Parties can contract out of fixed costs regime

Liverpool Civil and Family Court: Defendant did not object to terms of claimant’s acceptance

Parties can agree to contract out of fixed costs, a regional costs judge has ruled.

District Judge Baldwin in Liverpool said it was clear that a recent ruling of the Court of Appeal allowed parties to do this.

Turner v Cole was a claim that fell out of the road traffic accident portal as it became clear the value of the claim would exceed £25,000.

The defendant’s insurer made two offers of settlement in the alternative: the first was a part 36 offer of £55,000, including interest but gross of deductible benefits (which were nil in any event).

The second was for £60,000 net of deductible benefits, but it was open for only 14 days. The insurer also said it would pay “reasonable costs”.

The claimant accepted the second offer on the basis that costs would be paid on the standard basis, rather than “any portal, fixed costs or predictive costs basis, and that there was an interim payment on account of costs of £40,000.

The insurer agreed to pay the compensation at once but argued for regular portal fixed costs.

DJ Baldwin cited the comments of Lord Justice Males in the recent Court of Appeal decision in Ho v Adelekun, when he said: “Mr Mallalieu advanced a powerful argument that… the offer letter indicated an intention to depart from the fixed costs regime.

“In the end I have concluded, in agreement with Newey LJ, the taking the letter as a whole those words are not sufficiently clear to demonstrate such an intention and are outweighed by other considerations.”

DJ Baldwin said: “In my judgment, despite the undoubted intentions lying behind fixed costs regimes over time in terms of certainty, I am left in no doubt, in particular as a result of the remarks of Newey LJ in Ho, fortified by those of Males LJ, with which The Chancellor agreed… that it is open to parties to contract out of fixed costs by reaching agreement in that regard.

“By implication, Males LJ was also, in my view, clearly accepting that departing from or contracting out of fixed costs is permissible and can be found in appropriate cases of sufficient clarity.”

There was then the question of whether there was an agreement between the parties. DJ Baldwin said it was “abundantly plain or perfectly clear” that the claimant had made a counter-offer which the defendant accepted by agreeing to pay the damages.

There was nothing in the insurer’s letter which raised any concern that conventional costs were the condition of acceptance.

“Had any such concern been present, I would have expected to have seen language to the effect of a rejection in its entirety of any reference by the claimant to anything other than portal, fixed or predictive costs, as the case may be.

“The absence of a response of this type is entirely instructive as to a meeting of minds as to conventional costs.”

DJ Baldwin had “no hesitation” in concluding that the parties had by agreement contracted out of the fixed costs regime and that the claimant be awarded costs on the standard basis.

Andrew Roy (instructed by Simpkins & Co) represented the claimant and Sarah Robson (instructed by Horwich Farrelly) the defendant.

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