Regional costs judge reverses position on part 36 offers in fixed-costs cases

Besford: Decision can no longer stand

A regional costs judge has concluded that he was wrong to rule in a previous case that late acceptance of a part 36 offer automatically entitled the claimant to an award of indemnity costs, and thus provided an escape route out of fixed costs.

Judge Ian Besford decided that his widely reported decision in Sutherland v Khan “is unsupported and can no longer stand”.

Part 36 is silent on whether fixed, standard or indemnity basis costs apply in fixed-costs cases where there has been late acceptance, save that references are made to CPR 36.17.

This provides that the defendant should be encouraged to settle before trial without unfair costs penalties, whereas a claimant does not want to be put to additional work without appropriate costs reimbursement.

In Sutherland, District Judge Besford applied the Broadhurst principle that a claimant beating a part 36 offer that proceeded to trial was entitled to escape fixed costs, to cases that did not proceed to trial but were settled by accepting part 36 offers outside the 21 day period for acceptance.

There have been conflicting circuit judge appeals on whether he was right.

According to national insurance law firm BLM, which acted for the defendant in the new case, the judge’s ruling in Whalley v Advantage Insurance confirmed that unless there were ‘exceptional circumstances’ or conduct justifying indemnity costs, the fixed costs regime applied to acceptance of part 36 offers out of time.

BLM costs specialist Dean Holmes said they decided to tackle Sutherland “head-on rather than simply continue to add to the body of circuit judge appeals by bringing the point before the same regional costs judge”.

Adam Burrell, a partner and head of BLM’s costs practice group, added: “The Sutherland decision has been widely relied upon by claimants seeking to recover additional costs beyond the prescribed fixed costs on cases that do not proceed to trial, and are settled by accepting part 36 offers out of time.

“Hopefully this detailed reconsideration and very clear declaration that it can no longer stand will resolve the significant number of cases arguing this point.”

Speaking about part 36 at the recent Costs Law Reports conference in London, Professor Dominic Regan said the High Court ruling last year in Lowin v W Portsmouth was to be appealed. This case applied Broadhurst in finding that when a receiving party made a good part 36 offer in provisional assessment proceedings, this overrode the £1,500 costs cap set out in CPR 47.15(5).

“Sir Rupert Jackson has suggested in his recent report that a simple percentage uplift be applied to fixed costs where a good part 36 offer takes a matter out of the predicated regime,” Professor Regan said.

“This would obviate the necessity for an assessment of indemnity costs payable.”

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