do, however, reward earlier clarity.

Frontloading focused expert evidence, modelling a realistic net recovery, and addressing adverse costs and disbursement exposure at the outset all allow, firmer more confident decisions – whether that means proceeding or stopping.

Please call Tom Watkins on 01483 514875 or send an email to tom.watkins@temple-legal.co.uk with questions about a professional negligence case or to discuss your ATE insurance or disbursement funding requirements generally.