Is There Now a Way Out of the Fixed Costs Straitjacket?
In a decision which is a welcome boost to the Claimant Legal Industry, Claimants who beat their own Part 36 offers will now be entitled to more than just fixed costs, the Court of Appeal has ruled in a landmark judgment. In two joined-up hearings both concerning low-level RTA claims, Master of the Rolls Lord Dyson, said assessed costs should trump fixed costs where Claimants secure more than they had offered to settle for; under the provisions of CPR Part 36.
In Broadhurst & Anor v Tan & Anor, Dyson said assessed and fixed costs were ‘conceptually different’, and that Parliament had not intended to create a scheme to penalise Claimants when it had established a fixed costs regime. Professor Dominic Regan commented on Twitter that it was a ‘stupendous result’ for Claimants, while former Association of Personal Injury Lawyers president Matthew Stockwell said, “[it is] difficult to overstate how important this is given proposed extension of fixed costs”.
The cases related to separate Claimants Broadhurst and Taylor, were brought together on appeal after judges had ruled opposite ways on whether to equate indemnity costs with fixed costs. The appeals arose from apparent tensions between the rules fixing costs in most lower value PI cases (found in section IIIA of Part 45 of the Civil Procedure Rules) and the provisions in Part 36 which specifically apply to such claims.
Ben Williams QC, for the Claimants, said the tension is resolved by specific provisions that Part 36 is a self-contained procedural code intended to prevail over Part 45. If there is any doubt, this should be resolved by the explanatory memorandum to the 2013 amendment rules laid before Parliament. This states that if a Defendant refuses a Claimant’s offer to settle, and the court subsequently awards the Claimant damages which are greater than or equal to the sum they were prepared to accept in the settlement, ‘the Claimant will not be limited to receiving his fixed costs’.
The Defendants stressed that practical difficulties would arise if the Claimants’ interpretation was accepted. James Laughland argued that Parliament had not intended to draw any distinction between fixed costs and costs assessed on the indemnity basis.
Dyson accepted that, if rules in Part 45 stood alone, the Claimant would be entitled only to fixed costs and disbursements. But he stressed these rules did not stand alone: “‘I do not consider that there is any doubt as to the true meaning of these rules. The tension is clearly resolved in favour of rule 36.14A,’ said Dyson. ‘The starting point is that fixed costs and assessed costs are conceptually different. Fixed costs are awarded whether or not they were incurred, and whether or not they represent reasonable or proportionate compensation for the effort actually expended. On the other hand, assessed costs reflect the work actually done. The court examines whether the costs were incurred, and then asks whether they were incurred reasonably and (on the standard basis) proportionately.”
Although some people predict the Government will now amend the CPR to reverse this decision, in theory it should encourage Claimant practitioners to offer to accept a discount to their claim with the prospect of recovering standard basis costs in the event that such an offer is beaten. While any decision which should lead to an increase in the number of offers and settlements should be welcomed by both sides, this is unlikely to be the final word on this issue.
By Oliver Jones - Costs Lawyer