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Civil Litigation Section

Great news for claimants? Fixed costs trumped by part 36 offer

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Lord Dyson has ruled that assessed costs should trump fixed costs where claimants secure more than they had offered to settle for, and parliament had not intended to create a scheme to penalise claimants when it had established a fixed costs regime.

What’s happened?

The Court of Appeal has heard two cases (Broadhurst & Taylor v Tan & Smith [2016] EWCA Civ 94) concerning the interplay between part 36 and part 45, and clarified whether fixed costs apply if a claimant beats their own part 36 offer. 

Why is it important?

Since the introduction of the fixed costs regime for cases that fall out of the RTA and EL/PL portals, there has been much uncertainty as to whether fixed costs continue to apply if there has been an effective part 36 offer from the claimant.

It is now clear that:

‘If a claimant makes a successful Part 36 offer in a section IIA case, he will be awarded fixed costs to the last staging point provided by rule 45.29C and Table 6B. He will then be awarded costs to be assessed on the indemnity basis in addition from the date that the offer became effective.’

How does this fit into existing law and practice?

There is a clear tension between rule 45.29B and rule 36.14A (which is now CPR 36.17(b)). Part 45 states that the only costs to be awarded in section IIIA cases are fixed costs, whereas part 36 states that in such cases rule 36.14(3)(b) will apply.

It was accepted that the claimants in the current case were entitled under rule 36.14(3)(b) (now CPR 36.17(b)) to ‘costs on the indemnity basis from the date on which the relevant period expired’. However, the claimants argued that this meant that they were entitled to assessed costs and not just fixed costs. The defendants argued that costs meant the fixed costs in rule 45.29.

The Court of Appeal stated the following.

  • Under the principle that general provisions yield to specific provisions, rule 45.29B should yield to part 36 as it is the more specific provision.
  • The explanatory notes to the statutory instrument that introduced the fixed costs regime specifically stated that the claimant would not be limited to receiving their fixed costs, but will be entitled to costs assessed on the indemnity basis.
  • Fixed costs and assessed costs are conceptually different. Fixed costs are awarded whether incurred or not, and whether or not they represent reasonable or proportionate compensation for the effort actually expended. On the other hand, assessed costs reflect the work actually done.
  • The claimants were not limited to fixed costs, and were entitled to costs assessed on the indemnity basis from the effective date of the offer.

In what ways does this affect practitioners?

Costs expert Professor Dominic Regan commented on Twitter that it was a ‘stupendous result’ for claimants, while former Association of Personal Injury Lawyers president Matthew Stockwell said it was ‘difficult to overstate how important this is given the proposed extension of fixed costs’. 

  • This judgment highlights that part 36 can override the fixed cost provisions in cases where section IIIA of part 45 is applicable.
  • Claimants should always consider making a realistic part 36 offer as soon as possible. If made pre-issue, an effective offer will have considerable cost consequences.
  • Defendants need to consider part 36 offers made by a claimant carefully. It is now clear that the protection of fixed costs will be lost if the claimant beats their offer at trial.

Disclaimer

While we try to ensure the accuracy of the information provided, it does not constitute legal advice, and cannot be relied upon as such. The Law Society does not accept any responsibility for liabilities arising as a result of reliance upon the information given.

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