Fixed Recoverable Costs and Late Acceptance of Part 36 Offers

Fixed Recoverable Costs and Late Acceptance of Part 36 Offers: The Court of Appeal have handed down judgment in what is a disappointing decision for claimant solicitors

Christopher McClure considers the implications of the decision in Hislop v Perde [2018] EWCA Civ 1726 as it relates to recovery in claims subject to the fixed recoverable costs regime found at CPR Part 45, Section IIIA.

 It is probably fair to say that Claimants have enjoyed a decent run in the Court of Appeal insofar as decisions relating to fixed costs are concerned.

In Acorn v Bird [2016] EWCA Civ 1096 it was determined that where an ex-EL/PL Protocol claim, issued but not allocated, is listed for disposal following judgment but settles prior to the disposal hearing, the higher fixed fee in column 3 to Table 6D (row B) of CPR r. 45, Section IIIA applies.

The Appellant Court in Iqbal v Leek [2017] EWCA Civ 355 faced the question of whether Stage 1 costs paid under the old RTA Protocol could be recouped in the event that the matter did not proceed to Stage 2. In allowing the claimant’s appeal the Court determined that paid Stage 1 costs of £400 plus VAT were not to be treated as an interim payment on account by reference to old CPR r. 45.40 (current CPR r. 45.28) but rather a payment in respect of work actually undertaken pursuant to Stage 1 of the old RTA PAP. They were thus non-refundable.

Briggs LJ in his judgment in Qader v Esure EWCA Civ 1109 essentially re-wrote parts of CPR Part 45, Section IIIA to provide that any ex-Protocol matter, otherwise subject to the fixed recoverable costs regime, escapes that regime simply by reason of being allocated to the multi-track. The Civil Procedure Rules Committee has since amended CPR Part 45, Section IIIA to reflect the decision of the Court in Qader.

The decision in Broadhurst and Taylor v Tan and Smith [2016] EWCA Civ 94 represents another significant victory for claimants. There the Court held that where a claimant in an ex-new RTA Protocol matter equals or betters its own Part 36 Offer at trial, the defendant is liable for hourly rate – as opposed fixed – costs, to be assessed on the indemnity basis, from the date of expiry of the Part 36 Offer onwards. It was accepted by Dyson LJ that this would “lead to a generous outcome for the claimant [but that such was] consistent with [CPR r. 36.17] as a whole.”

But whereas the question in Broadhurst dealt with the position when a claimant equals or betters its own Part 36 Offer on judgment, the Court in Hislop was concerned with the situation where a defendant accepts a claimant’s Part 36 outside the relevant period. To state the issue in Hislop another way: in a case of late acceptance, for the period spanning the first day after the relevant period to the date of acceptance, is a claimant subject to fixed recoverable costs or entitled to recover at hourly rates?

In allowing the defendant’s appeal in Hislop, and having conducted a fairly thorough examination of the authorities discussing the relationship between late acceptance, fixed costs and indemnity costs, the Court found that CPR r. 36.20 (the fixed costs provision) neither preserved nor modified r. 36.13 (the assessed costs provision) and, as such, “the correct interpretation of the rules is to say that, in a fixed costs case, r. 36.20 applies where an offer is accepted late, and that r.36.13 does not apply at all.”

On the basis that CPR r. 36.13 was not engaged by r. 36.20, it was determined that neither indemnity nor standard basis costs could apply and, as such, the claimant could not look to rely upon a basis of assessment (whether standard or indemnity) as a means of escaping the fixed recoverable costs regime. Said Coulson LJ:

“These rules demonstrate that, in the mirror image of the situation in which these claimants find themselves (namely, where a claimant has accepted a defendant’s offer late) there is no question of either indemnity or standard basis costs being awarded to the defendant. The defendant’s recovery for the period of delay is limited to fixed costs only. There could be no reason to treat the claimant in a radically different way and to go outside the fixed costs regime, and order standard or even indemnity costs, in circumstances where a defendant in a similar position to these claimants is not permitted to recover costs on that basis. In this way, my interpretation of the rules applies the same fixed costs regime to any party whose offer has not been accepted when it should have been.”

But perhaps the greater concern for claimant solicitors is the decision in Hislop which concerns the relationship between late acceptance and CPR r. 45.29J: the exceptional circumstances provision.

CPR r. 45.29J provides claimants with one of very few escape routes from fixed recoverable costs; other avenues of escape include allocation to the multi-track (Qader refers) and equalling or bettering one’s own Part 36 Offer at trial (Broadhurst refers) and are dealt with in our article Fixed Costs in High Value Claims.

Whilst Coulson LJ was “anxious not to express detailed conclusions about the scope and extent of r. 45.29J [because he did] not consider that its general ambit [was] directly necessary to this appeal” (the argument was not argued before the Court in Hislop), he did have the following to say:

“I do not consider that a defendant’s late acceptance of a claimant’s Part 36 offer can always be regarded as an “exceptional circumstance”. On the contrary, I take the view that my reasoning in Fitzpatrick as to why there can be no presumption in favour of indemnity costs in these circumstances (see paragraph 37 above) is also applicable, at least in general terms, to the suggestion that there is a presumption that a late acceptance of a Part 36 offer is an exceptional circumstance for the purposes of r. 45.29J.”

 Although Coulson LJ continued by saying that “a long delay with no explanation may well be sufficient to trigger r. 45.29J; a short delay with a reasonable explanation will not” – he offered no definitive guidance on what, in the context of unjustified delay, amounts to ‘exceptional circumstances’ for the purposes of CPR r. 45.29J; this was a particularly unhelpful omission given Coulson LJ’s comment that “it remains the position that, in an exceptional case of delay, it may be possible for the claimant to escape the fixed costs regime [under] r. 45.29J.”

By deduction, then, a claim based on exceptional circumstances “may” succeed in an exceptional case of delay. Circular indeed.

Regrettably, there is no authoritative guidance on the definition of ‘exceptional circumstances’ which, perhaps, is somewhat surprising given its longstanding use in the predictive costs regime delineated at CPR Part 45, Section II.

Whilst the issue of late acceptance in the context of CPR r. 36.20 has now been closed, it is highly likely that another argument will open concerning what, in the context of late acceptance, constitutes exceptional circumstances for the purposes of CPR r. 45.29J.

Please contact Christopher McClure to discuss any query relating to this article. Christopher is based at our Manchester office and can be contacted on 0161 835 4087.

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