A senior costs judge has stressed that accepting a Part 36 offer does not mean the matter automatically moves away from fixed costs.
Ruling in Executors of the Estate of Kenneth Collins v Thames Valley Police, Costs Judge Whalan said the offer and acceptance of a settlement cannot be construed as an effective ‘contracting out’ of the fixed recoverable costs regime. However, in a wide-ranging judgment which also addressed the timing of the costs claim, Whalan did agree to depart from the FRC regime because the claim involved an intentional tort.
Claimant lawyers had submitted that fixed costs did not apply where the parties had expressly agreed they should not. The Part 36 offer included the standard proviso that if it was accepted within the relevant period, the defendant ‘will be liable for the claimant’s costs in accordance with rule 36.13’. This section, it was further argued, provides for costs to be assessed on the standard basis, if not agreed. By the acceptance of the offer, the claimant said the parties had effectively agreed the defendant would pay the claimant’s assessed costs and this ‘ousts’ FRCs.
But Whalan made clear that an agreement under Part 36 rules could not be construed as parties contracting out of the fixed costs regime. He added: ‘Quite apart from the fact that it invokes a procedural and not a contractual process, it is clear that the entitlement to costs conferred by 36.13 is simply a right to have those costs determined by the rules.’
The ruling also addressed another issue that has arisen since the extension of the fixed costs regime in 2023.
The Part 36 offer for £32,500 was accepted in February 2023 but costs-only proceedings were issued in December 2024 – when the rules applied fixed costs applied to most civil cases worth up to £100,000.
The claimant argued that when the fixed costs rules referred to when ‘proceedings are issued’, this applied to the substantive claim itself, not any subsequent costs-only proceedings. The defendant submitted that the fixed costs scheme makes no distinction between a substantive claim and a cost-only claim.
Whalan favoured the defendant’s argument, adding: ‘The transitional provisions implemented a relatively simple scheme which, inter alia, imposes a ‘bright line’ demarcation between FRCs and the previous regime. These changes were publicised well in advance and on the facts of this case the claimant had eight months to issue costs-only proceedings prior to the 1 October 2023 commencement date.’
However, the claim ultimately avoided being caught by fixed costs through a third strand argued by the claimant. The substantive claim had been for compensation after Thames Valley Police had destroyed guns belonging to the claimant. Whalan said that as the case was against the police and included an intentional or reckless tort, it should be allocated to the multi-track and should fall into the narrow band of claims exempt from fixed costs.
Nick McDonnell, director of specialist costs firm Kain Knight, described Collins as one of the most significant judgments to date on the expanding FRC regime, tackling three issues which are already generating satellite litigation. The ruling is 'a reminder to practitioners that the expanded fixed recoverable costs regime is not all-encompassing,' McDonnell said. 'Where a claim against the police includes an intentional tort, the rules themselves require an exit from fixed costs, regardless of how the case ultimately settles.'
However he added that Collins 'exposes a hard edge to the post-2023 costs rules. Even where a claim settles sensibly and without proceedings, claimants may still be forced into fixed costs if they later have to issue costs-only proceedings, and a standard Part 36 settlement offers no real protection against that risk. There seems to be a clear message — the rules can reward procedural speed over cooperation, and claimants who delay do so at their peril.’
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