Fixed costs trumped by Part 36 offer, rules Court of Appeal

Topics: Costs, fees and funding,Personal injury & clinical negligence

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Claimants who beat their own Part 36 offer are entitled to more than just fixed costs, the Court of Appeal has ruled in a judgment likely to be welcomed by claimant lawyers. 

In two joined-up hearings both concerning low-level RTA claims, master of the rolls Lord Dyson (pictured) said assessed costs should trump fixed costs where claimants secure more than they had offered to settle for.

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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.

The result will cheer claimant lawyers, particularly with the prospect of an extended fixed costs scheme being discussed for the future.

Costs expert 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 was ‘difficult to overstate how important this is given proposed extension of fixed costs’.

APIL had made a written submission in the appeals in support of the claimants.

The cases, relating 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, which state 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.’

Readers' comments (40)

  • A fantastic result. I'm sure the ABI will kick up a fuss and the government will amend the CPR to reverse this decision.

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  • Jonathan: perhaps. But Part 36 rather loses its point if offers have no effect on costs. I expect the government to be more interested (philosophically) in cases settling - which this decision encourages by advertising the penalty of misjudging a settlement offer - than in appeasing insurers. They have had their appeasement, through the proposed 'whiplash reforms.'

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  • I am pretty sure this will be one of a number of cases where clarification of the rules is the principal aim. The recent rule changes were rushed in and frankly are an impenetrable mess. Thankfully the rules are crystal clear to LJ Dyson , who if I recall rightly, was the same Judge who made me feel a complete poltroon when explaining the decision in Mitchell which had otherwise confounded me!

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  • This Government's record suggests that appeasing insurers is its only objective in respect of civil litigation.

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  • A very sensible and reasoned decision. Can't think of anybody much better than BWQC to have taken up the case for the Claimant side of things and can't think of a firm I'd rather see on the losing end that Horwich Farrelly. Frankly, I am sick and tired of having to spend considerable time arguing down their and a few other firms' deliberately selective interpretation of the rules.

    In terms of the Government quickly stepping in...It would be overtly perverse - even I dare say too much so for this Government - if Defendant Part 36 offer makers in fixed cost cases were granted indemnity costs upon obtaining a favourable Judgement vis-a-vis their offer but a Claimant in the exact same situation did not...

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  • So...every single claimant in an all-or-nothing case will offer a 1% discount for early settlement in a fixed costs case. And then claim actual costs.

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  • Scep tick - perhaps if you made reasonable offers you might avoid such pitfalls?

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  • How does this affect 'fixed' costs in Small Claims?

    I know there is the no costs rule, but when the settlement offer is obviously beneficial and was never going to be beaten?

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  • ... I understand your point Scep tic, so long as such Claimants are then ready for the cascade of claims from the latest batch of "Have you had a claim under-settled? We'll sue your former solicitors" companies so beloved of daytime TV.

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  • @Raynor
    CPR 27.2(1)(g) states that part 36 simply does not apply to a Small Claim, and CPR 27.14(3) provides that of itself, failing to beat a Calderbank offer or other settlement proposal will not automatically result in an order for assessed costs.

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