Zenith Personal Injury Current Awareness

LATE ACCEPTANCE OF PART 36 OFFER WHERE FIXED COSTS APPLY - YOU STILL ONLY GET FIXED COSTS

26 July 2018

Vilma Vodanovic

In the introduction to the judgment of the Court of Appeal in Hislop v Perde; Kaur v Committee (for the time being) of Ramgarhia Board Leicester [2018] EWCA Civ 1726,  Lord Justice Coulson succinctly identified the issues:

‘By reference to two earlier decisions of this court, the issue of principle can be delineated in this way. Where a Part 36 offer is accepted within 21 days, in a case governed by the fixed costs regime, neither party can recover more or less by way of costs than is provided for by that fixed costs regime: see Solomon v Cromwell Group PLC [2012] 1 WLR 1048. Conversely, where a claim that is subject to the fixed costs regime goes on to trial and, by way of judgment, the claimant recovers more than a Part 36 offer, he or she is entitled to indemnity costs from the date that the offer became effective: see Broadhurst v Tan [2016] EWCA Civ 94; [2016] 1 WLR 1928. That leaves what might be called the cases in the middle, where a defendant accepts the claimant’s Part 36 offer many months after it was made, and the case does not then go on to trial. In those circumstances, does the case remain within the fixed costs regime, or can the claimant escape its confines and recover standard or even indemnity costs from the date that the offer became effective?’

The facts can be dealt with briefly.

Hislop:

This was a claim that started out in the RTA portal, but then fell out and fixed costs still applied. Proceedings were issued in September 2014 with a Part 36 offer made by C in November 2014 in the sum of £1,500. It was rejected by D who then offered £1,000 in May 2016. This was rejected by C.

One week before trial D accepted C’s November 2014 offer of £1,500.

D said all that C was entitled to were fixed costs.

C sought relevant fixed costs up to date of expiry of offer and then indemnity costs thereafter, namely from early December 2014.

Deputy District Judge Lennon QC at first instance awarded fixed costs only. On appeal to the Circuit Judge, HHJ Walden-Smith held that fixed costs were relevant up to the date of expiry of the offer and then standard basis costs were awarded thereafter, but not indemnity.

Before the Court of Appeal it was argued for first time that all that was ever available to C in terms of recovery of costs were fixed costs - HHJ Walden-Smith had no basis for awarding standard basis costs.

Kaur:

A claim that started out in the EL/PL portal fell out and again fixed costs applied.

Proceedings were issued and shortly after, an offer was made by C in the sum of £2,000 in January 2016.

In early 2017 D made its own offer in the sum of £3,000 because it was concerned about costs consequences of accepting the earlier lower offer made by C. C accepted this higher offer.

D said C could only recover fixed costs.

C however argued that fixed costs were relevant only up to the date of expiry of her offer in January 2016 and indemnity costs thereafter.

DJ Reed in Leicester heard the issue and proceeded on the basis that had C’s own offer been accepted by D out of time then C would have been entitled to indemnity costs. By making its own higher Part 36 offer later on, D was seeking to avoid the operation of the indemnity costs which would have otherwise followed. So DJ Reed decided that indemnity costs were applicable.

This appeal was leap-frogged to the Court of Appeal to be heard with Perde.

The outcome of the appeals to the Court of Appeal

In Hislop the Court of Appeal decided that fixed costs only are recoverable because they are the only ones that apply; there is no basis for awarding standard or indemnity costs in the particular circumstances of that case.

In Kaur the Court of Appeal decided again that C gets to recover fixed costs only up the date of D’s offer which she accepted. DJ Reed had proceeded on a false premise because there was no presumption of indemnity costs if you do better than your own Part 36 offer before trial.

Reasoning of Court of Appeal:

In delivering its judgment and considering the overall position, the Court of Appeal reiterated four points:

1. The comprehensive nature of Part 45 and the limited ways of escaping it, as discussed in Sharp v Leeds City Council [2017] 4 WLR 3465.

2. The interaction between Part 45 and Part 36 was only complex where there was no provision made for one taking precedence over the other - Broadhurst v Tan [2016] EWCA Civ  94 applied to cases where the offer was beaten after trial and was the only exception (see below), and Solomon v Cromwell Group PLC [2012] 1 WLR 1048 reiterated that Part 45 took precedence over Part 36 as was made clear within Part 45.

3. There was a reminder that indemnity costs are reasonable only when conduct is unreasonable to a high degree and circumstances take it out of the norm - Excelsior Commercial and Industrial Holdings Ltd v Salisbury Hammer Aspden and Johnson [2002] CP Rep 67

4. Late acceptance of Part 36 offers - Fitzpatrick Contractors Ltd v Tyco Fire and Integrated Solutions (UK) Ltd (3) [2009] EWHC 274 (TCC)  where it was stated that late acceptance of a Part 36 offer may warrant an order for indemnity costs but this was a question of fact in each case, meaning there could be no presumption of indemnity costs.

The Court of Appeal went on to say further: 

41. Solomon is authority for the proposition that the fixed costs regime made mandatory by r. 45.29B and r.45.29D will continue to apply to those cases covered by it, unless there is an express exception. The claimants in Broadhurst moved out of the fixed costs regime (even though they could not put themselves within one of the Part 45 exceptions (rr.45.29F, 45.29G, 45.29H and 45.29J)) because they could demonstrate that what is now 36.21 (then 36.14A) provided an additional exception.

43. The fundamental difficulty for a claimant in a fixed costs case seeking to say that something very similar should happen where the defendant has delayed before accepting the claimant’s Part 36 offer is that different rules apply. In my view, those different rules demonstrate that the applicable costs regime in fixed costs cases where there has been late acceptance is different to that described in Broadhurst v Tan and, on analysis, very similar to that explained in Solomon.

44. Whilst the general rule dealing with costs consequences following judgment (r.36.17) is expressly preserved by the particular rule relating to the fixed costs regime (r.36.21), that is not the position in relation to the rules relating to the costs consequences of accepting Part 36 offers before trial. For that situation, the general rule (r.36.13, old rule r.36.10) is not preserved by the rule applicable to fixed costs cases (r.36.20, old rule r.36.10A). Instead, r. 36.20 makes plain that it is the only rule which applies to the costs consequences of acceptance of a Part 36 offer in fixed costs cases. It preserves no part of the general rule set out in r.36.13.

45. What is more, r.36.13 itself says that it is “subject to” r.36.20 which, because that rule applies to fixed costs cases and r.36.13 does not, also leads to the conclusion that r.36.13  does not apply to fixed costs cases. Where (without more) a general rule is made ‘subject to’ a specific rule that governs a particular class of case then, in that class of case (here, those subject to fixed costs), it will be the specific rule that applies, not the general rule (see Solomon). (my emphasis)

Conclusion in brief:

If fixed costs apply, they will continue to apply even when a Part 36 offer is accepted late before trial. The position is different if a Part 36 offer is beaten after a trial (Broadhurst v Tan).

There is scope for avoiding the operation of fixed costs under rule 45.29J. This was briefly touched upon by the Court of Appeal but its general ambit was not directly relevant to the issues in the appeal so no definitive guidance was given save for a comment (paragraph 56 of the Court of Appeal judgment) that a late acceptance of a Part 36 offer was not always to be regarded as an exceptional circumstance for the purposes of rule 45.29J, although it could be on the particular facts of a case. It is worthy of note though that in Hislop the delay in accepting the Part 36 offer was about 19 months - this was not deemed to be exceptional or ‘outside the norm’ (paragraph 63 of the  Court of Appeal judgment).

Current Awareness

By the Personal Injury team