CA: Accepting part 36 offer late does not displace fixed-costs regime

Hoe: Judgment gives certainty

A claimant in a fixed-costs case whose part 36 offer is accepted late is restricted to those fixed costs, the Court of Appeal has ruled.

The decision, which follows several conflicting lower court rulings, will “affect the costs outcome in many other cases”, Lord Justice Coulson acknowledged.

Both the Association of Personal Injury Lawyers and the Forum of Insurance Lawyers made submissions to the court given the importance of the issue.

In previous rulings on fixed costs cases, the appeal court has found that where a part 36 offer is accepted in time, the successful party is entitled to the fixed costs (Solomon v Cromwell Group), but where the case goes to trial and the claimant recovers more than a part 36 offer, he or she is entitled to indemnity costs from the date the offer became effective (Broadhurst v Tan).

The conjoined cases of Hislop v Perde and Kaur v Ramgarhia Board [2018] EWCA Civ 1726 dealt what “what might be called the cases in the middle”, said Coulson LJ.

Hislop concerned a road traffic accident claim where the claimant’s part 36 offer of £1,500 was initially rejected and then accepted 19 months later, a week before trial.

By then, Ms Hislop’s costs were £2,372 in fixed costs up to the expiry of the offer, and £5,534, being the costs actually incurred from then onwards. The claimant sought the £5,534 as indemnity costs.

At first instance, the deputy district judge said the costs should be the fixed costs. On appeal, Her Honour Judge Walden-Smith ruled that the post-offer costs should be assessed on the standard basis.

Kaur was a public liability claim. The claimant made a £2,000 part 36 offer and five months later, concerned about its liability for costs if it accepted this, the defendant made its own part 36 offer for £3,000, which Ms Kaur accepted.

She still sought indemnity costs for the period in between. District Judge Reed in Leicester decided that the claimant was entitled to £2,450 by way of fixed costs up to the date of allocation, and costs to be assessed on the standard basis thereafter.

He ruled that, if the defendant had simply sought to accept the claimant’s earlier offer out of time, then the claimant would have been entitled to claim indemnity costs for the period of delay.

The appeal was leap-frogged to the Court of Appeal to be heard with Hislop.

Coulson LJ found the CPR clear that the general rule on the costs consequences of accepting a part 36 offer did not apply to fixed-cost cases, except where a claimant beat the offer at trial, a situation “expressly” addressed by the rules.

This interpretation led to a “sensible and coherent result” for four reasons, he continued.

First, it accorded with “the comprehensive nature of the fixed costs regime in part 45 and the policy that, subject to limited exceptions, the fixed costs regime is intended to apply to the relevant PAP cases, without further ado or argument”.

The exception for beating the offer at trial “has always been a situation where the rules have striven to reward the claimant” and it was sensible that this should apply to a fixed-costs case.

Second, “if a case begins under the fixed costs regime, then it should only be in exceptional circumstances that the parties are able to escape it…

“The regime provides certainty. It also ensures that, in low-value claims, the costs which are incurred are proportionate.”

Third, the interpretation meant that the same rules applied as when a claimant accepted a defendant’s offer late.

Coulson J said: “Finally, it remains the position that, in an exceptional case of delay, it may be possible for the claimant to escape the fixed costs regime. That arises under r.45.29J.”

Though the judge did not wish to discuss rule 45.29J in detail, he did stress that a defendant’s late acceptance of a claimant’s part 36 offer could not always be regarded as an ‘exceptional circumstance’.

As a result, in Hislop, the deputy district judge’s ruling was restored, and in Kaur the claimant was only entitled to fixed costs up to the relevant stage when she accepted the offer.

Lady Justice King and Lord Justice Longmore agreed.

Matthew Hoe, director of dispute resolution at Peterborough firm Taylor Rose TTKW, who acted for the defendant in Hislop, said: “This judgment gives the certainty that practitioners need on this issue. The stayed cases can now be resolved.

“This argument followed on the heels of Broadhurst. Just a handful of wrongly decided first instance cases caused a swathe of copycat applications.

“This appeal probably always came down to the argument that fixed costs were not enough in these circumstances. But it was not clear why costs increased more than they otherwise would have done after a part 36 offer was made.

“So perhaps it came down to a broader contention that fixed costs are never enough. That will have to be resolved in a different way.”

The immediate reaction from claimant lawyers on social media was that the decision meant there was no encouragement for defendants to accept offers quickly.

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