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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. David Disney, Director and Head of the South West Region of John M Hayes takes a closer look at the issues and offers some strategic advice to Solicitors.
So, in what circumstances do fixed recoverable costs (under Part IIIA of CPR 45) apply to high value claims?
Pursuant to CPR 45.29A and the decision in Qader v Esure  EWCA Civ 1109 (please click here for further information), Fixed Recoverable Costs 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, which 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.
What should you do 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, these are:-
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 fixed recoverable costs 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); hence the suggested involvement of more experienced fee earners at the outset to ensure the correct evaluation of the claimed. Although costly, it will arguably be time well spent when hourly rates costs are obtained over fixed costs.
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 CMC, 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:
The key part of this provision is that there needs to be “exceptional circumstances”. Whether a case is exceptional or not will turn on its own facts but no definition of an “exceptional circumstance” is provided within the provision and it is not yet known, due to the lack of case law, what threshold will need to be met in order to satisfy this condition. We do however know that the threshold for proving exceptional circumstances was quite high under the previous fixed recoverable costs 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 of a similar level.
“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 to made that had allocation taken place fixed costs would have applied. However, due to the clear wording of CPR 45.29B, there is no ambiguity as to the costs that should apply; FRC costs.
CPR 45.29B; “…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—
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.
What happens if the court considers there to be “Exceptional Circumstances”?
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 less than 20% greater 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!
Should you need any further advice in relation to this issue, have any general queries or wish to discuss a particular costs issue you may be experiencing, please contact one of experts on 0370 300 3780 or click here for details of our Technical Costs Service.
BA (Hons), GDip
Thursday 22nd February 2018