Fixed costs regimes are often predicated on intricate rules that are difficult to navigate. The law also moves on quickly via regular updates to the Civil Procedure Rules and a constant stream of case law. I am frequently asked to advise on low value claims where a receiving party has acted unreasonably in bringing a claim outside of a fixed costs regime that otherwise would have applied but for the conduct complained of. When conduct is in issue on low value claims, identifying the starting point for costs and the remedies available can be somewhat confusing. I find that considering questions examined by greater minds than mine helps establish some basic principles to use as a springboard.
There are numerous principles from these cases painting a consistent picture to help insurers and compensators avoid unnecessary exposure on costs where a receiving party has acted unreasonably in bringing a claim outside of a fixed costs regime or track that would otherwise apply but for the unreasonable conduct.
Principle
| Authority | Practical Guidance |
“Fixed Costs” and “Assessed Costs” are conceptually different”
| Broadhurst v Tan [2016] EWCA Civ 94 | · Fixed Costs are awarded whether or not they were incurred, and whether or not they represent reasonable or proportionate compensation for the effort actually expended. · Assessed Costs reflect the work actually done. The court examines whether the costs were incurred, and then asks whether they were incurred reasonably and (on a standard basis) proportionately. |
Fixed costs applicable under the rules to a specific category or class of claim cannot directly apply to other claims that do not fall within the meaning and scope of those rules | Williams v Secretary of State for Business, Energy & Industrial Strategy [2018] EWCA Civ 852 | · Care must be taken to identify the correct factual circumstances and matrix/rules under which the claim falls when considering offer and acceptance. · A failure to fully appreciate under which rules/matrix the claim rests could lead to unintended costs consequences when making and accepting offers |
The parties can choose to agree different terms as to costs that are not prescribed or fixed by the rules | Solomon v Cromwell Group PLC [2011] EWCA Civ 1584 | · A failure to fully appreciate under which rules/matrix the claim rests could lead to unintended costs consequences when making and accepting offers · Care must be taken if reducing terms of settlement to writing following Part 36 offer and acceptance. It is not uncommon for receiving parties to try to change terms as to costs in a consent or Tomlin order to be made favourable than Part 36 |
A term as to costs is not within the scope of a Part 36 offer | Mitchell v James [2002] EWCA Civ 997 | · A party can make an offer which includes a term as to costs and the court will have regard to that in exercising its usual discretion as to costs. However, nothing in Part 36 permits a party to include a term as to costs as part of a Part 36 offer. · Part 36 is a self-contained code with automatic costs consequences prescribed |
The claimant will be entitled to costs to be assessed on the standard basis where a Part 36 offer is accepted within the relevant period
| CPR 36.13(1) | · Unless the modifications at CPR 36.20 or r36.24 apply, offer and acceptance under the general provisions of Part 36 require an assessment of costs to take place and fixed costs in Part 45 cannot apply · In assessing costs in accordance with r36.13(1), the general provisions in Part 44 are engaged which allows the court to take into account “all the circumstances of the case”, including whether fixed costs would have applied ‘but for’ any unreasonable conduct found |
The claimant will be entitled to the fixed costs in Table 6B, Table 6C or Table 6D in Section IIIA of Part 45 for the stage applicable at the date on which notice of acceptance was served where a Part 36 is accepted within the relevant period
| CPR 36.20(2) | · It is important when making Part 36 offers to fully appreciate under which rules/matrix the claim rests and whether or not the intended costs consequences when making and accepting offers are those relating to fixed costs in Section IIIA of Part 45
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Part 36 offers must carefully distinguish between the costs consequences intended to apply upon acceptance | Ho v Adelekun [2019] EWCA Civ 1988 | · A defendant wishing to make a Part 36 offer on the basis that the fixed costs regime will apply is well-advised to refer in the offer to CPR 36.20 rather than r36.13 and to omit any reference to the costs being “assessed”. · Parties who wish to settle on terms that fixed costs will be payable would be well advised to avoid reference to assessment “on the standard basis” in any offer letter or consent order which may be drawn up following acceptance · But remember: an offer to pay costs that do not in fact naturally apply under the rules because of the individual facts and circumstances of the case is not a Part 36 offer and instead will come under r36.2(2) |
In the absence of Part 7 proceedings and a judgment, CPR 45.24 does not apply and that route to fixed costs was not open to the defendant | Williams v Secretary of State for Business, Energy & Industrial Strategy [2018] EWCA Civ 852 | · In a claim that does not start under the portal in accordance with the relevant Pre-Action Protocol, offer and acceptance under CPR 36 results in costs to be assessed with reference to the court’s general powers under Part 44 · In the event the defendant only desires to pay costs akin to the fixed costs in Section III or Section IIIA of Part 45, such offer would have to be made via Calderbank rather than Part 36 |
Where a claim settles prior to allocation and costs fall to be assessed under the general provisions in Part 44, the court will have regard to “all the circumstances of the case” including the track it would likely have been allocated to and the costs recoverable in those circumstances | O’Beirne v Hudson [2010] EWCA Civ 52 | · A failure to fully appreciate under which rules/matrix the claim rests could lead to unintended costs consequences when making and accepting offers · If it is intended that only costs akin to the amount recoverable under a different track or fixed regime should be recoverable, this must be expressly stated in offers and recorded carefully in consent or Tomlin orders |
A paying party is not precluded from raising issues of conduct affecting the recoverable costs before the costs judge simply because it was not raised before the trial judge | Drew v Whitbread [2010] EWCA Civ 53 | · If a special order as to costs is sought for the costs judge to follow (i.e. an issue based costs order or a percentage reduction), that should be requested from the trial judge. · If the costs judge would be assisted in the assessment of costs by some indication from the trial judge about the way in which a trial has been conducted, that should be sought at conclusion of the trial · The court can consider conduct both at the time of making the order as to costs and assessing costs under that order – but the court will be mindful of ‘double jeopardy’ and will not penalise the receiving party twice over the same issue of conduct complained of |
In a case not covered by r45.24, a paying party could rely on the Part 44 conduct provisions to argue that only the EL/PL Protocol fixed costs should apply | Williams v Secretary of State for Business, Energy & Industrial Strategy [2018] EWCA Civ 852 | · Once a judge has concluded that, as a result of unreasonable conduct, the relevant fixed costs represent the maximum recovery, then an item by item approach to assessment of those costs is unnecessary · A paying party wanting to argue that the claimant should be restricted to fixed costs only should raise that submission as soon as possible in the costs proceedings |
Knowledge is Power
What underpins all these issues is the essential need to appreciate where the claim first sits within the rules, based on the individual facts and circumstances. It is only then the correct route can be plotted to achieve a remedy that ensures any unreasonable conduct does not allow the claimant to benefit from an enhanced costs recovery. Where such features exist and are to become an issue, they must be highlighted at the earliest opportunity. Offers and orders made by consent must be carefully worded. Following a trial, it is good practice when seeking any special order as to costs to raise this with the trial judge. Fixed costs regimes cannot apply to claims not falling within the scope of those rules. However, the court retains a powerful weapon by way of the conduct provisions in Part 44 to combat unreasonable behaviour and excessive costs.
Ben Petrecz
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