No indemnity costs and fixed costs remain where Part 36 is accepted late

Jenny Cawthorne – Costs Consultant

Our Jenny Cawthorne, Costs Draftsman and GCILEx, examines the recent Court of Appeal decision in Hislop v Perde and Kaur v Ramgarhia Board [2018] EWCA Civ 1726. The two cases were conjoined together for the purpose of the appeal.

In a dramatic turn of events, the Court of Appeal unanimously held that, generally, Claimants cannot recover costs on the indemnity basis when their Part 36 Offers are accepted out of time.

Hislop v Perde

The substantive claim arose from a road traffic accident in December 2013.  The Claimant brought a claim for damages for personal injury which was initially commenced under the Pre-Action Protocol for Low Value Personal Injury Claims in Road Traffic Accidents.

The Defendant failed to respond in respect of liability and the claim therefore exited the Portal in May 2014.  After making a Part 36 Offer of £2,100, which was rejected by the Defendant on the basis that liability was still in issue, proceedings were issued in September 2014.

In October 2014, the Defendant made a Part 36 Offer of £1,800 subject to a 50/50 split for liability.  This was rejected by the Claimant as she did not consider she was even partially responsible for the accident.

On 11th November 2014, the Claimant made a Part 36 Offer in the sum of £1,500.  This was rejected by the Defendant in January 2015.

Witness evidence was subsequently exchanged and the Claimant pointed out that the Defendant was in the incorrect lane for her direction of travel and the Defendant was invited to reconsider their offer and was reminded that “in the event that our client equals or betters her part 36 offer at Trial, indemnity costs will be sought following the recent decision in Broadhurst”.

 After attempting to make a further offer which was rejected by the Claimant, the Defendant accepted the Claimant’s Part 36 Offer in June 2016 one week before Trial.

The Claimant’s costs amounted to:

  1. £2,372 with respect to fixed recoverable costs up to the expiry of the Part 36 Offer on 2nd December 2014; and
  2. £5,534 from 2nd December 2014 onwards which were sought on the indemnity basis.

Decision

At first instance, the County Court rejected the claim for indemnity costs.  This was subsequently overturned on the initial appeal by Judge Walden-Smith.  Judge Walden-Smith did not overturn the decision not to award indemnity costs however she ruled that the costs after December 2014 should be assessed on the standard basis.

Coulson LJ, chairing the hearing in the Court of Appeal, stated that the same Part 36 rules should apply to both Claimants and Defendants, and the “exceptional circumstances” provision should still deter parties from delaying accepting an offer.  He did rule however that there could not be a “presumption that the Defendant’s late acceptance of a Claimant’s Part 36 Offer could always be regarded as exceptional”.

Kaur v Committee of Ramgarhia Board Leicester

In this matter, the Claimant made a Part 36 Offer of £2,000 in September 2016.  The offer was rejected by the Defendant however after further negotiations the Defendant made a Part 36 Offer of £3,000 on 6 February 2017, in an effort to avoid any perceived penalties for late acceptance of the Claimant’s Part 36 offer. This was subsequently accepted by the Claimant.

The County Court awarded costs on the standard basis after September 2016 instead of the indemnity basis on the basis that the Claimant should not be worse off simply because the Defendant made a higher offer months later. DJ Reed went on to say that it was an exceptional cases which triggered CPR r45.29J but this was on the assumption that the Defendant’s tactics had deprived the Claimant of an entitlement to indemnity costs.

Coulson LJ ruled that the Claimant on this matter was entitled to fixed costs up to the relevant stage when she accepted the Defendant’s offer. He stated that the District Judge’s approach was based on the erroneous assumption that the board’s offer deprived Mrs Kaur of a right to indemnity costs. She had no such right, so it inevitably follows that the district judge failed to exercise his discretion properly.”

Coulson LJ added that the acceptance of the increased Part 36 offer had in fact benefitted the Claimant as she had recovered an additional £1,000.00 and the Claimant’s solicitor had recovered slightly more fixed costs as the same were calculated in part as a percentage of the sum recovered.

Summary

  1. In a fixed costs case where the Part 36 Offer has been accepted out of time, fixed costs will apply all the way up to date of acceptance.
  2. There is no discretion (subject to CPR 45.29J) to award anything other than fixed costs.
  3. Parties in fixed costs cases are entitled to make representations to depart from fixed costs under CPR r45.29J (i.e. “exceptional circumstances”).

Update: my thanks to Roger Mallalieu for his comments.

If you would like to contact Jenny regarding this article or to arrange an in-house training session at your firm click here

VIEW OUR SERVICES+