Fixed Costs - Making Sense of Recent Decisions

 

In the last few months there have been a number of judgments pertaining to the issue of the applicability of fixed costs under the RTA and PL Protocols. Consideration of these may be of use to those practicing in the field. Three of these recent judgments are discussed and analysed below.

The Judgments

The first judgment is that of HHJ Grant sitting in the County Court at Birmingham in the matter of Qader & Others v. Esure Services Limited [2015] EWHC B18 (TCC). HHJ Grant heard an appeal challenging the first-instance decision that Rule 45.29A meant that CPR 45IIIA applies where the proceedings had dropped out of the RTA Protocol even if there was then allocation to the multi-track due to allegations of fraud.

The judgment of HHJ Grant upheld District Judge Salmon’s decision at first instance that the rule was clear that “the determining factor is not track but value in respect of the operation of the fixed costs regime” and as such to make an exception to the fixed costs provisions for cases subsequently allocated to the multi-track would amount to a “re-casting” of the rule. HHJ Grant held further that the Rules are clear that costs management applied to multi-track cases except where the proceedings are subject to fixed costs (Rule 3.12) and that there would still be scope for costs to be sought in excess of fixed costs pursuant to Rule 45.29J.

The second judgment is that of HHJ Saffman sitting in the County Court at Leeds in the matter of Sharp v. Leeds City Council (2 November 2015). HHJ Saffman heard an appeal in respect of whether an application for pre-action disclosure made after proceedings had dropped out of the PL Portal and before a claim form was issued, was an interim application to which Rule 45.29H applied.

The judgment of HHJ Saffman was that Rule 45.29H did apply and that the period after which applications were “interim” extended from commencement via a claim notification form until final settlement of the claim. The Appellants, therefore, were only entitled to fixed costs in respect of the application for pre-action disclosure. 

The third judgment is that of Lord Dyson, Master of the Rolls, writing for a unanimous Court of Appeal in the matter of Broadhurst v. Tan; Taylor v. Smith [2016] EWCA Civ 94, two joined appeals from decisions of HHJ Robinson and HHJ Freedman respectively. The Court of Appeal was asked to decide whether Rule 45.29B ,on the applicability of fixed costs in the RTA Protocol, took precedence over Part 36 costs consequences in circumstances where Claimants failed to beat a Defendant’s Part 36 offer or Claimants achieved an outcome more advantageous than their own rejected Part 36 offer.

The judgment of Lord Dyson was that the tension between these rules was to be resolved in favour of Part 36 and that the costs consequences of Part 36 would follow even when proceedings were under the RTA Protocol. Parties would not be limited to fixed costs for the relevant periods following rejected offers but would be able to take advantage of the favourable costs consequences of Part 36. This judgment was based largely on interpretation of the Rules within Part 36, specifically in that Part 36 provides in several places for situations in which fixed costs regimes apply.

Reconciling

The above decisions were reached largely based on the Judges’ respective interpretations of the provisions of the CPR, but there may, on first appraisal, appear to be some tension between them.

On the one hand there are two judgments which hold that Protocol fixed costs regimes apply somewhat expansively – to proceedings that were commenced in the Portal even if they have dropped out and are now multi-track claims and to all applications in proceedings even if the matter has left the Portal. On the other hand, the application of the fixed costs regimes apparently comes to an abrupt halt in situations where Part 36 costs consequences come in to play.

However, when one views these judgments in the context of the wider goals of the CPR and trends in the civil justice system, the decisions are reconcilable.

In recent times the trend in civil justice has been towards goals of fostering co-operation between parties, encouraging the settlement of claims without final resolution by the courts and seeking to limit the large expense associated with litigation. This is evident in everything from the promotion of ADR and routine stays to allow mediation to the costs-budgeting brought in for multi-track proceedings. Fixed costs regimes play their part in achieving these goals. Limiting the recoverable costs of successful parties in many circumstances is a clear disincentive to both litigants and solicitors to pursue protracted litigation which may ultimately be compensated in only a very limited way; gone are the days when those with faith in their case could simply run up costs which would ultimately be restrained only by what a Judge may have considered unreasonable or disproportionate.

But Part 36 also plays a crucial role in the above goals by making parties consider very carefully offers of settlement, increasing the risks of turning down offers that may be quite reasonable and making sure that they are well aware of the increased risks. Ultimately, Part 36 is a strong incentive to parties to settle their cases without the need for the courts to make the final determination, and this will now apply in cases even where fixed costs regimes are applicable.

 

Conclusion

The above decisions thus all serve the goals of the modern civil justice system. The impact of the Court of Appeal’s decision will be to ensure that Part 36 offers are properly and carefully considered in every case. The impact of the decisions of HHJ Grant and HHJ Saffman will be to ensure that costs are not allowed to build and incentives to settle are still present even prior to, or where there are no, Part 36 offers. The drive towards encouragement of co-operation and settlement by the courts thus continues.