PART 36 TRUMPS FIXED COSTS (AND NO DONALD IN SIGHT): Broadhurst and Taylor v Tan and Smith [2016] EWCA Civ 94

 By Ruwena Khan

In a claim which starts under the Pre-Action Protocol for Low Value Personal Injury Claims (in this case the RTA Protocol), what happens when a Claimant obtains a judgment against a defendant which is at least as advantageous to them as the proposals contained in a Part 36 offer – does the Claimant recover fixed costs only, as per the regime, or does the Claimant recover costs on an indemnity basis?

When pitting the apparent tension between the fixed costs rules prescribed by section IIIA of Part 45 against the provisions in Part 36, the Master of the Rolls has confirmed that it is Part 36 which holds its nerves…

Click here for Judgment.

The Cases

In the case of Ms Broadhurst, HHJ Robinson (Sheffield) held that CPR r.36.14(3) applies in a section IIIA case, but in such a case there is no difference between profit costs assessed on the indemnity basis and the fixed costs prescribed by Table 6 of CPR r.45.29C, subject to the possibility of awarding a greater sum than fixed costs in exceptional circumstances pursuant to CPR r.45.29J. Ms Broadhurst’s case was that the judge was wrong to equate indemnity costs with fixed costs in that way.

In the case of Ms Smith, HHJ Freedman (Newcastle-upon Tyne) also held that CPR r.36.14(3) applies in such a case where a claimant makes a successful Part 36 offer. However, unlike HHJ Robinson, he did not equate indemnity costs with fixed costs.

The Rules

The fixed costs regime for low value personal injury cases was introduced on 31^st July 2013 by the Civil Procedure (Amendment No 6) Rules 2013 (SI 1695 of 2013).  It introduced section IIIA which was to apply to all claims which had started under the RTA or the EL/PL Pre-Action Protocols but were no longer continuing there.

We all know that pursuant to CPR r.45.29B that if, in a section IIIA claim started under the RTA Protocol, the CNF is submitted on or after 31^st July 2013, the only costs allowed are:

a)the fixed costs in rule 45.29C (set out in Table 6); and,

b)the disbursements in accordance with rule 45.29I.

The 2013 Amendment Rules also introduced changes to Part 36 to take account of section IIIA. A new rule 36.10A legislated for the treatment of costs in section IIIA where a defendant’s Part 36 offer was accepted by the claimant.A new rule 36.14A was also introduced to prescribe the costs consequences following judgment in section IIIA cases, but it left rule 36.14(3) unmodified. Click on this link for the material sections of rules 36.14/36.14A

The Claimants’ Case

• ‘Fixed costs’ and ‘assessed costs’ were conceptually different.
• None of the modifications in rule 36.14A affected rule 36.14(3) i.e. costs to be awarded on the indemnity basis from the date on which the relevant period expired.
• Rule 45.29B contained the general rule which applied to all section IIIA cases, but rule 36.14A contained the specific rule which prescribed the costs consequences following judgment where section IIIA or Part 45 applied.
• Where fixed costs were intended to prevail, Part 36 said so.
• If there was any doubt, it should be resolved in the Claimants’ favour by the Explanatory Memorandum to the 2013 Amendment Rules which was laid before Parliament to accompany the draft statutory instrument.
• HHJ Freedman’s reasoning was to be preferred to HHJ Robinson’s.

The Defendants’ Case

• There would have been clear guidance if there was to be a difference between fixed costs and indemnity costs as to how to apportion the fixed costs applicable to the stage during which the relevant period expired.
• Any tension should be resolved in favour of the fixed costs regime prescribed by rule 45.29B.
• Rule 45.29B was the specific provision and rule 36.14(3)(b) was the general provision.
• Rule 45.29B was subject to a number of rules, but none of those rules concerned the situation which arose where a claimant made a successful Part 36 offer.

Discussion by the Master of the Rolls

• Rule 45.29B did not stand alone.
• Rule 45.29F(8) provided that where a Part 36 offer was accepted in a section IIIA case “rule 36.10A will apply instead of this rule.” And rule 45.29F(9) provided that where a claimant failed to obtain a judgment more advantageous, “rule 36.14A will apply instead of this rule.”
• Rule 45.29F did not, however, make provision as to what should happen where the claimant makes a successful Part 36 offer.
• The effect of rules 36.14 and 36.14A when read together was that where a claimant made a successful Part 36 offer he was entitled to costs assessed on the indemnity basis.
• Rule 36.14(3) had not been modified by rule 36.14A and therefore continued to have full force and effect.
• Any tension must be resolved in favour of 36.14A. It was a straightforward matter of interpretation.
• The fact that rule 36.14A contained provision for payment of disbursements in accordance with rule 45.29B(b), but not for payment of fixed costs in accordance with rule 45.29B(a) confirmed that interpretation.
• Fixed costs and assessed costs were conceptually different.

Conclusion 
The appeal in the case of Broadhurst was allowed and the appeal in the case of Smith was dismissed.

Where a claimant makes a successful Part 36 offer in a section IIIA case, they will be awarded fixed costs to the last staging point provided by rule 45.29C and Table 6B. They will then be awarded costs to be assessed on the indemnity basis in addition from the date that the offer became effective. This does not require any apportionment. It will, however, lead to a generous outcome for the claimant.

• As always, Claimants need to ensure they make reasonable and early Part 36 offers in order to increase the prospects of recovering costs outside of the fixed costs regime. The earlier in the staged process, the better.

• Defendants need to now be aware of the risk of paying costs beyond the fixed costs regime should a Part 36 offer not be accepted early.

 

 

RUWENA KHAN

29^th February 2016