Draft your settlements precisely …. or lose Your Standard Costs!!!!
As a Claimant multi-track personal injury lawyer, you must read the recent case of:
If you want to obtain standard costs instead of fixed costs, when a case leaves the portal due to quantum but is not yet allocated to multi-track, you must specifically state that fact in your Settlement Order when the case settles. Care should be taken to avoid P36 if you are agreeing to contract out of fixed costs.
In April 2017, the parties to this appeal compromised a claim which the Respondent, Miss Seyi Adelekun, had brought against the Appellant, Mrs Siu Lai Ho, following a road traffic accident. What was at issue was the extent of the Appellant’s liability for costs. The Respondent contended that the Appellant was liable to pay her costs, on what might be called the “conventional” basis, under which costs are assessed, item by item, by reference to the work done. The Appellant, on the other hand, maintained that the fixed costs regime for which Section IIIA of CPR Part 45 provides was applicable.
The accident giving rise to the litigation occurred on 26 June 2012. On 15 January 2014, the Respondent notified the Appellant’s insurer of a claim in accordance with the RTA Protocol. The Appellant not having admitted liability, the claim left the RTA Protocol and proceedings were issued on 7 January 2015. The claim was allocated to the fast-track, but on 18 January 2017 the Respondent issued an Application for re-allocation to the multi-track pursuant to CPR 26.10, on the basis that the value of the claim had increased. The Application was listed to be heard on 24 April 2017, but on 19 April 2017 the Appellant’s Solicitors sent the Respondent’s Solicitors what was described in the document as a “Part 36 Offer Letter”.
This read as follows –
“We are instructed by the Defendant to offer £30,000.00 gross in full and final satisfaction of this claim.
This offer is made in accordance with Part 36 of the Civil Procedure Rules. The terms of the offer are as follows:
- Our client offers £30,000.00 by way of a gross lump sum in full and final settlement of your client’s claim. This offer is made in relation to the whole of your client’s claim.
- The sum is gross of benefits repayable to the CRU […]
- If the offer is accepted within 21 days, our client will pay your client’s legal costs in accordance with Part 36 Rule 13 of the Civil Procedure Rules such costs to be subject to detailed assessment if not agreed.
If your client accepts the offer after the 21-day period, then either we will need to agree the costs liability or the court will have to make an order as to costs.”
The draft Order attached to the email was in “Tomlin” form. It recited that the parties had agreed the terms of settlement set out in the schedule and provided for all further proceedings to be stayed except for the purpose of carrying those terms into effect. There was also provision for the hearing listed for 24 April 2017 to be vacated and for the Appellant to pay “the reasonable costs of the [Respondent] on the standard basis to be the subject of Detailed Assessment if not agreed”. An Order in that form was thereafter made by consent on 24 April.
The dispute came before Deputy District Judge Harvey, sitting in the County Court at Central London, on 7 February 2018. He concluded that the fixed costs regime applied, but he was reversed on appeal by His Honour Judge Wulwik, who held that the fixed costs regime was not applicable. The Appellant challenged that decision in Court.
Two principal issues therefore arose –
- i) Did the Appellant’s solicitors, by their letter of 19 April 2017, offer to pay “conventional” rather than fixed costs? [Issue 1]
- ii) If not, should the claim be re-allocated to the multi-track with retrospective disapplication of the fixed costs regime? [Issue 2]
The court of appeal ruled
They considered that the 19 April letter, correctly construed, did not offer to pay conventional rather than fixed costs. The parties did not, therefore, contract out of the fixed costs regime and the Respondent had no contractual entitlement to conventional costs. It followed that the Appeal should be allowed unless the Respondent succeeded on Issue 2.
Newey L.J. stated
“For the future, a Defendant wishing to make a Part 36 offer on the basis that the fixed costs regime will apply would, of course, be well-advised to refer in the offer to CPR 36.20, and not CPR 36.13, and to omit any reference to the costs being “assessed”.”
Males L.J. stated
“If parties wish to settle on terms that fixed costs will be payable if an offer is accepted, it is easy enough to say so and thereby to avoid any scope for argument.
The court, on issue 2, found as follows:
“The fact that the stay imposed by CPR 36.14 did not prevent the Court from dealing with “any question of costs … relating to the proceedings” cannot, I think, assist the respondent. The words do not extend to the respondent’s application for re-allocation. The question of re-allocation was not one of “costs … relating to the proceedings” regardless of whether re-allocation was being sought with a view to obtaining a costs direction under CPR 46.13. For good measure, the Tomlin order of 24 April 2017 provided for the proceedings to be stayed except for the purpose of carrying the terms set out in the schedule into effect, and those terms made no reference to either re-allocation or disapplication of the fixed costs regime. Further still, it seems to me that if, contrary to my view, it was open to Deputy District Judge Harvey or Judge Wulwik to entertain an application for re-allocation and disapplication of the fixed costs regime, there was very good reason to refuse it. If, as I consider to be the case, it was no part of the agreement that the parties had reached that the fixed costs regime should be displaced, to make an order subsequently having that effect would run counter to the agreement. Deputy District Judge Harvey was undoubtedly entitled to decline to re-allocate even supposing that he had power to do so.” [p.40]
Key Learning points
- If you are accepting an offer, outside of Part 36, this case reminds us to be very clear in the court order what basis the costs are being paid on. If the court order had expressly said that fixed costs were not to apply the court may have ruled the other way. If you want standard costs clearly state this in the order.
- We at PIC are more than happy to advise on the wording of any settlement.
- The Claimant had already made an application to have the case re-allocated to the multitrack. If successful, the case would have attracted standard costs and not fixed costs. When the Claimant received the Part 36 offer from the Defendant, they could have waited the full 21 days before accepting. During this time, the court may well have allocated the case to multi-track. It is a key reminder that you have 21 days to accept for a reason. It gives you the time to assess accepting the offer on the best possible terms for your client. Obviously you must accept offers if the client instructs you to do so.