Kerry Underwood

PART 36 AND FIXED COSTS:  CLAIMANTS’ OFFERS POINTLESS RULES COURT OF APPEAL

with 5 comments


In September and October I am delivering my new course – Getting the Retainer Right – in 10 cities – details and booking form here.

In Hislop v Perde [2018] EWCA Civ 1726

the Court of Appeal held that in fixed costs cases a late accepting defendant has to pay only fixed costs, unless there are exceptional circumstances, and that of itself late acceptance is not an exceptional circumstance within CPR 45.29J.

A long delay without explanation may be a special circumstance, but a short delay with a reasonable explanation will not.

A claimant at trial, or on judgment being entered, who matches or beats her or his own Part 36 offer, still receives indemnity costs in accordance with the decision in

 

Broadhurst v Tan [2016] EWCA Civ 94

 

specifically endorsed here by the Court of Appeal, although unfortunately the Court of Appeal refers on several occasions to a claimant having to beat its offer at trial.

 

This is wrong on two points; firstly the claimant only has to match, not beat, its own offer, and secondly it is any judgment, and not just judgment after trial, which triggers the entitlement to indemnity costs.

 

Given that virtually all fixed costs cases settle before trial, this very limited exception is for all intents and purposes meaningless.

 

The Court of Appeal accepted that there was no authority as to when CPR 45.29J exceptional circumstances come into play, and here it chose to give no guidance, except the very limited, non-specific guidance set out above.

 

The issue of what happens on late acceptance of a Part 36 offer in non-fixed costs cases was not addressed.

 

 

Comment

A poor and chaotic decision which shows that this division of the Court of Appeal simply does not understand the funding mechanisms of civil litigation and fixed costs.

 

Paragraph 53 says it all:

 

“53. This is important. These rules demonstrate that, in the mirror image of the situation in which these claimants find themselves (namely, where a claimant has accepted a defendant’s offer late) there is no question of either indemnity or standard basis costs being awarded to the defendant. The defendant’s recovery for the period of delay is limited to fixed costs only. There could be no reason to treat the claimant in a radically different way and to go outside the fixed costs regime, and order standard or even indemnity costs, in circumstances where a defendant in a similar position to these claimants is not permitted to recover costs on that basis. In this way, my interpretation of the rules applies the same fixed costs regime to any party whose offer has not been accepted when it should have been.”

 

This shows a complete failure to understand Part 36 consequences. In no way is this a mirror image; a claimant who fails to beat a defendant’s Part 36 offer, or accepts late, pays the defendant’s costs and is deprived of its own costs, even though it has won.

Thus that is a double penalty. In contrast a defendant now suffers no penalty whatsoever on late acceptance.

The decision makes no sense at all. If the policy issue set out by the Court of Appeal are correct – and they are not – then why does a claimant at trial or on judgment get indemnity costs if it matches or beats its own Part 36 offer?

How can the happenstance of judgment or trial reverse entirely the policy objectives of certainty etc. trotted out by the Court of Appeal?

The Court of Appeal also falls into the trap of equating indemnity Part 36 costs with indemnity costs caused by misconduct or bad behaviour and here at paragraphs 35 and 36 the Court of Appeal recites the bad behaviour indemnity costs cases, which of course have nothing whatsoever to do with Part 36.

This totally misses the point. Why should a Part 36 penalty on a defendant require bad behaviour?

If so, then why, in the absence of bad behaviour, does a Part 36 late-accepting claimant have to pay the defendant’s costs and be deprived of its own costs, even though it has won the case?

This is all the more the case – a fortiori -in words the Court of Appeal might understand – as in personal injury cases, Qualified One-Way Costs Shifting applies, so failure to beat Part 36 imposes a costs penalty on a claimant, whereas normally a personal injury claimant is now not liable for costs, even in the event of complete defeat.

In the past that costs liability would have been covered by an After-the-Event insurance policy, with a premium recoverable from the defendant in the event of success.

The quid pro quo of the Jackson Reforms was QOCS protection in return for the abolition of recoverability of After-the-Event insurance premiums.

As I have pointed out previously the Part 36 regime drives a coach and horses through QOCS.

This decision reinforces that point, and more so.

There is now no point in a claimant in a fixed costs case making a Part 36 offer on quantum.

On liability – yes – as if that issue is got out of the way, then there is less work to do and fixed costs are the same whether or not liability is in dispute.

A claimant in a fixed costs case is now best advised to just proceed as far as possible, so as to get through to the latest fixed costs stage possible.

For all intents and purposes, in fixed costs cases, Part 36 is now an issue for defendants, and because of the costs consequences on a claimant who fails to beat a defendant’s Part 36 offer, it is at that stage that a claimant must engage with Part 36.

Having said that, there is now little incentive on a defendant to admit liability; they can, at no penalty, force the fixed costs claimant to do extra work, for no extra costs, which of course leads to pressure to under settle.

This is an insurance company decision.

As far as the Court of Appeal is concerned, some litigants are more equal than others.

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Written by kerryunderwood

September 13, 2018 at 8:30 am

Posted in Uncategorized

5 Responses

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  1. I haven’t practised in the field of personal injury since referral fees were allowed and cases had to be bought. I have, however, watched with horror the appalling mess that the government has made of the PI and costs regimes.

    Any solicitor practising in PI these days would be utterly astonished if they could experience the world of PI in which I practised over 20 years ago. In those days PI was a slightly dull backwater of litigation, but could still be justifiably described a proper profession. There were no protocols and no portals. We were expected, as professionals, to know how to do the job without having it set out for us in hundreds of pages of detail by civil servants who had no ideal of legal practice.

    In a typical claim you would take details, write to the insurance company, who would usually write back admitting liability. You’d obtain a medical report from whichever you liked (both you and the insurers knew who were the fair and competent ones without the need for parasitical and corrupt `medical agencies’) and you would then negotiate with the insurers.

    In those days they employed claims negotiators who are senior staff, usually in their 40’s or 50’s. They were vastly experienced, and although not qualified solicitors they knew more about PI than most solicitors.

    Believe it or not they would often arrange to visit the solicitor to discuss the claim in person. On probably the majority of occasions this would result in a settlement, and as often as not they would also agree the costs there and then. Because they were experienced and knew their job they would usually be fair and reasonable regarding costs, and there was a high degree of mutual respect. In fact it wasn’t uncommon to go for a pint together afterwards!

    We were treated as professional people in those days, and we deserved to be. Although there was the odd rogue practitioner that we all knew the vast majority of PI solicitors were straight and did a decent job for decent pay.

    The situation began to change with the disastrous withdrawal of legal aid for PI cases and the even more disastrous introduction of the CFA. Suddenly the solicitors had an unhealthy financial interest in the claim, and was immediately placed in an unavoidable conflict of interest with the client, which has never been resolved to this day. At the same time, the vile claims management industry gradually crawled out of the slime to begin its insidious corruption of the profession and we began to see TV ads for PI claims.

    Ever since that time PI claims have turned from a profession into one of the most greedy and corrupt areas of modern life. For some years it was a licence to print money, and was viciously exploited by hucksters who made millions. It also led to hundreds of PI firms suddenly appearing from nowhere, usually run by people who, though qualified as solicitors, had no concept of a profession or professional ethics and were deeply corrupt individuals. These were the ones who were more than happy to run fictitious claims, and who ended up owning credit hire companies and medical agencies, conspiring with CHO’s and accident repair shops to screw insurers.

    For several years, the PI industry was like the Wild West, as far removed from the concept of a profession as could be imagined.

    But when the government was finally forced to recognise the disaster they’d created their belated and panicked attempts to shut the stable door resulted in some of the worst and most incomprehensible legislation ever passed, and as this latest fiasco of a case demonstrates the system is now completely broken.

    It would be hard to imagine any scenario in which the phrase “If it ain’t broke don’t fix it” is more appropriate. The government has spent over 20 years and wasted hundreds of millions of pounds destroying a system that worked perfectly well and replacing it with a Kafkaesque nightmare.

    Michael Loveridge

    September 13, 2018 at 11:44 am

    • Michael

      I agree with much of what you say, and certainly the old arrangements, without portals and protocols and where solicitors met with claims negotiators, was vastly superior to the current system.

      I disagree with you concerning Conditional Fee Agreements – in the south very many people did not qualify for Legal Aid on financial grounds and therefore, even before the introduction of Conditional Fee Agreements, we were effectively dealing with matters on a Conditional Fee Agreement basis, in that we would not charge in the event of defeat, although it was true that we would not charge an additional fee in the event of success.

      In any event, many thanks for your comment, which will no doubt rattle some cages!

      Kerry

      kerryunderwood

      September 14, 2018 at 2:58 pm

  2. The Court of Appeal has got its understanding completely wrong in respect of the cost consequences where a Claimant accepts a Defendant Part 36 offer late. The Defendant gets standard basis costs after the expiry of the relevant period not fixed costs (see CPR 36.20(12)). The amount of costs the Defendant receives cannot exceed the equivalent fixed costs levels but if they are not the fixed costs themselves they must be standard basis costs that are capped.

    Daniel Higgins

    September 13, 2018 at 4:54 pm

    • Daniel

      You are entirely right, and the Court of Appeal is entirely wrong.

      In due course I will go through the full judgment again in detail and list all of the factual and legal errors made by the Court of Appeal.

      This judgment is so deeply flawed in its incorrect statement of the law and facts that it is strongly arguable that it is per incuriam, that is obviously wrongly decided without reference to the law, and that all other courts are entitled not to follow the decision.

      Kerry

      kerryunderwood

      September 14, 2018 at 2:55 pm

  3. Kerry, I must confess I’ve never understood this argument of yours in respect of this so called ‘double penalty’.
    Surely, the point is that a reasonable offer was made by either side, and somebody has unreasonably not accepted the offer in time. In the circumstance, following a late acceptance of that reasonable offer, the costs arisen as a result of the late acceptance should be paid by the unreasonable party, and recovered by the reasonable party.
    Given this, why should the level of costs be any different regardless of who is paying it?
    It seems that you push the point that the Claimant has ‘won’, and is being deprived of costs and paying costs, but that doesn’t set aside the fact that the case should have been ‘won’ at the moment of the offer, and not continued on by either Party. The costs liability must therefore follow the event of the late acceptance, with either the Claimant being liable for the Defendant’s costs, or vice versa. Why is the position any different for either Party to justify one side being entitled to different costs to the other?
    If a Claimant’s offer is accepted late, the costs are fixed, but the profit costs still go up in the next stages of Fixed costs if the offer is accepted out of time. Similarly, if the Defendant’s offer is accepted out of time, the Defendant only gets the difference in the increase of fixed costs stages as the maximum profit costs. Similarly, if the offer is accepted out of time for either Party, but the case has not moved stages, the Defendant effectively gets no profit costs at all, and the Claimant gets no level of increased costs.
    I can’t see how anything other than the decision in Hislop is reasonable, fair, and rational. I can’t see why the level of costs liability for late acceptance should be any different regardless of who accepts the offer out of time, and in my own opinion, don’t think this ‘double penalty’ argument has any weight to it.
    Happy to listen to any counter argument you may have, but nothing I’ve read in your blogs to date has changed my opinion so far?

    Callum Johnson

    September 14, 2018 at 10:56 am


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