Court of Appeal to rule on interplay between fixed costs and part 36 offers

Court of Appeal: hearing next month

Court of Appeal: hearing next month

The Court of Appeal is to decide on whether a party who beats a part 36 offer in a case where fixed fees apply is eligible for indemnity costs as well.

The news comes in the wake of conflicting circuit judge rulings on the issue.

According to Ben Williams QC of 4 New Square, who acted for the claimant in Smith v Taylor (see below), the appeal judges will consider it on 8 February in an expedited appeal called Butler v Palmer.

The most recent case on the point was Dixon v Bennett, in which HHJ McKenna in Birmingham ruled just before Christmas that had it been the intention to allow the court to depart from applying part 45 fixed costs, “I would have expected clear guidance to that effect”.

He said the problem for the claimant was that the wording of CPR 45.29A was clear in stating that fixed costs applied where a claim was commenced under the portal but then exited.

HHJ McKenna added: “There is no express limitation to the effect that the fixed costs regime only applies where costs were awarded on the standard basis, still less any suggestion that the fixed costs regime should or could be departed from where indemnity costs were awarded.

“By way of example, an award of costs on the indemnity basis at the conclusion of a fast-track trial would not entitle the successful party to seek trial fees higher than the fixed costs provided for in the rules.”

There was a similar outcome last autumn in Broadhurst v Tan in Sheffield, where HHJ Robinson decided that there was no distinction to be drawn between fixed costs specified in table 6B and costs assessed on the indemnity basis. He also said there would have been specific guidance had the contrary been the intention.

However, in Smith v Taylor last November, HHJ Freedman in Newcastle disagreed – albeit “not without some hesitation” – saying that costs under the fixed costs regime and indemnity costs “cannot and should not be construed as being one and the same: they are separate and distinct and require a completely different approach when costs are being assessed”.

He gave several reasons for this conclusion, including that “if the intention was that the claimant should only recover fixed costs from the defendant in the event of a successful part 36 offer, such would have been spelt out in the amendment to the rules made by virtue of CPR 36.21 [in 2013]”.

The judge also took comfort from the explanatory memorandum attached to the statutory instrument that changed the part 36 rules in 2013.

This said: “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 settlement, the claimant will not be limited to receiving his fixed costs, but will be entitled to costs assessed on the indemnity basis in accordance with rule 36.14.”

“It could not be clearer in its terms,” HHJ Freedman said. “I ask rhetorically what is the point of preserving the part 36 benefits of indemnity costs if, in reality, the claimant’s solicitor receives no more by way of costs.”

HHJ Robinson had found that the explanatory memorandum did not appear to reflect the statutory instrument as enacted.

Meanwhile, in a ruling on a separate aspect of part 36, the Court of Appeal found that Mr Recorder Catford in Slough County Court was wrong to conclude that a claimant had failed to beat a defendant’s offer which was made “net of CRU”.

Crooks v Hendricks Lovell Ltd [2016] EWCA Civ 8 turned on the effect of an initial certificate from the Compensation Recovery Unit applied at the point of judgment for the claimant. The recorder postponed the decision on costs pending an appeal of the CRU decision, which eventually led to far lower deductible benefits.

Lord Justice Lindblom said: “The real measure of whether, after the CRU’s revised certificate had been issued, Mr Crooks had bettered the part 36 offer was whether the total payment he would actually receive as a result of the recorder’s judgment on the claim was more or less than the amount on offer.”

He ruled also that the words “upon judgment being entered” in CPR 36.14 should not be narrowly interpreted to mean simply the actual day.

“The regime in CPR 36.14 must be understood as applying to the relevant circumstances as they are once judgment has been given, but not necessarily only at the moment at which it is given,” Lindblom LJ said.

“There will be cases in which a judge is entitled not to proceed straight away to make his decision on costs. These will include cases where a judge has to compare a pre-trial offer to settle proceedings and the award of damages he has made in the trial.”


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