Avoiding the trap of fixed costs in high-value claims

Disney: Prevention is always better than remediation

Posted by David Disney, director and head of the south-west region of Litigation Futures Associate John M Hayes

Have you been caught out by fixed costs on a high-value RTA or EL/PL claim that settled prior to allocation to the multi-track? Over the past couple of months, we have seen this issue arise on a number of occasions.

So, in what circumstances do fixed recoverable costs (FRC) under part IIIA of CPR 45 apply to high-value claims?

Pursuant to CPR 45.29A and the decision in Qader v Esure [2016] EWCA Civ 1109, FRC apply if a claim was submitted through the portal but no longer continues under the relevant protocol and the matter is not allocated to the multi-track.

The application of fixed costs is therefore quite straightforward. If a seemingly low-value claim is started under the portal but later becomes more complex and/or increases in value, and subsequently exits the portal, it will be subject to fixed costs if settlement is reached before allocation to the multi-track.

This is the scenario we are finding to be quite common in practice and something which practitioners should become familiar with in order to avoid the pitfalls of fixed costs.

To avoid fixed recoverable costs before/during the claim, prevention is always better than remediation.

There are two immediate and obvious ways in which FRC can be avoided, although both require more case management. The first is not to submit the claim via the portal in the first place (if there is reasonable justification), the second is to ensure the claim is allocated to the multi-track as soon as possible (CPR 45.29B) or, if possible, delaying settlement until after allocation.

The first method will likely require time to be spent by senior fee-earners assessing the potential quantum of claims at the outset, in an effort to avoid incorrectly submitting claims through the portal. It also carries an element of risk in that the defendant may be ordered to pay no more than FRC if “the court considers that the claimant has acted unreasonably… by valuing the claim at more than £25,000, that the claimant did not need to comply with the relevant protocol” (CPR 45.24).

Although costly, it will arguably be time well spent when hourly rates costs are obtained.

The second method should not be relied on as a standard practice as it is not always within the claimant’s control. For example, the defendant could make an acceptable part 36 offer, more than 21 days prior to the initial case management conference, which would almost certainly result in settlement.

Even if the claim did not settle and was later allocated to the multi-track, the defendant could still raise the argument that had the claimant accepted the offer within the relevant period, fixed costs would have applied.

What can you do if fixed costs apply?

If fixed costs apply once the substantive claim has settled, then the claimant has a couple of possible avenues.

They could make an application pursuant to CPR 45.29J – which allows the court, if it considers there are exceptional circumstances, it summarily assess the costs or make an order for an amount of costs which is greater than fixed costs.

Whether a case is exceptional or not will turn on its own facts as ‘exceptional circumstances’ is not defined and there has not been any case law to determine what the threshold is. We do, however, know that the threshold for proving exceptional circumstances was quite high under the previous FRC provisions (which are now covered under CPR 45.13 – please click here for a previous article on this point) and therefore one would assume the threshold will be at a similar level.

Another possibility is making an application pursuant to CPR 46.13(a): “Where the court is assessing costs on the standard basis of a claim which concluded without being allocated to a track, it may restrict those costs to costs that would have been allowed on the track to which the claim would have been allocated if allocation had taken place.”

If the claim would have been allocated to the multi-track, there may be an argument that fixed costs would not apply. However, due to the clear wording of CPR 45.29B, there is no ambiguity as to the costs that should apply: “For as long as the case is not allocated to the multi-track, if, in a claim started under the RTA Protocol, the Claim Notification Form is submitted on or after 31st July 2013, the only costs allowed are the fixed costs in rule 45.29C.”

It may therefore be that this argument is used in support of an application made pursuant to CPR 45.29J rather than as a standalone application.

If the court is persuaded that exceptional circumstances exist, it will either summarily assess the claimant’s costs or make an order for detailed assessment of the claimant’s costs.

However, you should beware that there is a possible sting in the tail. If the claimant’s assessed costs are not 20% more than the fixed recoverable costs they would have received had they not obtained an order for hourly rate costs, the court will only allow the lower of assessed costs and fixed recoverable costs, and may order that the applicant pay the costs of the assessment (CPR 45.29K and CPR 45.29L).

It will therefore be necessary to undertake an analysis of the likely recovery under assessed costs before making such an application.

Take time to assess claims upon receiving initial instructions and consider whether a letter of claim is more appropriate than submission through the portal; the costs implications of these initial steps are significant.


    Readers Comments

  • Duncan Paine says:

    What is the consensus on the trigger point for the revised CPR 45.29 applying? I’ve had a number of cases where a client’s left the portal for one reason or another, well before Qader, or the resultant removal of the £25k upper limit from the costs tables at CPR 45.29 and addition of the wording to 45.29B. They have continued to litigate such matters on the basis of normal costs, ultimately settling for over the £25k limit (but not reaching the key multi track allocation point) only to be faced with some drastically relocated costs goalposts. Did the rule committee not anticipate this lacuna, could they not be bothered to draft a proper transitional provision, or did they just not care? Has anybody tested/is anybody testing the questions of what constitutes “exceptional circumstances”, or whether a matter that exited from the portal pre April 2017 is not caught by this ridiculous rule change?

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