Part 2 : Escaping from the Fixed Recoverable
Costs regime Last week we considered the application of the fixed recoverable costs regime to the various claim values, tracks and aspects of the case, e.g. interim applications. This week, despite the seemingly ever widening scope of fixed costs, consideration will be given to the exits and escapes out of the regime which have become apparent due to the interpretation of the Court of both the rules regarding allocation, Part 36 offers and the fixed costs provisions themselves. As we will see, a can of worms has been opened by recent decisions which Claimant lawyers can use to go fishing with in an attempt to maximise costs recovery outside the regime.
A finer discussion of the decision of the Court of Appeal in Qader & ors v Esure Services Limited  EWCA Civ 1109 can be found in Michael Mansi’s blog here. Briefly, however, the Court of Appeal gave a novel judgement in holding that fixed costs should “apply as widely as possible (and therefore to cases allocated to the fast track, and to cases sent for quantification of damages at disposal hearings), but not to cases where there had been a judicial determination that they should continue on the multi-track.”. Essentially the judgement was that fixed costs do not apply to cases directed onto the multi-track by the judiciary and such a clear expression within the rules had been left out by mistake. Claimant Solicitors should be looking out for cases that should properly be on the multi-track to ensure that they are allocated as such whilst at the same time being wary of Defendants who attempt to have such cases put onto the fast track.
Per Broadhurst & anr v Tan & anr  Civ 94 the effect of Part 36 can be significant to the applicability of fixed costs. In Broadhurst the balance between the applicability of the fixed costs regime and the provisions of Part 36 relating to indemnity costs was considered, with the Court of Appeal holding that a Claimant who successfully matches or betters his Part 36 offer is entitled to costs on the indemnity basis after the expiry of the relevant period, and that indemnity basis assessment cannot be equivalent to fixed costs.
The decision in Broadhurst is now widely understood and applied, however the case only dealt with a situation in which the Claimant successfully beat his Part 36 offer at Trial. What if the situation where the Defendant accepts the Claimant’s costs out of time?
In Sutherland v Khan (DJ Besford sitting at Kingston upon Hull, 21st April 2016, unreported) the Claimant relied upon the decision in Broadhurst in arguing for indemnity costs. DJ Besford, in considering the factors at CPR 36.17(5), found that that there was no good reason not to make an indemnity costs order and referred to the carrot and stick effect of Part 36 offers in deciding “if there was no incentive or penalty there would be little point in a Defendant accepting offers early doors, as opposed to immediately prior to Trial”. Effectively, Part 36 must have “teeth”, and a Defendant cannot be allowed to accept an offer after the expiry of the relevant period with no discernible consequence.
A different approach was taken in Whiting v Carillionamey (Housing Prime) Limited in which HHJ Hughes QC sitting at Winchester decided, despite the rule, that there had to be more than late acceptance to award indemnity costs. However Whiting was not a fixed costs case and it appears that the Courts are treating the issue differently where fixed costs are applicable. The point was back on the table in Car Craft Test Centre & Martin v Trotman & Advantage Insurance Company (DJ Etherington sitting at Stoke, 3rd February 2017) in which there was similar reasoning to that of DJ Besford in Sutherland, namely that a there must be consequences for a Defendant accepting the Claimant’s Part 36 offer out of time in a fixed costs case. DJ Etherington agreed with the Claimants and DJ Besford in deciding, in consideration of the factors at CPR 36.17(5), there was no reason why an award of indemnity costs against the Defendant from the expiry of the relevant period would be unjust.
This is a point I have taken and been successful on before and I am in complete agreement with both District Judge Besford and Etherington that there must be consequences for Defendants who accept Claimant’s Part 36 offer after the expiry of the relevant period.
The escape from fixed costs also applies to costs of provisional assessment it seems. On 20th June 2016 in Lowin v W Portsmouth & Co Ltd  EWHC 2301 (QB) Mrs Justice Laing, on appeal from Master Whalan in the SCCO, followed the logic of the Broadhurst decision in ruling that a Part 36 offer took precedence over fixed costs and therefore removed “cap” on provisional assessment costs at rule 47.15(5) of £1,500.00, albeit Laing J distinguished the case from Broadhurst slightly to take account that the costs concerned were “capped” rather than “fixed”. In any case, the principal appears the same in that Part 36 should incentivise settlement and failure to accept a reasonable Part 36 are likely to have costs consequences if the offeror matches or betters such an offer at provisional assessment. It should be kept in mind however that permission to appeal the decision of Laing J in Lowin has been sought and was approved on the papers on 22nd February 2017. The Court of Appeal is to hear the same by 9th October 2017.
Claims can escape via CPR 45.29 J and K if there are exceptional circumstances, in doing so the Court will make a summary assessment or make an order for detailed assessment if such circumstances are present. If it is not appropriate the Court will order the fixed costs. If on assessment, the assessed costs do not exceed the fixed costs by the 20% escape margin – the lesser sum will be ordered. It should not be taken that the exceptional circumstances clause only applies to the case as a whole. As above, interim applications have their own fixed costs rule within the larger section. There is no reason of which I am aware why either party cannot submit within an application that, due to its nature, complexity, necessity of the work involved or conduct of the opposing party, the fixed costs should not apply, and that instead the costs of the application should be assessed on the standard or indemnity basis as opposed to the fixed costs as CPR 45.29H applying.
Written by Liam McKee - Costs Draftsman
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