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FREE BOOK CHAPTER: Fixed Costs Schemes (Chapter One from 'A Practical Guide to Costs in Personal Injury Cases' by Matthew Hoe

So much has changed in the legal costs field, particularly in the field of personal injury cases. The rules on recovery of legal costs have been through extensive reform. There are new fixed costs regimes and changes to procedure. There is so much to absorb. This book is the essential guide to the issues that frequently recur when dealing with costs in personal injury cases, and it addresses those issues without being weighed down by the more arcane and obscure points of costs law. It is a refreshing and light hands-on guide for personal injury solicitors, insurers, barristers, costs professionals and judges who want to or have to deal with costs issues themselves. The necessary information is laid out clearly and accessibly. When faced with another costs argument and you need an explanation, an answer, or instructions - this is the book for you. Here is a free chapter to help convince you.

This is a free sample chapter from 'A Practical Guide to Costs in Personal Injury Cases' by Matthew Hoe, please click here for more information or to order the book.

Introduction to fixed costs

There are different types of fixed costs in the CPR.

There are fixed costs, where the amount is fixed for all claims falling within the category. There may be different tiers of fixed costs depending on the amount of damages or the stage reached in the case, but there is no maths involved. Small claims costs, portal costs and fast track trial costs are examples.

There are fixed recoverable costs, which are calculated with a formula based on damages. Predictable costs and post portal costs are examples.

There are capped costs, where there is a prescribed upper limit. Costs of a provisional assessment are an example.

In personal injury claims, fixed costs or fixed recoverable costs may apply depending on what has happened in the claim.

The intention of fixed recoverable costs

In Nizami v Butt [2006] 1 WLR 3307, Simon J (as he then was) said at [23]:

It seems to me clear that the intention underlying CPR rr 45.7-45.14 was to provide an agreed scheme of recovery which was certain and easily calculated. This was done by providing fixed levels of remuneration which might over-reward in some cases and under-reward in others, but which were regarded as fair when taken as a whole.

He was speaking about predictable costs, using the rule numberings at that time. What he said is also true of post portal costs in CPR 45 Section IIIA which have arrived since.

Fixed recoverable costs are by nature proportionate to the damages and the CPR prefer them for more valuable claims. Fixed costs such as portal costs might also be fair when taken as a whole across many cases, assuming the captured cases do not much deviate from one another.

Getting the right fixed costs

The first step is to decide which fixed costs scheme applies, if any. That is harder than it may sound. There is no one scheme for each claim type. The facts of the case decide which scheme applies and thus one needs some knowledge of the claim.

Usually, the successful claimant will work out which scheme applies as a matter of procedural law and will present a claim for costs accordingly. The flow chart in the next section should assist.

The defendant will then vet the claim and decide whether to agree that scheme applies or to argue that as a matter of reasonableness or by one of the other means that the law allows, a less generous fixed costs scheme should be applied.

Fixed Costs Flow Chart – Which Scheme Applies

Portal costs in CPR 45 Section III apply to RTA, EL, PL and ELD claims which settle under the relevant Protocol.

Post portal costs in CPR 45 Section IIIA apply to claims (except for EL Disease claims) which start under the RTA Protocol after 31 July 2013 or the EL/PL Protocol but exit that Protocol before settlement.

Predictable costs apply to RTA claims which do not belong in the RTA Protocol or exit it where the CNF pre-dates 31 July 2013, and which settle under the Personal Injury Pre-Action Protocol for damages less than £10,000.

Small claims fixed costs apply to Part 7 claims allocated to that track.

‘Apply’ is used in a loose sense in those descriptions; a right to costs is not usually automatic.

Claims with a value below the small claims threshold which settle after exiting or never start under the RTA or EL/PL Protocol and which are not allocated to the small claims track may be argued to be subject to small claims costs per CPR 46.13(3).

In order to work out conclusively which fixed costs scheme applies you will need to know: the type of claim, the accident date, the CNF date, the amount of damages and whether Part 7 proceedings were started.

There are all sorts of complications that may alter the result. It is important to know whether a claim should have started under one or other of the RTA or EL/PL Protocols. The amount of damages can affect things. All those complications are covered in subsequent sections.

The flowchart will be right in about 99% of claims, but there will always be aberrations.

The workings of each fixed costs scheme

Portal costs

This is a fixed costs scheme. It was introduced on 30 April 2010 for RTAs on or after that date with a value up to £10,000 excluding vehicle related damages. On 30 April 2013, the fixed costs were reduced for claims with CNFs on or after that date. On 31 July 2013, the scheme was expanded horizontally to cover EL, PL and EL Disease claims and vertically to damages of £25,000.

For a while it was a muddle, but it is becoming simpler as time passes by as claims subject to the older, higher costs get settled.

The costs are payable in instalments for each of the three stages of the Protocol (but most settle at stage 2).

Fixed costs in relation to the RTA Protocol

Where the value of the claim for damages is not more than £10,000

Where the value of the claim for damages is more than £10,000, but not more than £25,000

Stage 1 fixed costs

£200 (£400 if CNF before 30 April 2010)

Stage 1 fixed costs

£200

Stage 2 fixed costs

£300 (£800 if CNF before 30 April 2010)

Stage 2 fixed costs

£600

Stage 3
- Type A fixed costs

£250

Stage 3
- Type A fixed costs

£250

Stage 3
- Type B fixed costs

£250

Stage 3
- Type B fixed costs

£250

Stage 3
- Type C fixed costs

£150

Stage 3
- Type C fixed costs

£150

Source: CPR 45 Table 6

Fixed costs in relation to the EL/PL Protocol

Where the value of the claim for damages is not more than £10,000

Where the value of the claim for damages is more than £10,000, but not more than £25,000

Stage 1 fixed costs

£300

Stage 1 fixed costs

£300

Stage 2 fixed costs

£600

Stage 2 fixed costs

£1300

Stage 3
- Type A fixed costs

£250

Stage 3
- Type A fixed costs

£250

Stage 3
- Type B fixed costs

£250

Stage 3
- Type B fixed costs

£250

Stage 3
- Type C fixed costs

£150

Stage 3
- Type C fixed costs

£150

Source: CPR 45 Table 6A

Post portal costs

These are fixed recoverable costs. There are simple formulae for the costs based on the damages, where the formula is selected according to the stage at which settlement was reached plus, for pre-issue settlements, the amount of damages.

Although the structure is the same, there are different sets of formulae for RTA, EL and PL claims.

Fixed costs where a claim no longer continues under the RTA Protocol

A. If Parties reach a settlement prior to the claimant issuing proceedings
under Part 7

Agreed damages

At least £1,000, but not more than £5,000

More than £5,000, but not more than £10,000

More than £10,000, but not more than £25,000

Fixed costs

The greater of—
(a) £550; or
(b) the total of—
(i) £100; and
(ii) 20% of the damages

The total of—
(a) £1,100; and
(b) 15% of damages over £5,000

The total of—
(a) £1,930; and
(b) 10% of damages over £10,000

B. If proceedings are issued under Part 7, but the case settles before trial

Stage at which case is settled

On or after the date of issue, but prior to the date of allocation under Part 26

On or after the date of allocation under Part 26, but prior to the date of listing

On or after the date of listing but prior the date of trial

Fixed costs

The total of—
(a) £1,160; and
(b) 20% of the damages

The total of—
(a) £1,880; and
(b) 20% of the damages

The total of—
(a) £2,655; and
(b) 20% of the damages

C. If the claim is disposed of at trial

Fixed costs

The total of—
(a) £2,655; and
(b) 20% of the damages agreed or awarded; and
(c) the relevant trial advocacy fee

D. Trial advocacy fees

Damages agreed or awarded

Not more than £3,000

More than £3,000, but not more than £10,000

More than £10,000, but not more than £15,000

More than £15,000

Trial advocacy fee

£500

£710

£1,070

£1,705

Source: CPR 45 Table 6B

Fixed costs where a claim no longer continues under the EL/PL Protocol –

employers’ liability claims

A. If Parties reach a settlement prior to the claimant issuing proceedings
under Part 7

Agreed damages

At least £1,000, but not more than £5,000

More than £5,000, but not more than £10,000

More than £10,000, but not more than £25,000

Fixed costs

The total of—
(a) £950; and
(b) 17.5% of the damages

The total of—
(a) £1,855; and
(b) 12.5% of damages over £5,000

The total of—
(a) £2,500; and
(b) 10% of damages over £10,000

B. If proceedings are issued under Part 7, but the case settles before trial

Stage at which case is settled

On or after the date of issue, but prior to the date of allocation under Part 26

On or after the date of allocation under Part 26, but prior to the date of listing

On or after the date of listing but prior the date of trial

Fixed costs

The total of—
(a) £2,630; and
(b) 20% of the damages

The total of—
(a) £3,350; and
(b) 25% of the damages

The total of—
(a) £4,280; and
(b) 30% of the damages

C. If the claim is disposed of at trial

Fixed costs

The total of—
(a) £4,280;
(b) 30% of the damages agreed or awarded; and
(c) the relevant trial advocacy fee

D. Trial advocacy fees

Damages agreed or awarded

Not more than £3,000

More than £3,000, but not more than £10,000

More than £10,000, but not more than £15,000

More than £15,000

Trial advocacy fee

£500

£710

£1,070

£1,705

Source: CPR 45 Table 6C

Fixed costs where a claim no longer continues under the EL/PL Protocol –

public liability claims

A. If Parties reach a settlement prior to the claimant issuing proceedings
under Part 7

Agreed damages

At least £1,000, but not more than £5,000

More than £5,000, but not more than £10,000

More than £10,000, but not more than £25,000

Fixed costs

The total of—
(a) £950; and
(b) 17.5% of the damages

The total of—
(a) £1,855; and
(b) 10% of damages over £5,000

The total of—
(a) £2,370; and
(b) 10% of damages over £10,000

B. If proceedings are issued under Part 7, but the case settles before trial

Stage at which case is settled

On or after the date of issue, but prior to the date of allocation under Part 26

On or after the date of allocation under Part 26, but prior to the date of listing

On or after the date of listing but prior the date of trial

Fixed costs damages

The total of—
(a) £2,450; and
(b) 17.5% of the damages

The total of—
(a) £3,065; and
(b) 22.5% of the damages

The total of—
(a) £3,790; and
(b) 27.5% of the damages

C. If the claim is disposed of at trial

Fixed costs

The total of—
(a) £3,790;
(b) 27.5% of the damages agreed or awarded; and
(c) the relevant trial advocacy fee

D. Trial advocacy fees

Damages agreed or awarded

Not more than £3,000

More than £3,000, but not more than £10,000

More than £10,000, but not more than £15,000

More than £15,000

Trial advocacy fee

£500

£710

£1,070

£1,705

Source: CPR 45 Table 6D

Predictable costs

These are fixed recoverable costs. There is just one formula but it is more simply expressed by putting it two ways:

  • If the damages are no more than £5,000, costs are £800 plus 20% of the damages.

  • If the damages are more than £5,000 but no more than £10,000, costs are £1,800 plus 15% of the balance of the damages in excess of £5,000.

Small claims costs

These are fixed costs.

Fixed costs on commencement of a claim for the recovery of money or goods

Relevant band

Where the claim form is served by the court or by any method other than personal service by the claimant

Where –

  • the claim form is served personally by the claimant; and

  • there is only one defendant

Where there is more than one defendant, for each additional defendant personally served at separate addresses by the claimant

Where –

  • the value of the claim exceeds £25 but does not exceed £500

£50

£60

£15

Where –

  • the value of the claim exceeds £500 but does not exceed £1,000

£70

£80

£15

Where –

  • the value of the claim exceeds £1,000 but does not exceed £5,000; or

  • the only claim is for delivery of goods and no value is specified or stated on the claim form

£80

£90

£15

Where –

  • the value of the claim exceeds £5,000

£100

£110

£15

Source: CPR 45 Table 1

Adjustments which apply to all fixed costs schemes

VAT on fixed costs and fixed recoverable costs

VAT is recoverable in addition where applicable. Portal costs, post portal costs and predictable costs all make provision for it. In a personal injury claim the claimant, even if VAT registered for business purposes, is unlikely to be able to recover VAT as input tax on damages for personal injury. If there is a subrogated claim for business losses it might be argued that a proportion of VAT is not recoverable, but it is very hard to decide what that proportion should be so VAT is treated as all or nothing and is ordinarily paid on the costs in those claims.

There is no VAT in small claims. That is by concession from HMRC, but the decisive point is that there is no provision for it in CPR 45 Section I. The other fixed costs rules state where VAT is payable in addition.

London weighting

Everything costs more in London, including legal services. Lawyers’ hourly rates in London are higher. To achieve a similar effect for fixed costs under CPR 45 Section III and fixed recoverable costs under CPR 45 Sections II and IIIA, the costs are uprated by 12.5%. It is called ‘London weighting’ in the CPR.

To qualify for it, the solicitor must practise in London, and the client must live or work in London – such that it would be reasonable to instruct a London lawyer.

London is defined by PD45 2.6 as ‘the area served by’:

(within London) the County Court hearing centres at

  • Barnet

  • Bow

  • Brentford

  • Central London

  • Clerkenwell and Shoreditch

  • Edmonton

  • Ilford

  • Lambeth

  • Mayors and City of London

  • Romford

  • Wandsworth

  • West London (now Hammersmith)

  • Willesden

  • Woolwich

(outside London) the County Court hearing centres at

  • Bromley

  • Croydon

  • Dartford

  • Gravesend

  • Uxbridge

This requires a map. Find the locations of the solicitor’s office and where the claimant lives or works, and check if the nearest County Court hearing centre is one on the list. Other hearing centres in the London area are at:

  • Guildford

  • Kingston Upon Thames

  • Reigate

  • Slough

  • Staines

  • Watford

If one of those is the nearest hearing centre, London weighting won't apply.

A useful but not completely accurate guide is whether the claimant and solicitor are within the M25. It is not quite accurate as some areas to the western edge are not covered, and some areas across the eastern loop are. Online maps can be invaluable here.

A solicitor’s firm might argue that it can have the 12.5% when it has a London office, even though the work on the claim was done in a regional office. The defendant is likely to say that the solicitor doing the work must practise in London to qualify for the 12.5%. There are no cases on the point, but a purposive approach is likely to favour the latter.

The trick known as ‘post-boxing’, where a solicitor’s postal address is a London PO Box to give the impression that he practises in London when in fact he does not, is both a sharp practice and insufficient to create a right to the 12.5%. Thankfully it is very rarely encountered.

Protocol costs in detail

Stage 1 costs

Stage 1 fixed costs are payable at the start of Stage 2. There are 10 days to make payment from receipt of the Stage 2 Settlement Pack via the portal: paragraph 6.18 of the RTA Protocol and paragraph 6.16 of the EL/PL Protocol.

That assumes that liability was admitted and the claim proceeds to Stage 2. If liability was denied or in an RTA claim contributory negligence other than the failure to wear a seatbelt in the case of a vehicle occupant was alleged, the claim will never make it to Stage 2 and the costs will not be paid.

In RTA claims, the fees for a fixed price medical report and any medical records must be paid also. The RTA Protocol uses a portmanteau term for the stage 1 fixed costs and those medical fees: ‘Stage 1 Fixed Recoverable Costs’. That is an unusual usage of ‘recoverable’, because there is no formula involved in those costs.

There is a proviso that the invoices for the medical fees must have been included with the Settlement Pack. It may have been the intention that if those invoices were missing, the stage 1 fixed costs would still be payable; but on the way paragraph 6.18 is worded it appears arguable that none of the Stage 1 Fixed Recoverable Costs would be payable at that time.

The only exception is where the claimant is a child. The rationale is that the child’s settlement requires approval, so nothing is paid until that approval is given.

If Stage 1 costs or Stage 1 Fixed Recoverable Costs are not paid by the time they should be, the claimant has 10 days from the date when they should have been paid to give written notice that the claim will not continue under the Protocol: 6.19 of the RTA Protocol and 6.17 of the EL/PL Protocol. There is a limited window of opportunity because the claimant cannot keep the threat of an exit hanging over the defendant as the claim proceeds under Stage 2 or Stage 3. That might have a blackmailing effect. There needs to be certainty about whether or not the claim is continuing under the Protocol.

If the defendant fails to make payment and the claimant lets the claim continue under the Protocol, the defendant does not avoid paying the Stage 1 costs. There are provisions for settlement at Stage 2 or going on to Stage 3 for unpaid Stage 1 costs to be paid: paragraphs 7.47 and 7.70 of the RTA Protocol and 7.44 and 7.53 of the EL/PL Protocol.

The former version of the RTA Protocol required Stage 1 fixed costs to be paid at the end of Stage 1. There were an alarming number of claims in which Stage 1 costs were paid and a Stage 2 Settlement pack never followed, and consequential concerns about dishonest or duplicative claims.

If Stage 1 costs are paid and the claim exits the Protocol at Stage 2 or Stage 3, the payment is treated as a payment on account of costs generally: CPR 45.28.

Stage 2 costs

Stage 2 costs are payable at the end of Stage 2, which is reached when the claim settles or when it is proceeding to Stage 3.

An offer to settle made under the RTA or EL/PL Protocol automatically includes an offer to pay the costs of the claim (paragraph 7.44 and 7.41 respectively). Thus on acceptance, there is an agreement to pay costs. Those automatic terms are inserted by the Protocols because the common law does not recognise an automatic right to costs just because a claim is won. The provisions save arguments about whether the defendant has to pay costs.

There is an exception if the claimant is a child. The claim has to proceed to Stage 3 for approval, and costs are not payable until the court’s approval is given.

Where the claim has settled, paragraph 7.47 of the RTA Protocol or paragraph 7.44 of the EL/PL Protocol applies. Both paragraphs are headed ‘Settlement’. Regarding costs, they require payment of any unpaid Stage 1 costs, the Stage 2 costs, relevant disbursements and if applicable a success fee, all within 10 days of the settlement.

Unlike Stage 1, there is no provision for exiting the Protocol if that deadline is missed. The reason is straightforward: the claim has settled, so it cannot exit the Protocol. Failure to comply with post-settlement obligations may require a polite reminder or ultimately enforcement action from the claimant. However, it does not mean it is reasonable for the claimant to declare unilaterally that the claim has ‘exited’ the Protocol and demand the greater post-portal costs. See Coggon v Irvine (Regional Costs Judge Jenkinson, County Court at Birkenhead, 17 October 2014, unreported).

Where the claim is proceeding to Stage 3, paragraph 7.70 of the RTA Protocol and paragraph 7.53 of the EL/PL Protocol require the defendant to pay the same costs save for the success fee (the claim not yet having been won) within 15 days of receiving the Court Proceedings Pack. There is an exception; if the defendant does not have a CRU certificate that remains in force for at least 10 days, the defendant must request one as soon as possible, inform the claimant and pay the costs within 30 days of receiving the court proceedings pack.

If the defendant fails in either of those things, the claimant may give notice to the defendant that the claim will no longer continue under the Protocol. Unlike Stage 1, there is no time limit for that notice: see paragraphs 7.75 and 7.58 of the Protocols respectively. So the claimant has a choice; but an astute claimant will surely exit in order to claim greater costs.

If Stage 1 and/or Stage 2 costs are paid and the claim exits the Protocol at Stage 3, the payment is treated as a payment on account of costs generally: CPR 45.28.

Stage 3 costs

Stage 3 costs are split into three types. Type A fixed costs are the legal representative’s costs, and cover the paperwork done by the solicitor. Type B fixed costs are the advocate’s costs for attending a Stage 3 hearing. Type C fixed costs are for the cost of advice, whether given by counsel or solicitor, on the amount of damages where the claimant is a child.

If the claimant is a child and seeks approval at Stage 3, the claimant gets Types A, B and C (CPR 45.21 and 45.22). Those rules also deal with multiple approval hearings.

Otherwise, the winner at Stage 3 gets the Stage 3 costs.

If the claimant beats the defendant’s Protocol offer, the claimant gets Stage 3 fixed costs as appropriate: no hearing – Type A only; at a hearing – Types A and B; at a hearing and the claimant is a child – Types A, B and C (CPR 45.20).

If the claimant does not beat the defendant’s Protocol offer, the claimant pays the defendant’s Type A and B fixed costs if the claim was determined at a Stage 3 hearing, or just the Type A fixed costs if the claim was determined on the papers (CPR 45.26).

If the claim settles after the Court Proceedings Pack has been sent but before proceedings are started, CPR 45.23A says the claimant gets Stage 3 Type A fixed costs. That rule insertion reversed the position under several first instance decisions which held that no Stage 3 costs were payable if the Part 8 proceedings had not been started. However, if the claimant sent the Court Proceedings Pack before the total consideration period under Stage 2 of the Protocol had expired, the defendant may still object. The defendant may need to exit the claim from the protocol in order to give effect to that objection; the defendant may decide it is disproportionate.

Fixed recoverable costs – general issues

Qualifying for post portal costs

There are two basic criteria under CPR 45.29A(1) for getting post portal costs in CPR 45 Section IIIA. The claim must have (a) started under the RTA or EL/PL Protocol and (b) exited that Protocol or the Stage 3 procedure in PD8B. A further implied criteria is that the claim must fit somewhere within Table 6B, 6C or 6D. If there are no fixed recoverable costs specified, the Section cannot apply.

A possible example of that, perhaps one that was not intended, is a claim that exits the Stage 3 procedure under PD8B and continues as a Part 7 claim. Part B in each table, and the definitions in CPR 45.29C(4) and 45.29D(4) refer to proceedings being ‘issued’ under Part 7. That has not happened in a PD8B claim. The proceedings were issued under Part 8, and the court has used the power in CPR 8.1(3) to direct that the claim continues as if the claimant had not used the Part 8 procedure. In order to claim greater costs, a claimant may say such a claim was not issued under Part 7. A defendant may seek to apply Section IIIA by saying the proceedings are to be treated as if issued under Part 7 and that is enough. There have not yet been any cases on the point, probably because there are relatively few Stage 3 claims and most are concluded at Stage 3. Further, this problem would not arise if the claim proceeded to trial. Part C in the relevant table would apply, which requires only that the claim went to trial and is not concerned with how proceedings were started.

The only express exclusion is in CPR 45.29A(2): the Section does not apply to a disease claim which is started under the EL/PL Protocol.

Qualifying for predictable costs

In contrast to qualifying for post portal costs, the qualifying criteria for predictable costs in CPR 45 Section II which are set out in CPR 45.9 are much more complicated.

Predictable costs do not apply where portal costs in Section III or post portal costs in Section IIIA apply, or the claimant is a litigant in person.

Predictable costs are the costs to be allowed in costs-only proceedings under CPR 46.14 or approval proceedings under CPR 20.10(2): see CPR 45.9(1). That requirement for a specific type of proceedings clashes with the understanding that predictable costs are for unlitigated cases. It can be explained. The substantive claim has finished before there are costs-only or approval proceedings, and in that sense the damages claim itself was unlitigated. Further, defendants do not usually require claimants to start the costs-only proceedings. That would just add extra costs. Instead, knowing the predictable costs will apply if proceedings are started, defendants pay them anyway. Approval proceedings on the other hand must be started, but again the expectation of what will be payable allows parties to agree the costs in advance of the approval hearing.

However, that expectation of what would be payable in costs-only proceedings does not mean that the defendant will always pay predictable costs. In their hey-day, claimants would often present a claim for predictable costs on the basis that the criteria in CPR 45.9(2) were fulfilled, forgetting the criteria in CPR 45.9(1). Assuming that it is not a claim requiring approval proceedings, it must be a claim in which costs-only proceedings are available. Pursuant to CPR 46.14(1)(a), costs-only proceedings are available only where ‘the parties to a dispute have reached an agreement on all issues (including which party is to pay the costs) which is made or confirmed in writing’. An agreement confirmed by exchange of correspondence (see the general guidance in Thomas v Home Office [2007] 1 WLR 230 at [25]-[26]) or a Part 36 offer and acceptance (a Part 36 acceptance where there is no proceedings does not create a ‘deemed order’ for costs on the standard basis: CPR 44.9(2), codifying Solomon v Cromwell [2012] 1 WLR 1048 at [16]) would suffice. If the defendant has refused to pay costs, then costs-only proceedings are not available and predictable costs will not apply. Circumstances in which the defendant might reasonably do that are where the claim was for ‘bent metal’ only, i.e. vehicle damage, and the defendant’s insurer is not persuaded the claim needed lawyers to become involved.

CPR 45.9(2) sets out the fact specific criteria. First, the claim must have arisen from a road traffic accident that occurred on or after 6 October 2003. Road traffic accident has a specific definition for the Section at CPR 45.9(4):

road traffic accident’ means an accident resulting in bodily injury to any person or damage to property caused by, or arising out of, the use of a motor vehicle on a road or other public place in England and Wales.

The claimant does not have to be the one injured; it can be any person. The property does not need to be the claimant’s; it can be anyone’s. (For more on this definition, see the sections ‘Differing definitions of RTA’ and ‘Use of a vehicle’.)

Second, the agreed damages must include damages in respect of personal injury or damages to property (or both). So although the definition of road traffic accident is broader, the second criterion makes it personal to the claimant.

The definition of road traffic accident and this criterion mean that claims which do not include personal injury or damage to property are outside the scope of predictable costs. Claims for hire charges only are an example. Although they arise from damage to a vehicle rendering it unroadworthy, they are consequential losses rather than actual damage to property. If there is an agreement to pay costs in such a claim, it is likely to be as a small claim or on the standard basis instead. If there are other damages in addition to those for personal injury and damage to property, the claim can still fall within predictable costs and, subject to other factors covered in the next section, costs would be calculated on the grand total of damages.

Third, the total value of the agreed damages must not exceed £10,000. ‘Agreed damages’ here is generally held to be the net amount – the amount the claimant receives in hand – because of the explanation in the PD45 2.3:‘Fixed recoverable costs are to be calculated by reference to the amount of agreed damages which are payable to the receiving party. In calculating the amount of these damages… (c) where the parties have agreed an element of contributory negligence, the amount of damages attributed to that negligence must be deducted’.

PD45 2.2 deserves an honourable mention. It is sometimes read to mean that that £10,000 refers to the gross amount of the claim, because of a confusing reference to calculating the value of the claim for allocation purposes. ‘The Section does not apply to disputes where the total agreed value of the damages is within the small claims limit or exceeds £10,000. Rule 26.8(2) sets out how the financial value of a claim is assessed for the purposes of allocation to track.’ Value for allocation under CPR 26.8 is the gross not net value of the claim. However, the practice direction refers also to the small claims limit, and it seems the signpost is there for that purpose. It does not create two conflicting and unnecessarily confusing definitions of ‘agreed damages’ for the purposes of predictable costs. PD45 2.2 appears to be imperfectly worded and it also possibly conflicts with CPR 45.9(2)(d), the upcoming fourth criterion.

Fourth and finally, if a claim had been issued for the amount of the agreed damages, the small claims track would not have been the normal track for the claim. Broadly speaking, small claims are excluded. However, that is not quite what the rule says. (See the sections below ‘Split liability and the small claims threshold’ and ‘Predictable costs and small claims’.)

What damages should be included in a fixed recoverable costs calculation?

Predictable costs in CPR 45.11 and Section IIIA post portal costs in Part 45 Tables 6B, 6C and 6D set out simple formulas for the costs based on the amount of damages.

PD45 2.3 assists in defining damages for the purposes of predictable costs. ‘Damages’ includes general damages, special damages and interest, interim and final payments. It is the amount net of a deduction for contributory negligence. Any payment made under statute to a third party does not count (that practice direction is directed primarily at CRU charges).

There is no mirror provision for Section IIIA costs. That appears to be a drafting omission. It would be reasonable for parties and the court to adopt the same approach as for predictable costs.

The rules do not specify whether the solicitor has to have acted for the claimant in recovery of a particular head of loss for it to be included in the damages for the formula. That may be an issue where an insurer or hire care company recovers directly from the defendant’s insurer. On the one hand, as the formula is by nature rough and ready, does it really matter? But on the other, as the costs are proportionately higher where damages are higher, is it right that a solicitor gets paid according to heads of loss that he did nothing to recover? Those questions have never been authoritatively answered but there are two helpful County Court circuit level decisions.

Swatton v Smithurst (Oxford County Court, 3 February 2005, unreported) favours limiting the heads of loss. HHJ Harris QC finished up with a memorable phrase:

The total value of the agreed damages with which the solicitors were concerned in the instant case was £1850, and it is on that figure that the costs entitlement should be paid. If this conclusion is correct it can be foreseen that some solicitors may endeavour to give themselves entitlement to greater levels of costs by modifying the terms of their retainers and by addressing themselves directly to car hire providers or insurers. This is one of the considerations behind Mr Bacon’s “necessary and reasonable” test. I would only observe that of this happens the Court should be astute to the reality and not the form, and should be ready to intervene if it appears that costs are being claimed by masking the work of others behind a misleading solicitor’s carapace.

Judge Harris’ last sentence is directed at some dishonesty on the part of the solicitor in passing off the work of non-employees as his own. It is not directed against the practice of the solicitor taking on the work. Predictable costs did have the effect of encouraging solicitors to get involved in the recovery of sums formerly recovered by insurers and credit hirers using in house teams. In some such claims there was no personal injury, and some liability insurers refused to agree to pay costs at all, with considerable success.

Byrne v Richwood (Liverpool County Court, 25 January 2008, unreported) considered the work taken on by the solicitor. The defendant argued that some heads of loss which the solicitor had recovered should be excluded from the predictable costs calculation because someone other than the solicitor, such as an insurer or credit hire company, could have recovered them. HHJ Stewart QC (as he then was) decided that there was nothing in the rules supporting that approach. The rules simply referred to ‘damages’. It did not exclude damages that someone else could have recovered.

The general approach is to calculate costs by including in the damages any sum recovered by the solicitor and leaving out any not recovered by the solicitor. Attempts to claim predictable costs by including damages recovered on behalf of the claimant by others generally do not arise for the simple reason that if the solicitor was not involved, he does not know about the damages to include in his calculation.

The same approach should apply to Section IIIA post portal costs.

Split liability and the small claims threshold

Where the deduction from damages for contributory negligence or where a settlement after ‘split liability’ results in a net damages settlement below the small claims threshold it seems that fixed recoverable costs will no longer apply. The small claims threshold for a personal injury claim is presently £1,000.

Part 45 Tables 6B, 6C and 6D do not provide a formula where damages are less than £1,000 and no Part 7 proceedings have been started. If ‘damages’ for Section IIIA is the net sum, then post portal costs will not apply to pre-issue net settlements under £1,000. However, if Part 7 proceedings are started then the tables no longer categorise by the amount of damages, and small claims net settlements may fall within the Section. (Small claims are considered further in their own sections below.)

For predictable costs, CPR 45.9(2)(d) provides: ‘The Section applies where… if a claim had been issued for the amount of the agreed damages, the small claims track would not have been the normal track for that claim.’ That rule is not the most clearly drafted. It is asking whether the normal track for Part 7 proceedings for the amount of the damages that were paid in the end would be the small claims track. A definition of ‘amount of agreed damages’ is needed. There used to be a ‘signpost’ – a note in the CPR – to CPR 26.6 which explains the normal track for each claim, but that disappeared when the rules were renumbered on 1 April 2013 as a result of implementing the Jackson reforms. PD45 2.2 and 2.3 seem to provide the definition, but do not use those exact words. PD45 2.2 covers where Section II applies and 2.3 deals with what is included in damages for the purposes of the formula. It would make little sense if what constituted ‘damages’ for the purpose of working out whether the Section II applied differed from ‘damages’ for calculating the costs. So they are generally construed identically, and 2.3 excludes any amount for contributory negligence. That has led to decisions such as Parveen v Farooq (HHJ Stewart QC, Liverpool County Court, 30 June 2009, unreported) and Lisbie v SKS Scaffolding [2011] EWHC 90203 (Costs)which restrict a claimant’s costs to small claims costs where the net damages are below the small claims limit.

The effect is that a claim for a sum exceeding the small claims threshold, say general damages of £1,500, would be excluded from predictable costs by this small claims exclusion if it settled on a 50/50 basis and the claimant received £750 in hand.

While it is easier to see why the Section does not apply where net damages are below the small claims threshold, it is harder to see why a leap should be made to applying small claims costs. Why would standard basis costs not apply? Some assistance may be derived from the reasoning of Patten LJ in Dockerill v Tullett [2012] 1 WLR 2092 at [45]. He was talking about children with small claims when construing the rule, but the principle could be extended to net settlements:

to apply a normal multi-track assessment of costs in all such cases seems to me to run contrary to the purpose of [CPR r 45.9(2)(d)] which must, in my view, have been intended to allow the court to apply a less generous regime to approval applications based on small claims. The predictive costs regime could have been applied to all cases involving claims of less than £10,000 but it was not.

Thus a ‘less generous’ regime such as small claims costs may be reasonably applied.

Post portal costs – specific issues

Section IIIA, track allocation and costs budgets

Section IIIA does not apply only to fast track claims. There is no mention of track allocation in the Section. The closest thing to a mention is the exclusion of small claims from the RTA and EL/PL Protocols, in which qualifying claims must have started – but that is still quite remote.

There is a correlation with the fast track if a claim settles before Part 7 proceedings are started. The formulae in Part A of Tables 6B, 6C and 6D cover a damages value range of £1,000 to £25,000.

However, the value of damages is not relevant to whether a claim is in scope when it settles after Part 7 proceedings are started. The formulae in Parts B and C of the tables have regard only to the stage at which the claim settled. They use the damages figure, but only so that it is relevant to the amount of costs.

Anecdotal evidence suggests claims that do not belong in the Protocols often start under them. There may be various reasons. There may be uncertainty about the value of the claim at the outset. A particular firm may zealously follow the procedure of starting claims under the Protocols. Some claimants may be angling for a prompt admission of liability. Either way, once a claim starts under the Protocol, exits and settles after Part 7 proceedings start it will be in scope of Section IIIA.

Potentially, that creates tensions with other Parts of the CPR.

Small claims are the first example. If a claim starts under the Protocol and exits because its value is below the small claims threshold, and settles after Part 7 proceedings are started but before it is allocated to track, then fixed recoverable costs under Part A Stage 1 of the relevant table would apply. However, CPR 46.13(3) would also allow the court (if making an assessment of costs) to limit the costs to fixed commencement costs for a small claim. It is not clear which would prevail.

Costs budgeting cases are another example. A multi-track claim may start under the Protocol and exit. CPR 3.12(c) says that costs budgeting is excluded ‘where the proceedings are the subject of fixed costs or scale costs or where the court otherwise orders.’ HHJ Grant in Qader v Esure Services (County Court at Birmingham, 15 October 2015, unreported) accepted on appeal that Section IIIA captured multi-track claims that had begun life under the Protocol and confirmed therefore the exclusion of costs budgeting.

But say the exclusion is overlooked and the claim settles after a costs management order is made. If the value of the damages is so high that the formula for costs gives an amount in excess of the budget amount approved by the costs management order, it is again not clear whether Section IIIA or CPR 3.18 would prevail. A claim may also settle for a sum of damages that results in costs much lower than an approved budget.

If the damages are expected to be very high, there may be benefit in starting a multi-track claim under the Protocol. A £1M claim would lead to very high costs under the post-issue formulae. Defendants may argue that such an approach is an abuse of process.

Many parties may not appreciate that Section IIIA apparently applies in this way. Opponents may tactically omit to bring it to the attention of their opponents as suits their interests.

Fixed costs under Section IIIA for other possible outcomes in litigation

The post portal scheme in Section IIIA is the only fixed costs scheme that covers the whole duration of a claim, including litigation all the way to trial. The aim is that the scheme is a complete costs solution, so that any party’s costs are fixed in the event of obtaining a costs order. There are some exceptions, but in addition to the claimant’s costs at the conclusion of the claim the scheme does cover the following:

  • Defendant’s costs

  • Counterclaims

  • Interim applications

Defendant’s costs under Section IIIA

Section IIIA post portal costs also cap (not fix) the defendant’s recoverable costs. When the defendant wins outright, CPR 45.29F applies. When a claimant accepts a defendant’s Part 36 offer out of time, CPR 36.20 applies. When the defendant wins at trial on a Part 36 offer, CPR 36.21 applies.

When the defendant wins outright, the defendant’s costs are capped at the amount of fixed recoverable costs that the claimant would have recovered had the claimant won. As the amount of fixed recoverable costs is calculated from the damages, a notional figure for damages is required. CPR 45.29F(4) defines that as the amount sought in the claim form (or failing that, the upper limit in the claim form, and if that is blank too, £25,000) less any amount not in dispute, any vehicle related damages where the claim started under the RTA Protocol, interest and costs. Contributory negligence is to be ignored. VAT, disbursements under CPR 45.29I and London weighting where appropriate are in addition.

The court would assess the defendant’s costs on the standard basis, applying the cap. However, the cap is lifted if a QOCS exception applies (see separate section): CPR 45.29F(10).

Under Part 36, the principles are similar. There is a cap; and VAT, disbursements and London weighting are in addition. The cap is the difference between the amount of fixed recoverable costs applicable on the date the claim settled and the amount that applied at the expiry of the relevant period of the defendant’s offer. The offer can be an offer made under the RTA or EL/PL Protocol or an offer made after the claim exited.

The claimant gets the amount applicable at the end of the relevant period; the defendant can recover costs up to the cap. The longer ago the offer was made, the higher that cap is likely to be. In many cases, it may be nil. The claim would have to have progressed to a later stage under Table 6B, 6C or 6D after the expiry of the offer’s relevant period in order for there to be any difference in the figures.

A claimant could therefore accept a defendant’s Part 36 offer after the expiry of its relevant period and as long as the case had not progressed to the next stage under the relevant Table, the costs allowed would be the same.

The rule incentivises defendants to make good Part 36 offers as soon as possible. No other type of offer will have these costs consequences.

CPR 36.20(4)(b) and (5)(b) and CPR 36.21(2)(b) and (3)(b) provide that the claimant is liable for the defendant’s costs after the expiry of the defendant’s offer’s relevant period. The inflexible wording – ‘is liable’ – means that there is an automatic right.

The rules leave some scope for argument about the cap on the defendant’s costs, but it is very narrow. CPR 36.20(12) and CPR 36.21(9) impose the limit on defendant’s costs where the court makes an order for the defendant’s costs. A defendant might argue that he should be allowed uncapped costs under the automatic right and it is only when the court makes an order that the cap will apply. A claimant might argue that the liability to pay the defendant’s costs should or could be reduced to an order, and once the court does that the cap will apply; and in expectation that the court will do that the cap should be applied in any event.

The rules make provision at CPR 36.20(11) for situations where the parties cannot agree the liability for costs. There might be a dispute about whether a particular defendant’s offer should have costs consequences. The court can then make an order. The rules do not specify how the matter should be brought before the court but affected parties have generally made an application on notice under Part 23.

Counterclaim costs under Section IIIA

CPR 45.29G deals with the costs of successful counterclaims by defendants. It applies only in RTA claims.

Where the counterclaim includes personal injury and it succeeds, the counterclaimant gets the same costs any other successful claimant would be allowed under Section IIIA. Where the counterclaim does not include personal injury, the counterclaimant gets the same fixed costs allowed on an interim application.

Interim applications under Section IIIA

Section IIIA sets fixed costs (not fixed recoverable costs, like the rest of the Section) for interim applications at CPR 45.29H.

Where the court makes an order for the costs of an interim application in favour of either party, the amount of costs will be half of the Type A and Type B costs from Table 6 in Part 45 if it is an RTA claim or Table 6A if it is an EL or PL claim. On present figures there is no difference; half the sum for both types is £250. VAT and disbursements under CPR 45.29I (likely only to be the court fee, but may include a telephone conference fee – although telephone conference fees are not listed as a recoverable disbursement so there may be some argument as set out in the disbursements section) are in addition, as is London weighting where appropriate.

Because Type B fixed costs are the advocate’s costs, it appears that half of the Type B costs should be allowed only where there is a hearing. Some interim applications will be dealt with on paper. The rule refers to the ‘applicable Type A and Type B costs in Table 6 or 6A’. It is arguable whether ‘applicable’ refers to the Types or the Tables of costs. It was read as Types in Davis v Asda Stores, a decision on appeal by HHJ Denyer in the County Court at Bristol. Thus an interim application dealt with on paper or by consent would attract fixed costs of £125 plus VAT and court fee (no other disbursements being likely), and London weighting if relevant.

The rule implies or expects that an interim application should involve half of the work of a Stage 3 hearing for a claim under the RTA or EL/PL Protocols. That may be true of a simple application, but some are more complicated and will not be based on precedents. The fixed costs may be very low compared to the work required and a party might consider carefully whether it is truly necessary to make the application.

Interim applications plainly include such things as applications to vary directions or extend time.

‘Interim’ in the CPR generally means ‘not final’; therefore an application for any remedy that is not final would arguably fall under the definition. Examples are applications for summary judgment or strike out. An application for an order that was ‘final’, for instance an order for the costs of the claim in principle (as opposed to an application to decide the amount of costs), would not fall within scope of CPR 45.29H. An application under CPR 36.20(11) may be an example. In such cases, it is arguable that no additional costs would be payable, as the work would fall within the limitation on costs in CPR 45.29B for RTA claims or CPR 45.29D for EL/PL claims.

A contentious point has been whether CPR 45.29H applies to applications made before proceedings have been started. There have been conflicting first instance decisions on whether an application for pre-action disclosure (‘PAD’) is captured. The district judges who have found that it does not held that PAD is not an interim application because ‘interim’ means between the issue of the claim form and the conclusion of the claim. They held that PAD was outside the scope of fixed costs and thus PAD costs were to be assessed on the standard basis. However, circuit judges on appeal have been unanimous in their conclusion that fixed costs do apply, albeit for slightly differing reasons: see HHJ Denyer in Davies v Asda Stores Ltd (County Court at Bristol, 9 June 2015, unreported), HHJ Saffman in Sharp v Leeds City Council (County Court at Leeds, 2 November 2015, unreported) and Her Honour Judge Belcher in Mills v Farmfoods; Salter v Muller (County Court at Leeds, 27 November 2015, unreported). At the time of writing, permission for a second appeal has been sought from the Court of Appeal in Sharp but it is too early to say whether the Court of Appeal will hear the point.

Difficulties with the Stages in Part B of the Tables

A dispute about the stages in Tables 6B, 6C and 6D is due to be heard by the Court of Appeal in October 2016. In Bird v Acorn Group, the dispute is whether the first stage or third stage under Part B of the relevant table applies to a claim which settled post issue, after a disposal hearing had been listed but before that disposal hearing took place.

The first stage’s definition appears satisfied: the claim settled post issue but before allocation.

It is also possible that the third stage’s definition is fulfilled as well: the claim settled post listing but before the trial. A trial is defined by Section IIIA as ‘the final contested hearing’. It is arguable that a disposal hearing would fulfil that definition; but it is also possible in certain circumstances it would not. For instance, it may be uncontested because the defendant, having failed to acknowledge or defend the claim, does not attend the hearing.

Thus the rules appear in conflict. Also, are the stages sequential? Does the claim have to be allocated before it can proceed to the next stage of fixed costs in Part B of the relevant Table?

Similar problems can arise when the courts roll into one the stages of allocation and listing by dealing with them both in the same order.

Hopefully the Court of Appeal will unravel those issues. It is unfortunate that the hearing is so far off, as the number of stayed claims could reach five figures by the time judgment is handed down.

Part 36 and post portal costs

Where a Part 36 offer is accepted and the claim has exited the relevant Protocol, CPR 36.20 sets out the costs consequences.

Parties may refer specifically to CPR 36.20 when making Part 36 offers by letter. But the rule appears to apply regardless of express mention. Although the standard Part 36 Offer form N232A refers to consequences under CPR 36.13 if the offer is accepted, CPR 36.13(1) is subject to CPR 36.20; and CPR 36.13(3) says costs will not be on the standard basis where fixed costs apply. Essentially, CPR 36.13 redirects to CPR 36.20 in Section IIIA cases, which then modifies or substitutes it.

CPR 36.20 deals with specific circumstances in which a Part 36 offer is accepted. CPR 36.20(1) states the rule applies ‘where a claim no longer continues under the RTA or EL/PL Protocol pursuant to rule 45.29A(1)’, and then the following subsections deal with costs consequences:

  1. where offer accepted within its relevant period;

  2. where offer for part of the claim is accepted and rest of claim abandoned;

  3. where defendant’s offer accepted after its relevant period;

  4. where the defendant’s Protocol offer is accepted after the claim has left the Protocol.

The remaining subsections clarify various points:

  1. where the defendant makes an offer before receiving a fixed price medical report;

  2. what is meant by fixed price medical report;

  3. what is meant by Protocol offer;

  4. what is meant by Court Proceedings Pack Form and business day;

  5. that fixed costs are calculated on the amount accepted;

  6. the court’s residual jurisdiction to make an order where the parties cannot agree the liability for costs;

  7. the cap on defendant’s costs;

  8. the parties’ right to disbursements.

CPR 36.20 does not deal with every scenario. For instance, if the claimant’s offer is accepted outside of its relevant period there is no special rule. There, resort might be made back to CPR 36.13(5) if the parties could not agree. There would seem to be no reason why post portal costs for the applicable stage at settlement would not apply; indemnity costs do not apply when a claimant’s offer is accepted outside of its relevant period: Fitzpatrick Contractors v Tyco Fire [2010] 2 Costs LR 115.

CPR 36.20 prescribes the costs entitlement in many scenarios. A deemed order is not created for fixed costs. CPR 44.9 creates deemed orders only for costs on the standard basis, and consistently with that it does not list CPR 36.20.

Part 36 and portal costs arguments

A grey area is whether arguments under CPR 45.24 are available to the defendant where a Part 36 offer is accepted. CPR 45.24 may still be available when the costs are quantified. Plainly CPR 36.20(11) envisages that there may be a dispute about the costs liability, because it confirms the court’s residual jurisdiction to make an order where there is a dispute. Further CPR 36.14(5)(b) confirms that the stay on acceptance of a Part 36 offer does not affect the power of the court ‘to deal with any question of costs (including interest on costs) relating to the proceedings’.

However, there is no express provision in CPR 36.20 allowing the court to ‘order otherwise’, unlike there is in CPR 38.6 which applies when proceedings are discontinued and under which a deemed order can arise.

A defendant might say that CPR 36.20 does not ride roughshod over CPR 45 Section IIIA. Part 36 sets general rules about costs consequences, which give way to conflicting specific rules targeted at the specific situation: c.f. Solomon v Cromwell [2012] 1 WLR 1048 at [21]. Part 36 sets general rules, and CPR 45.24 is a specific rule.

What do the rules say?

CPR 36.20(1) provides:

This rule applies where a claim no longer continues under the RTA or EL/PL Protocol pursuant to rule 45.29A(1).

CPR 45.29A(1) provides:

Subject to paragraph (3), this section applies where a claim is started under—

(a) the Pre-Action Protocol for Low Value Personal Injury Claims in Road Traffic Accidents ('the RTA Protocol'); or

(b) the Pre-Action Protocol for Low Value Personal Injury (Employers’ Liability and Public Liability) Claims ('the EL/PL Protocol'),

but no longer continues under the relevant Protocol or the Stage 3 Procedure in Practice Direction 8B.

CPR 45.29A(3) provides:

Nothing in this section shall prevent the court making an order under rule 45.24.

As CPR 45.29A(1) is subject to that qualification, it is logically arguable that so too is CPR 36.20(1). Therefore there is nothing to prevent the court limiting costs under CPR 45.24.

Likewise, and simply to show the balance between competing interests, there is nothing in CPR 36.20 expressly ousting CPR 45.29J, under which the claimant can argue for greater costs where appropriate by reason of exceptional circumstances.

While some first instance courts have accepted those arguments, some have not, and it remains a grey area.

Defendants wishing to argue CPR 45.24 points might avoid the uncertainty by not making Part 36 offers and making Calderbank offers instead, and only accepting a claimant’s Part 36 offer outside its relevant period.

Disbursements on Part 36 acceptance in Section IIIA claims

Disbursements, for the most part, are not fixed. Thus on Part 36 acceptance there would be a deemed order for detailed assessment of the disbursements on the standard basis under CPR 36.13(1) and (3). CPR 36.20(13) qualifies that by confirming the entitlement is only to disbursements listed in CPR 45.29I, as opposed to any and all disbursements. PD44 8.3 says the court will assess disbursements.

It might be argued that CPR 45.29I is the source of the entitlement rather than a restriction on the entitlement to disbursements, and CPR 36.13 is ousted. The problem then would be that there was no deemed order for the disbursements under CPR 44.9(1)(b) and no immediate way to get the assessment that PD44 8.3 says the court will make. It would require an application for an order. The interpretation in the last paragraph is therefore likely to be preferred.

Thus there may be a divergence in the way the disbursements and fixed costs are decided; see the section below regarding assessment of fixed costs.

Do indemnity costs apply where the claimant beats his own offer?

The interaction between CPR 36.17 and CPR 36.21 which apply when judgment is entered is clearer than the interaction between CPR 36.13 and CPR 36.20 when a Part 36 offer is accepted. CPR 36.21(1) specifically says that rule modifies CPR 36.17.

CPR 36.17(3) provides the defendant gets costs from the expiry of the relevant period of the defendant’s offer if it is not beaten by the claimant. CPR 36.21(2) modifies that so that the claimant gets costs as appropriate from Table 6B, 6C or 6D in Part 45 to the end of the relevant period, and the defendant gets costs after the relevant period, which are capped at the difference between the claimant’s fixed costs and the fixed costs applicable at the date of judgment. CPR 36.20(3) modifies that further for when the claimant does not beat the defendant’s Protocol offer; the claimant then gets only Stage 1 and Stage 2 portal costs.

Those are the only modifications to CPR 36.17. Thus, where the claimant beats his own offer, nothing in CPR 36.21 applies, and instead the claimant would be likely, at the court’s discretion as to whether it was unjust, to receive the package under CPR 36.17(4): interest on the damages at up to 10% above base rate, costs on the indemnity basis; interest on the costs at up to 10% above base rate; an additional amount of 10% or as capped against the damages.

However, there remains a grey area about the amount of costs. Even though there is an order for costs on the indemnity basis, the quantification of those costs may still fixed by Section IIIA. Section IIIA applies when a claim starts in the protocol and exits, and Part D of the relevant Table in the Section covers trials. Nothing in the Section excludes its application if there is an order for costs on the standard basis or the indemnity basis. It does seem that an order for assessment of costs excludes fixed costs (see the next section) but CPR 36.17 only deals with the basis of costs, and nothing in the CPR appears to make the standard or indemnity basis mutually exclusive with fixed costs. Any disbursements that were not fixed would be assessed on the indemnity basis, but perhaps the claimant still only gets fixed profit costs. In Dixon v Bennet (HHJ McKenna, County Court at Birmingham, 23 December 2015, unreported), the court observed that the rules in Section IIIA are plain and do not require interpretation: post portal costs remain applicable notwithstanding the order for indemnity costs. This issue is due to be heard by the Court of Appeal in Butler v Palmer at an expedited hearing in February 2016.

However, rather than encountering this interesting little conundrum, it may be better for a defendant to avoid going to trial and failing to beat the claimant’s offer.

Can there be an assessment of fixed costs?

The CPR appear to say that fixed costs should not be subject to detailed assessment. That leaves a puzzle: if the court is asked to decide the amount of fixed costs, what process should be followed?

In most cases fixed costs will be agreed so this is only an occasional problem. Fixed costs may not be agreed if for instance there is a Bird v Acorn Group dispute, an argument over what damages to include, or some other dispute about the calculation of fixed recoverable costs.

An assessment of fixed costs will not arise under the rules. There are no ‘deemed orders’ for fixed costs upon Part 36 acceptance, for instance, and an entitlement under CPR 36.20 is not a source of a right for detailed assessment for CPR 47.7. Thus Part 36 gives no ready way to commence detailed assessment for the fixed costs entitlement. The rules imply fixed costs should simply be allowed in the appropriate sum without an assessment, indicating that the process of ascertaining the amount of fixed costs is not an assessment.

The only way an assessment of fixed costs will arise is if the court orders it, either by consent or at a hearing in Part 7 proceedings, or on request in costs-only proceedings. Many courts and parties may not appreciate such an order is against the intention of the CPR.

Nevertheless, detailed assessment of fixed costs disputes has proved entirely satisfactory to parties on both sides for many years, so any contrary intention in the CPR has been slow to catch on. Some of the best known fixed costs cases have come before the court by detailed assessment.

CPR 44.6 is the main rule here:

(1) Where the court orders a party to pay costs to another party (other than fixed costs) it may either –

(a) make a summary assessment of the costs; or

(b) order detailed assessment of the costs by a costs officer,

unless any rule, practice direction or other enactment provides otherwise.

(2) A party may recover the fixed costs specified in Part 45 in accordance with that Part.

Its practice direction at PD44 expands:

8.1 …where the court does not order fixed costs (or no fixed costs are provided for) the amount of costs payable will be assessed by the court…

8.2 An order for costs will be treated as an order for the amount of costs to be decided by a detailed assessment unless the order otherwise provides.

8.3 Where a party is entitled to costs some of which are fixed costs and some of which are not, the court will assess those costs which are not fixed. For example, the court will assess the disbursements payable in accordance with rules 45.12 or 45.19. The decision whether such assessment should be summary or detailed will be made in accordance with paragraphs 9.1 to 9.10 of this Practice Direction.

As not all disbursements are fixed, it is obvious there are some circumstances in which an assessment of disbursements will be required. PD44 8.3 codifies what Simon J said in Nizami v Butt [2006] 1 WLR 3307 at [25]: ‘I have rejected the argument that there is an anomaly in that CPR 45.10 requires a different approach. The reason why the costs under CPR 45.10 call for a different approach is that there are no fixed figures for disbursements.’

Note that it appears to be fixed costs and assessment that are mutually exclusive, not fixed costs and the standard basis or indemnity basis.

The underlying presumption of these provisions is that fixed costs are fixed, and are not capable of dispute. Experience tells us otherwise. All sorts of quantification disputes can arise. For instance: disputes whether certain damages should be included for calculating fixed recoverable costs; which stage under the tables in Section IIIA apply; whether there has been an unreasonable exit from the RTA or EL/PL Protocols.

If not an assessment, what? For pre-issue settlements, the costs-only procedure provides at CPR 46.14(5):

In proceedings to which this rule applies the court may make an order for the payment of costs the amount of which is to be determined by assessment and/or, where appropriate, for the payment of fixed costs.

PD44 9.4 unhelpfully then refers to only one fixed costs scheme:

Unless the court orders otherwise or Section II of Part 45 applies the costs will be treated as being claimed on the standard basis.

The provision is probably as it is because it takes its lead from the pre April 2013 wording of the costs-only procedure and the decision in Solomon v Cromwell [2012] 1 WLR 1048. Without a specific namecheck, one would expect that Sections III and IIIA would lead to the court ‘ordering otherwise’.

The procedure that might be adopted is hinted by paragraph 9.6:

A costs judge or a district judge has jurisdiction to hear and decide any issue which may arise in a claim issued under this rule irrespective of the amount of the costs claimed or of the value of the claim to which the agreement to pay costs relates.

Thus the court may convene a hearing to decide the fixed costs issue. Then, if needed, any disbursements could be summarily assessed or made subject to a detailed assessment under paragraph 9.9.

However, in practice, that rarely happens. Very rarely, if the fixed costs appear undisputed and are claimed (usually they are not claimed if they have been agreed and paid already), the court will make an order for the payment of fixed costs on the papers; but otherwise an order for detailed assessment will be made. That appears to suit most parties. The dispute then typically goes to provisional assessment, which might be preferred to short notice of a short Part 8 hearing, perhaps in a distant court.

Where proceedings have already been started and a settlement is reached, bearing in mind that there are no rules creating deemed orders for fixed costs where Part 36 offers are accepted, the alternative procedure might be a general application under Part 23. If an application is made, there is then scope for argument as to whether it is an interim application (and potentially subject to fixed costs if the claim has exited the RTA or EL/PL Protocols) or a final application (potentially attracting no further profit costs, depending on the nature of the order sought). An application for an order for costs in principle is logically and more likely to be an application for a final order. PD44 4.2’s table uses term ‘final costs order’ to refer to the order at the end of the claim, but PD52A 3.6 and 3.7 do not expressly confirm that an order for costs is ‘final’. (All that is certain is that a detailed or summary assessment of costs does not result in a final order: The Access to Justice Act 1999 (Destination of Appeals) Order 2000, art. 1(2)(c) and PD52A 3.8(2).)

Where there is a Part 36 acceptance some provisions point in the direction of an application to resolve disputes about the costs, but they are not entirely clear. CPR 36.14(4)(b) confirms the court’s jurisdiction. Where a Part 36 offer is accepted in a claim that has exited the RTA or EL/PL Protocol, CPR 36.20(11) provides: ‘Where the parties do not agree the liability for costs, the court must make an order as to costs.’ It depends how far that rule will stretch. It adapts CPR 36.13(4) which is concerned only with costs in principle, the ‘liability’ for costs, not their quantification by assessment. If ‘liability’ here could also mean not only who pays fixed costs but also how much, then it means parties will need to apply to the court for fixed costs.

If there is no Part 36 acceptance or a different fixed costs scheme applies and the parties cannot agree an order for fixed costs, then again an application may be needed.

The difficulty is that the rules say nothing about the court’s approach to such an application. Presumably the applicant would seek an order for an amount of fixed costs and advance his argument as to why that was the correct amount, and the respondent would reply with an alternative sum and reasons. But it is all rather uncertain and less attractive to parties that the familiar detailed assessment procedure which is, after all, designed for the resolution of costs disputes. Parties might choose to apply for an order for assessment, perhaps by consent.

One unattractive risk of detailed assessment of fixed costs for paying parties would be the possibility of failing to beat a receiving party’s Part 36 offer for fixed costs, and having to pay 10% extra. There wouldn’t be Part 36 costs offers if the assessment procedure was not used and the costs were instead resolved at an application hearing.

Another possible problem is the divergent approach required for disbursements. The receiving party may have accrued a right to detailed assessment of disbursements; so he might commence detailed assessment for disbursements if they are in dispute but may need also to make a separate application to resolve a dispute about fixed costs. Fixed costs disputes often get drawn into a detailed assessment that way, because it is easier to deal with everything in one place.

This is a free sample chapter from 'A Practical Guide to Costs in Personal Injury Cases' by Matthew Hoe, please click here for more information or to order the book.

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