Court finds exceptional circumstances and allows costs above fixed costs
Posted on 10th November 2021 at 15:34
By Sean Linley, Costs Draftsman
Many practitioners will be aware of the mechanism of CPR 45.29J. It is the procedure which allows parties to claim for an amount of costs exceeding fixed recoverable costs. In Lloyd v 2 Sisters Poultry Ltd (Costs)  EW Misc 18 (29 January 2019), a judgment recently added to Bailii, the Court considered a decision to accept exceptional circumstances and to allow costs which exceeded the fixed recoverable costs.
The claim was for employer's liability and was initially brought within the pre-action portal but left the portal on 2 September 2016 with Part 7 proceedings issued on 11 October 2016. The case concluded before it had been allocated to either the fast or multi-track following acceptance of a Part 36 offer of £50,000.00 by the Claimant.
The Claimant prepared a Bill of Costs which totalled over £45,000.00, the Defendant sought to argue that the case fell within the recoverable fixed costs scheme and should be limited to £16,384.00. Both parties accepted the principal set out in Qader v Esure Services Limited & Ors  EWCA Civ 1109 whereby a case which starts on the portal and concludes without allocation will be restricted to fixed recoverable costs.
At the original assessment, the Deputy District Judge considered a preliminary argument as to whether there were exceptional circumstances under CPR r45.29 and thus whether the Court would consider a claim for an amount of costs (excluding disbursements) which was greater than the fixed recoverable costs. The DDJ heard the arguments and gave the Claimant permission to argue the exceptional circumstances point.
Her Honour Judge Howells, dealing with the appeal, summarised the issues before her as follows:
"the question for me is whether the Deputy District Judge was in fact wrong in law or whether he misapplied the law, or going on further, whether he acted outside the generous ambit of his discretion, if we reach that stage. It is the defendant appellant’s case that here the Deputy District Judge in fact misapplied himself as to the law in finding, pursuant to CPR45.29J, if he did so find, that there were exceptional circumstances making it appropriate for him to move away from the fixed costs regime and to order costs which were further than that. When the appeal came through on paper, I gave permission to appeal, and I have heard the submissions today of Mr Smith on behalf of the appellant and Dr Friston as I indicated on behalf of the claimant respondent to this appeal.
The nub of the appeal effectively boils down to this: it is said on behalf of the appellant that the Deputy District Judge failed to articulate the test which he was to apply. As such, it is not clear the test that he did apply, and it is not apparent that he applied the test correctly. Further, on a proper application of the test as set out in CPR45.29J, there are no exceptional circumstances which he could have identified here, such as it would be appropriate to make an award of costs greater than that in the fixed costs regime. It is said there is nothing exceptional about this case. By way of background , the case arose as a result of a personal injury accident at the claimant’s place of employment. Liability I think was not in dispute. The proceedings started on the assumption of one medical report which was that the claimant sustained orthopaedic injuries but had a good prognosis. The second medical report in fact gave a much gloomier prognosis and that indicated that the claimant had a permanent disability, that he would be disabled pursuant to the Equality Act 2010, that meant that he had a disability in terms of his employment, and as such an Ogden calculation in relation to loss of earnings or a Billett calculation in relation to effectively Smith and Manchester as it used to be known, would be appropriate."
The Defendant argued that:
1. There was nothing within the case that made it exceptional.
2. The reasoning of the Deputy District Judge was unclear and the fact the claim would have been allocated to the multi-track was irrelevant given the principal in Qader.
3. The fact the costs claimed were significantly in excess of fixed recoverable costs was not a relevant factor.
4. The Deputy District Judge did not undertake the test under CPR r45.29J correctly.
The Claimant contended that:
1. The Deputy District Judge properly applied the test and that amounted to an excercise of discretion in all the circumstances.
2. The DDJ had looked into all of the circumstances and the parties had agreed at the assessment on the correct test.
3. The DDJ had the benefit of the full file of papers and was able to reference this in reaching his decision.
The Claimant referred to the significant work which had been undertaken, in particular relating to the Schedule of Special Damages which totalled £71,500.00 and including detailed calculation of an Odgen 7 approach in terms of future losses of earnings and witness evidence. The Claimant stated that the DDJ's judgment was evalative as to the facts of the case.
It was further contended by the Claimant that the reference to allocation was made by the DDJ because of the Defendant's submission that it was a case which could have been allocated to fast-track. It was said that the DDJ considered a number of factors as to whether the test in 45.29J ought to be applied including the complexity of the matter. the level of costs claimed (which were three times that of the fixed costs regime), the correspondence and "appreciated the duty on the claimant solicitor's in those circumstances to appropriately deal with those issues".
The Test for Exceptional Circumstances
The Court considered in the first instance how the test under CPR r45.29J should be approached:
"15. [...]I have considered specifically the test that was set out at 45.29J which is under the heading ‘Claims for an amount of costs exceeding fixed recoverable costs’, which states:
‘If it considers that there are exceptional circumstances making it appropriate to do so, the Court will consider a claim for an amount of costs excluding disbursements, which is greater than the fixed recoverable costs’, referred to in Rules 45.29B to 45.29H.
Then it deals with how the Court should deal with that.
16. The applicability and how that test should be approached has been dealt with by Leveson LJ in the case of Costin v Merron  3 Costs LR 391 which the District Judge referred to in his judgment and I reiterate now when Leveson LJ said:
‘I for my part have no difficulty in concluding that the exceptional circumstances to which 45.12 refer must be exceptional in the sense that the case is taken out of the general run of this type of case by reason of some circumstances which means that greater costs are in fact incurred that would reasonably be expected to be incurred’, and he went on to say this, ‘In my judgment the phrase “exceptional circumstances” in the context of 45.12 speaks for itself. It cannot possibly mean anything other than that for reasons which make it appropriate to order the case to fall outside the fixed costs regime exceptionally more money is had to be expended on the case by way of costs than would otherwise had been the case’.
17. That test was further clarified and considered in the Court of Appeal in the case of Hislop v Perde and Kuar  EWCA Civ 1726, the judgment of Coulson LJ in particular being referred to me; I quote paragraphs 57 and 58 of that judgment;
’57. Secondly, I reject the argument advanced by Mr Post QC, in the Kaur appeal, that this provision’ which is the provision we are talking about, ‘would only come into play if it could be shown that the exceptional circumstances had caused the litigation to be more expensive for the claimant. In support of this proposition, he relied on r.29J and r.29K which are concerned with the circumstances in which a party seeks to recover more than fixed costs. The rules make that party liable for the costs consequences if the assessment gives rise to a sum which is less than 20% greater than the amount of the fixed recoverable costs.
58. I do not accept Mr Post’s gloss on r.45.29J. His suggestion that a claimant must demonstrate a precise causative link between the exceptional circumstances and any increased costs would, in my view, lead to an unnecessarily restrictive view of the rule. It goes without saying that a test requiring “exceptional circumstances” is already a high one. It is not a proper interpretation of the rules to suggest that there should be further obstacles placed in the way of a party who wishes to rely on that provision.’"
The Court recognised that the link between the causation of the increased costs and exceptional circumstances had been 'uncoupled' by the decision of Coulson LJ in Hislop but "that the exceptional circumstances were in the context of 45.12 so it is in the context of exceptional circumstances within the fixed costs regime, not exceptional circumstances in terms of litigation of personal injury claims generally."
It remained recognised that the exceptional circumstances was a high one.
The Court held that the Deputy District Judge was not wrong to find exceptional circumstances.
The DDJ had noted that the Claimant's case had changed in nature substantially when the second medical report was obtained and that the Claimant was permanently disabled. It had also been noted that the "case bore no resemblance to a run of the mill fast-track case which one would expect to have been concluded under the portal" and crucially "that the claimant had to expend further sums of money on this claim than otherwise would have been done in a standard fast-track claim".
Her Honour Judge Howells found that the DDP had taken into consideration all of the circumstances:
"He referred specifically to the claimant being permanently disabled. There is reference to the Ogden calculation. There is reference to the considerable correspondence and the work done in terms of proving that aspect of the claim. This is not a case where, as may have been submitted , the Deputy District Judge simply said, “well really this should have been a multi-track case so I am going to say it is exceptional circumstance”."
The Court on appeal rejected the Defendant's argument that the Ogden calculation did not give rise to exceptional cirucmstances in the present case or make it appropriate for further costs outside the fixed costs regime. This was rejected, the Court stated that: "It is not simply a question of saying there is a claim for an Ogden loss of earnings and that can be pleaded very quickly and very easily. The whole background which substantiates such a claim needs to be investigated and it is clear from the skeleton argument presented at the Court below, that is what was done. It is also clear that this is a factor which the learned Deputy District Judge referred to when he was looking at the solicitor’s file and when he said that there was work to be done, that needed to be done to do the case properly."
Her Honour Judge Howells found that:
"25. In my judgment there were, in this case, factors which would entitle the Deputy District Judge to find that there are exceptional circumstances making it appropriate to effectively award costs higher than the fixed costs regime, and the Deputy District Judge took those matters properly into consideration. No guidance is given in the notes to the White Book in relation to the applicability of this test. However, I find that the Deputy District Judge looked at all relevant matters and, in reference to those matters which he referred to in his judgment, particularly considering the correspondence between the parties, it was appropriate for him to reach the conclusion that there were exceptional circumstances here, making it appropriate to consider a claim for a higher amount of costs. Those factors as stated were not only the value of the claim, but also the permanent disability and the Ogden calculation. All of those factors are in my judgment capable of being exceptional circumstances in the context of CPR45.12, i.e. within a fixed costs regime.
26. The Deputy District Judge in my judgment looked at all of those issues and he was not wrong to find exceptional circumstances, nor was this a case where he found exceptional circumstances purely on the basis that the case ought to have been allocated to a different track. I find that his judgment has to be read in its entirety, so whilst there are references to this not being a fast-track claim, that was not in itself the exceptional circumstance. The allocation issue obviously goes not simply to a question of the value of the claim, but to the issues that were involved; for example, a case which is particularly complex, where there is likely to be a trial of more than one day, where there is likely to be a need for more expert evidence, all of that would factor into an allocation process in any event. I make it clear that the question of allocation, whilst referred to in the District Judge’s judgment in terms of it not being a fast-track case, was not the exceptional circumstances relied upon. It was the matters that I have referred to above. I find it was appropriate therefore for him to make an order as he did, he having found not only that there were exceptional circumstances, but that as a result of those that what that meant was that further costs were appropriate to be incurred, as set out in the test in full in 45.29J.
27. I have been referred by counsel to policy decisions in a case of this nature, and I recognise those entirely. I recognise that the purpose of the fixed costs regime is to give certainty and clarity to parties in bringing claims in terms of what the costs will be. I recognise that the test in 45.29J is one of exceptional circumstances and that any Court would be loath to open too wide an ambit in allowing claims to fall outside the fixed costs regime. The Court needs to ensure that we do not have satellite litigation and that the fixed costs regime provides certainty to all parties. It is a regime which is said to have swings and roundabouts in that, in some claims, the receiving party will perhaps receive more than they would have done had costs been assessed in a different way. I agree with all of that, but I also recognise that the fixed costs regime is one that has an exception, and one of those exceptions, a safety valve so to speak, is 45.29J. I do not find that in upholding the judge’s finding of exceptional circumstances I am widening the ambit in any way, or loosening the control of the fixed costs regime, or opening us up to satellite litigation.
28. I find that the Deputy District Judge properly applied the test as set out there. He looked at all of the circumstances. He set out, having considered the file, what were capable of amounting to exceptional circumstances making it appropriate to make a costs order other than the fixed costs one. I find that he did so properly. He did not misdirect himself as to the law. He did not err as to the law. There is no widening of the rule in this judgment and I find that there is no criticism of what the Deputy District Judge did. In all of those circumstances, I reject this appeal and I dismiss it."
The case offers an interesting insight to the application and intepretation of the test for exceptional circumstances under CPR r45.29J. Of note is the Court's clear indication that there is a distinction between exceptional circumstances in fixed costs cases as opposed to exceptional circumstances in general personal injury litigation. This is a welcome conclusion.
It's also useful for parties considering seeking a claim for costs exceeding fixed recoverable costs. HHJ Howell is very clear that consideration should be given where a party has had to expend further sums of money on a claim than otherwise would been done in a standard fast-track claim. The bar for the test remains high but in 2 Sisters Poultry Limited we have some real fact specific examples offered up as to where it might succeed. The Ogden calculations were viewed as costs drivers, as were the fact that the Claimant sustained disability. It was also appropriate to include issues such as value, the level of costs incurred and all of the circumstances of a case.
There was also a clear recognition that where such issues arise there is a positive duty on a Claimant solicitor to appropriately deal with such matters. This is important as it reflects the fact that there are unavoidable drivers of costs in cases and a Claimant ought not to be penalised for that.
What is also made clear is that 2 Sisters Poultry Limited is not an escape from the Qader anomaly and that allocation is not in itself an exceptional circumstance, this quirk of costs remains.
Previous case law has also shown a reluctance by the Court to accept late acceptance of a Part 36 offer as an exceptional circumstance.
The test for exceptional circumstances retains a high bar and will be one which turns on the fact of the case.
The decision is published against the backdrop of continuing fixed costs arguments between parties, a review into fixed costs (both as to the level of fixed costs generally and the impact of vulnerability on the level of fixed costs) and the proposed expansion of fixed recoverable costs in civil litigation. Cases like this are therefore likely to be noteworthy as it is likely it will such battlegrounds will become more commonplace moving forwards and as 2 Sisters Poultry Limited such arguments are likely to be hard fought.
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Tagged as: Fixed Costs
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