Cost Conflict Resolved in the Court of Appeal
7th Mar 2016
In Personal Injury Litigation, the Court Rules provided that for claims worth less than £25,000 in damages, a regime of fixed costs should apply. This regime sets out the precise calculation of costs awarded to a successful Claimant upon the conclusion of the case. The amounts awarded for costs are set out at Civil Procedure Rule Part 45 and vary dependent upon the type of case being pursued. For example, a road traffic collision or an accident at work will be governed by a different scale and the fixed costs awarded under the scales increase as the case approaches a final determination by a judge as the amount of work has increased.
Although the ultimate determination of a case is before a Judge, the parties to any litigation are encouraged to explore settlement terms and one of the most effective tools in a lawyer’s possession for negotiating settlement is what is known as a Part 36 offer. A Part 36 offer is a formal offer to settle a case and can be specific to an issue in a case or, as is often the case in personal injury claims, in respect of the whole claim by making an offer to accept a specific sum of money.
Under Part 36 of the Civil Procedure Rules, a Claimant who proceeds their case to a trial before a judge and who does at least as well or better than their offer is entitled to invite the court to award them additional amounts to, it can be said, penalise a Defendant for not accepting an earlier reasonable offer. The additional awards which a court can make can be in respect of additional interest, an additional amount in damages and what is know as indemnity costs.
Indemnity costs involve the court assessing costs on a different basis and deciding any doubt as to whether the costs should be allowed in favour of the party receiving the award for costs, as opposed to the party paying the costs as is normally the case. However, what if a party who is pursuing a case covered by the fixed costs regime beats their offer, what should the court allow by way of costs? Should it:-
Still award them the fixed costs, or
Depart from the fixed costs under Part 45 and award a figure assessed on the indemnity basis referred to above.
This was the issue the Court Of Appeal addressed in Broadhurst & Taylor v Tan & Smith  EWCA Civ 94, in a judgement given on the 23rd February 2016. The case actually comprises of two cases which were heard together on appeal as the two judges in the differing cases in the County Court decisions reached different conclusions to each other upon the effect of both part 45 and Part 36 of the Civil Procedure Rules. Lord Dyson gave the leading judgement in the appeal which was agreed by Lord Justice McCombe and Lord Justice Richards was able to clarify the operation of the court rules where a Claimant does better at trial than their earlier Part 36 offer in a case normally covered by the fixed cost regime.
The outcome was very helpful to the Claimants in both cases and held that if a Claimant beats a Part 36 offer, the Claimant will recover costs on an indemnity basis and that those costs will not be in accordance with the fixed scale but assessed by an analysis of what costs have been incurred. That entitlement to assessed costs would arise from the point the offer was made. In effect the successful Claimant would receive fixed costs under Part 45 until the stage of the case when the offer was made and assessed costs from that date onwards.
Giving judgement Lord Dyson acknowledged that may mean in some cases that Claimants will receive “a generous outcome” (on the issue of costs) but “in such circumstances is consistent with rule 36.14(3) as a whole and its policy of providing claimants with generous incentives to make offers, and defendants with countervailing incentives to accept them.”
In effect this case is a clear directive from the Court of Appeal that the parties are encouraged to make offers as soon as they are able and can benefit from a more generous award of costs if they do so and beat that offer.
Mark Hambling, director in Rogers & Norton’s Personal Injury department comments “ this is a great decision for Claimants and supports the advice that we as Claimant lawyers have been providing for sometime to make appropriate offers when you are able to settle a case as the Defendant who ignores those offers does so at their peril.”
Contact Mark Hambling on 01603 675637 or email firstname.lastname@example.org.
Rogers & Norton offer a free initial; discussion on all Personal Injury and Clinical Negligence cases and can be contacted on 01603 666001 or email email@example.com.