Part 36 limits scope to argue Exceptional Circumstances where fixed costs apply
Posted on 14th October 2022 at 10:05
By Sean Linley, Costs Draftsman
In an interesting judgment from Costs Judge Leonard, in the case of McGreevy v Kiramba  EWHC 2561 (SCCO) (26 September 2022) it was found that the provisions of Part 36, where Section IIIA of Part 45 applies, would limit a Claimant's costs to the those prescribed in the relevant tables and crucially there would be no right to seek a larger sum by reference to CPR 45.29J.
Practitioners must now exercise caution were a Part 36 offer is made in a case which commenced in the Portal but subsequently does not continue under the RTA or EL/PL protocols, particularly where it is felt that there would be scope to seek an amount higher than fixed recoverable costs. Costs Judge Leonard was clear in his view that CPR 36.20(2) only "confers upon the Claimant a right to recover the fixed costs in Table 6B" and he could not see "any basis for putting a gloss upon the plain wording of CPR 36.20(2) so as to confer [...] a right to claim costs beyond what is prescribed by the rule itself".
In the current case, the Court had found that the Part 36 offer was not accepted and that the final settlement of the claim had been reached prior to it, though it helpfully gave guidance on how it would have interpreted Part 36 in any event.
Know the terms of the offer when you accept - You will be bound by them
It cannot be repeated enough but if you are faced with any offer which sets out any kind of impositions on costs take a moment to consider them and the implications. It is clear that the parties can both contract into and out of fixed costs.
In McGreevy, the Defendant made a calderbank offer of £100,000.00 which expressly provided that "the Defendant would pay the Claimant's costs in accordance with CPR 45.29C, and that the Claimant accepted that offer without qualification."
The Claimant sought to argue that this should not preclude them from applying under CPR 45.29J for an order providing a recovery of costs in excess of those set out in Table 6B.
Costs Judge Leonard considered that "CPR 45.29C itself provides without qualification for the recovery of the fixed costs at Table 6B, and the Claimant agreed to accept costs limited by that unqualified provision. The Defendant's Calderbank letter did not mention CPR 45.29B or CPR 45.29J, which to my mind can have no bearing on the terms agreed by the parties."
The Claimant also argued that this agreement was superseded by a Part 36 offer which was subsequently made by the Defendant as an alternative to a consent order. The Court ultimately did not accept that the Part 36 offer had been accepted as the Claimant had rejected the terms of that offer with regards to costs. The Defendant had set out they would be liable for the Claimant's costs "in accordance with CPR 36.13, and where CPR 45 applies, in accordance with CPR 36.20". It was accepted by the Claimant that fixed recoverable costs applied and as such in the context of the Part 36 36.20 would apply.
Ultimately, the Court found that the calderbank constituted a binding agreement, however, crucially made clear that even if the Part 36 offer had been accepted it would not have altered the position.
1. The Claimant had contracted into a specific regime for fixed recoverable costs and could not seek a higher sum under the exceptional circumstances test under CPR 45.29J.
2. Even a Part 36 offer and acceptance would have resulted in the same scenario as 36.20 doesn't allow for scope to seek a higher sum.
This creates problems. Concerning the calderbank this can be dealt with easily by the Claimant considering the terms of the offer and making a counter offer specifically allowing scope to apply CPR 45.29J. For Part 36, however, this highlights a serious flaw as under Part 36 terms as to costs cannot be imposed.
This, as Costs Judge Leonard states, leads to an "unattractive position" indeed. What is a Claimant to do? Weigh up the litigation risk, potentially seek shortfall from their client but ultimately be restricted to fixed costs. The practical advice has to be to start deliberations at the case outset and to very carefully consider the potential value of a claim and take a bold approach even where a Defendant may be insistent that a claim is a fixed costs matter. At least in this scenario it avoids the Qader trap and will allow for greater flexibility when arguing about costs down the line.
But what if the case is submitted to the Portal and you are faced with such an offer? You could invite the Defendant to agree to alternative terms though they will not necessarily do so. You could explain the costs implications to the client, particularly if there is an enforceable contractual right to seek further costs from the client. Thirdly, do the maths, you may find that the fixed costs under Table 6B are adequate, given you get a percentage of damages. Solicitors have to remain vigilant and mindful as to their duties first and foremost to their clients. Ultimately, taking informed and decisive action at the outset of the case is likely to be the best preventative measure of falling into this trap.
It does potentially give Defendants an upper hand on costs as a good offer could trap a Claimant into fixed recoverable costs with no scope to argue for a higher amount. Could this be something picked up by the lacuna sub-committee? One would hope so as it seems non-sensical to separate fixed recoverable costs from the exceptional circumstances test which is there as a fail safe. It has to be said that the exceptional circumstances test does not guarantee a right to costs above fixed recoverable costs but provides an opportunity to seek the same.
Claimant's solicitors would be aware of implications of settling pre-allocation
The Court also considered that the Claimant's lawyers ought to have been aware of the implications of settling a Portal case pre-allocation and the implications of this upon the costs entitlement. In the case at hand the claim settled for £100,000.00, significantly above the upper limit of £25,000.00, though the implications of Qader that a case which starts in the Portal but settles without allocation to the Multi-Track will be restricted to fixed costs applied. The Claimant argued that a restriction to fixed costs would be unfair, Costs Judge Leonard stated that:
I do not accept that, in the circumstances of this case, it is unfair. The Claimant's advisers must be taken to have understood the costs implications of settling the case before allocation to the Multitrack. The Defendant, shortly before the case would have been allocated, made two offers which required the Claimant to consider and weigh litigation risk, the timing of the Defendant's offers and their effect on prospective cost recovery. The Claimant, having no doubt taken appropriate advice, accepted one of those offers, and is bound by that acceptance. It is not unreasonable for the Defendant to hold him to that.
This gives Claimant practitioners two possible options:
1. Not to enter the claim on the Portal (though this is fraught with risk in a case which is clearly a Portal case as a potential abuse of process).
2. Not to settle the claim until after allocation.
Indeed given QOCs, if the case had continued and the Part 36 offer had not been withdrawn it would be interesting to see if the Part 36 offer had been accepted after allocation if the Court and Defendant would have accepted the principle of standard basis costs or again would an alternative order have been sought on the grounds of abuse of process?
Moreover, there are other practicalities wrapped up in this given the duties first and foremost to the Claimant. In theory, if a CFA allows for the recovery of a shortfall there may be scope to advise the client that there shortfall would be more significant on a fixed costs basis (depending on the level of costs incurred to that point). Even this point is complicated and one only has to look at the case of Belsner v Cam Legal Services which deals with informed consent and whether a solicitor can charge more to their client than they can recover. The Court of Appeal judgment is awaited but it is easy to see how this is bound up in the implications of the present case and the lingering impact of Qader.
Exceptional Circumstances - Just because it is Multi-Track does not make it exceptional.
Costs Judge Leonard also considered whether there had been exceptional circumstances under CPR 45.29J to allow costs above fixed recoverable costs in the event he had found the Claimant was entitled to pursue such actions.
It was noted that the claim involved serious injury but ultimately settled at £100,000 due to significant causation issues. Both the Claimant and Defendant had agreed that allocation to the Multi-Track was appropriate and it was only the pre-allocation settlement that restricted the case to fixed costs. The Claimant contended that the Court "should not disincentivise settlements. If the Defendant is right, then the Claimant would have had to await the CCMC and allocation (increasing costs and the utilisation of court resources) before settlement. That would be contrary to the overriding objective."
The Defendant relied upon Ferri v Gill which it submitted "established first that the "exceptional circumstances" test must be applied strictly, and that it is wrong to set a low bar for exceptionality by reference to the proposition that the Portal is intended to deal with simple, low-value cases: and second, that in considering whether a case is exceptional, the Court must compare it to the whole basket of cases covered by section IIIA of CPR 45, which includes cases that have exited the Portal because of value or complexity."
Reliance was also placed on Qader v Esure Services Ltd  EWCA Civ 1109 which was referred to earlier in the article and makes clear that:
"The position is, accordingly, that unless and until a case that has exited the Protocol is allocated to the Multitrack, it will be governed by the fixed costs provisions of section IIIA of CPR 45. "
Costs Judge Leonard concluded thus:
63. It seems to me that the chief difficulty faced by the Claimant is that the only real ground given for exceptionality is that before allocation this case was considered, by all concerned, as suitable for the Multitrack. To treat that in itself as a sufficient reason for a finding of exceptionality would be inconsistent with the express provisions of CPR 45.29B and would fall into the error identified in Qader v Esure of disapplying the fixed costs regime before allocation.
64. Given that the case cannot be treated as exceptional simply by virtue of being suitable for the Multitrack, and given that it is not in itself (it seems to me) exceptional by the standards of Multitrack cases, I do not believe that, had it been open to the Claimant to seek an increase in costs under CPR 45.29J, there would have been a sound basis for a finding of exceptionality.
Harsh Lessons Learned
All Claimant solicitors need to be aware, if not already, that:
1. If case goes into the Portal it will be fixed costs unless it is allocated to the Multi-Track. Think very carefully about whether a case should enter the Portal. A Defendant requesting a case go on to a Portal even if you disagree but do it to placate them will lead to the same fixed costs outcomes. Claimants have the choice how to run their claims.
2. Know the terms of any settlement agreement and if unclear clarify them with your opponent or a costs specialist before accepting.
3. Part 36 offer and acceptance, where Section IIIA of Part 45 applies will preclude a party from seeking costs above fixed costs under CPR 45.29J.
I would expect Defendants looking very carefully at the terms they propose on costs, particularly in fixed costs matters as they stand to benefit from holding a party to the fixed recoverable costs in Table 6B and to avert any prospect of arguments for a higher sum under CPR 45.29J.
Such arguments will not go away and if anything are highly likely to increase with the extension of fixed recoverable costs to most cases up to a value of £100,000.00.
This case is very much a warning to Claimant practitioners and a flag to savvy Defendants as to how to exploit those who are unwary.
Are you unsure as to the implications of the terms of an offer on costs or do you want to discuss the implications of the case further? Should you have any queries arising from this article or upon costs generally then please do not hesitate to get in touch with our friendly team either via phone 01482 534567 or e-mail email@example.com
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