UK: Fixed Costs Apply To Late Acceptance Of Part 36 Offers

Last Updated: 3 August 2018
Article by Jonathan Shaw

Most Read Contributor in UK, November 2018

Hearing a conjoined appeal, the Court of Appeal has held the fixed costs regime applies to the late acceptances of Part 36 offers before the commencement of trial.

Background

Hislop v Perde

In 2013, the Claimant was injured in a road traffic accident and commenced proceedings under the Pre-Action Protocol for low value RTA personal injury claims. The claim was removed from the portal as the Defendant did not respond on the issue of liability.

In June 2016, one week before trial, the Defendant accepted the Claimant's offer of £1,500 which was made on 11 November 2014.

The Claimant's costs as claimed were:

- £2,372 (representing fixed costs up to 2 December 2014, the day the offer expired)

-£5,534 (being the costs incurred from 2 December 2014).

The Claimant sought the sum of £5,534 on an indemnity basis.

At first instance DDJ Lenon QC held this case was not "an appropriate case for an order for indemnity costs" and "it would be unfortunate if it became customary for late acceptances of part 36 offers to attract applications for indemnity costs, which can themselves be, as in this case, quite complicated and time-consuming and costly". He ordered that fixed costs were payable.

His decision was overturned on appeal by Judge Walden-Smith who held the costs after 2 December 2014 should be assessed on standard basis.

The Defendant appealed to the Court of Appeal.

Kaur v Committee of Ramgarhia Board Leicester

In 2014, following an injury sustained on the Defendant's premises, the Claimant commenced proceedings. The Defendant denied liability and the claim was removed from the ELP/PL protocol, albeit the fixed costs regime remained in place.

The Defendant rejected an offer to settle on £2,000 made by the Claimant on 7 September 2016. Following a joint expert's report the Defendant made an offer of £3,000 on 6 February 2017 in an effort to avoid any cost penalty for the late acceptance. This was accepted by the Claimant.

District Judge Reed, sitting at Leicester County Court, held the Claimant was entitled to £2,450 by way of fixed costs up to the date of allocation, and costs thereafter to be assessed on standard basis. He stated if the Defendant had accepted the Claimant's offer of £2,000 out of time then the Claimant would have been entitled to claim indemnity costs for the period of delay. He concluded "the Claimant should not be worse off simply because the Defendant had got round that difficulty by making a higher offer months later" as such a result did not further the overriding objective.

The Defendant appealed. The appeal was directed straight to the Court of Appeal to allow it to be heard at the same as Hislop.

The Court of Appeal

Hislop v Perde

The Court of Appeal overturned the decision of Judge Walden-Smith and held:

  • Judge Walden-Smith had erred in finding the Claimant was entitled to anything other than fixed costs;
  • A claimant who beats a part 36 offer after trial is entitled to indemnity costs provided by CPR r.36.14(3);
  • A claimant whose Part 36 offer is accepted out of time by a defendant prior to trial is not allowed to recover an additional sum for indemnity costs in consequence of late acceptance. Potentially an exception for exceptional circumstances;
  • In the context of this case, a 19 month delay, even with no reason to justify the delay, is not considered an 'exceptional circumstance' for the purpose of departing from the fixed costs regime under CPR r.45.29J.

Kaur v Committee of Ramgarhia Board Leicester

The Court of Appeal found in favour of the Defendant and held:

  • District Judge Reed had erred in assuming but for the Defendant's part 36 offer the Claimant would have been entitled to costs on an indemnity basis.
  • Given the decision in Hislop, the Claimant actually benefited from the Defendant's late offer, as her costs entitlement would always have been subject to the fixed costs regime.
  • The Claimant received an additional £1,000 and the recovered fixed costs were higher due to it being in part a percentage of the sum recovered.

What can we learn?

  • There is no presumption in favour of indemnity costs for late acceptance of offers to settle. Where a defendant has accepted a claimant's Part 36 offer prior to trial, the fixed costs regime will apply. In contrast, where a claimant beats their own Part 36 offer after trial, costs on an indemnity basis will be applicable (Broadhurst v Tan [2016] EWCA Civ 94).
  • Claimants will not be able to rely solely on the point of late acceptance as justification for departing from the fixed costs regime (unless that delay is sufficient to be deemed an exceptional circumstance). This decision provided insight on the threshold for what is deemed "exceptional circumstances" for the purposes of CPR r.45.29J. In Hislop, a 19-month delay with no reason provided was not enough to be considered "exceptional" by the District Judge.
  • Expect claimants to ask for reasons why an offer was not accepted in time, as they look to build a case (potentially with other factors) for exceptional circumstances.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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