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Fixed Costs- A Swing Too Far?

Section IIIA of CPR Part 45 contains the rules on fixed recoverable costs for low value personal injury claims that are started, but do not continue, under the RTA, or EL/PL pre-action protocols.

The Court of Appeal decided, in Broadhurst & Anor v Tan & Anor [2016] EWCA Civ 94, that an award of costs on the indemnity basis to a claimant who obtains a judgment at least as advantageous as the terms of her Part 36 offer pursuant to CPR 36.17(4), prevails over the fixed costs regime.

In contrast, what are the costs consequences arising from a defendant’s late acceptance of a claimant’s Part 36 offer? Are the claimant’s costs limited to the fixed recoverable costs for the entire period, or is the claimant entitled to assessed costs on the standard, or indemnity, basis after the expiry of the relevant period? CPR 36.13(4)(b) provides that, unless the parties agree the costs, the liability for costs must be determined by the court.  According to CPR 36.13(5) the court must, unless it considers it unjust to do so, award the claimant costs up to the date on which the offer expired and also to the date of acceptance. In considering whether it would be unjust to make that order, the court must take into account all the circumstances of the case, including the matters listed in CPR 36.17(5). However, 36.13(5) is silent as to the basis upon which those costs are to be assessed.

Following a number of divergent decisions, including on appeal at circuit judge level, this issue was thoroughly examined by District Judge Besford in Whalley v Advantage Insurance Company Limited (CC, 5 October 2017).

District Judge Besford concluded that the decision to award the Claimant costs on the indemnity basis from the end of the relevant period, which he had made in Sutherland v Khan (CC, 21 April 2016) represented ‘a swing of the pendulum beyond where it should swing’ and could no longer stand. Finding in favour of the Defendant, the judge held that, in a Section IIIA claim that is not allocated to the multi-track, costs continue to be determined under CPR 45.29B, save for those specific situations expressly excluded within Part 36. Consequently, upon late acceptance of a claimant’s Part 36 offer, fixed costs prevail.

The delay of one month on the part of the Defendant was not an exceptional circumstance such as to justify an award of costs greater than the fixed recoverable costs pursuant to CPR 45.29J, or ‘out of the norm’ conduct which would justify an award of costs on the indemnity basis under CPR 44.2.

What might constitute ‘exceptional circumstances’? According to Leveson LJ in Costin v Merron [2013] 3 Costs LR 391 [11], the phrase, in the context of CPR 45.12, meant that ‘exceptionally more money has had to be expended on the case by way of costs than would otherwise have been the case.’ Would this hurdle be surmounted where the defendant delayed accepting a reasonable offer until shortly before the trial? Possibly, if the delay was deliberate, or tactical.  However, every case will be fact specific.

The conclusion that fixed costs applied upon the late acceptance of a claimant’s Part 36 offer in a Section IIIA claim was also reached by HHJ Tindal in Parsa v DS Smith PLC and QBE Insurance Europe Ltd (CC, 8 September 2017). Further, the judge determined that there is no ‘indemnity escape clause’, in that, whilst indemnity costs might be justified, there is no jurisdiction to make such an award because CPR 44.2 is overridden by CPR 45.29B. In light of the number of conflicting circuit judge decisions, HHJ Tindal granted permission to appeal to the High Court, which we hope will result in an authoritative decision. In the meantime, for further information, or to discuss a specific case, please do not hesitate to contact us.

Any queries please contact Jonathan Sandford on Jonathan.Sandford@kain-knight.co.uk

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