Contracting Out of the Fixed Costs Regime - Nicholas Dobbs, Temple Garden Chambers

13/07/22. In Doyle v M & D Foundations Building Services Ltd [2022] EWCA CIV 927, [1] the Respondent was injured whilst working on a construction site in the course of his employment by the appellant. His claim fell within the scope of the Pre-Action Protocol for Low Value Personal Injury (Employers’ Liability and Public Liability) Claims (‘the Protocol’). Liability was disputed with the result that the Protocol ceased to apply to the claim. Proceedings were commenced and the case allocated to the fast track.

The parties subsequently engaged in without prejudice negotiations to compromise the claim, which resulted in a draft order being prepared. As a result, by a consent order (‘the Order’) signed by both parties, the Appellant was ordered to pay the Respondent damages in respect of an injury he had suffered during the course of his employment. The Order further provided that the Appellant was to pay the Respondent’s costs, “such costs to be the subject of detailed assessment if not agreed”.

The Respondent subsequently lodged a bill of costs for detailed assessment on the standard basis, citing the terms of the Order. The Appellant disputed that approach and put the interpretation of the consent order in issue. The Appellant contended that, as an ex-protocol low-value personal injury claim, the case fell within the fixed recoverable costs regime set out in section IIIA of CPR Part 45 and that the reference to ‘detailed assessment’, interpreted in that context, referred to the process of determining the amount of such fixed costs and disbursements.

The CPR does not make specific provision for the parties to contract out of the fixed costs regime, but it is recognised that there is no bar on them doing so.[2] In the present case, where the Order was by consent, there was no judgment to assist in interpreting it. The immediate context of the Order was that it embodied an agreement between the parties. Accordingly, as the central question was whether the parties had contracted out of the fixed costs regime, the real question was the true interpretation of the parties’ agreement:

[44] In my judgment, and contrary to the appellant’s contention, there is no ambiguity whatsoever as to the natural and ordinary meaning of “subject to detailed assessment” in an agreement or order as to costs. The phrase is a technical term, the meaning and effect of which is expressly and extensively set out in the rules. It plainly denotes that the costs are to be assessed by the procedure in Part 47 on the standard basis (unless the agreement or order goes on to provide for the assessment to be on the indemnity basis). The phrase cannot be read as providing for an “assessment” of fixed costs pursuant to the provisions of Part 45 unless the context leads to the conclusion that the wrong terminology has been used (by the parties or by the Court) so that the phrase should be interpreted otherwise than according to its ordinary meaning.

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46. The clear distinction between assessed costs and fixed costs to be found in the rules (as set out above) was recognised in Broadhurst, Lord Dyson MR describing them at [30] as “conceptually different”, a difference also recognised by Moore-Bick LJ in Solomon at [19]. Moore-Bick LJ went on, in the same paragraph, to state that the fixed costs regime does involve an assessment of some kind (particularly in relation to disbursements), but not one that is properly regarded as an assessment on the standard basis.

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[48] Notwithstanding the agreement between the parties in Adelekun (which I consider to have been mistaken, for the reasons set out above), Newey LJ took the view, in [31], that the reference in the offer letter under consideration in that case to detailed assessment of the costs “was far from ideal if the appellant intended the fixed costs regime to apply”, but accepted that the reference was “not wholly inapposite” as an assessment of some kind was necessary. For that reason Newey LJ did not consider that the use of the term detailed assessment “should be taken to imply an intention to displace the fixed costs regime where there are other indications that that was not intended”. I read that analysis as recognising that the term “detailed assessment” does not naturally or ordinarily include an assessment of fixed costs (hence the term was “not ideal”), but also recognising that that meaning might permissibly be overridden where it was clear that the fixed cost regime was applicable under the rules and was not intended to be disapplied. The circumstances arising in Adelekun, which resulted in such a finding in that case, are discussed in the next section.

The court went on to determine whether, judged objectively, that meaning was truly intended by the parties in the present case, including whether they had used the wrong words. The Order was agreed in the course of inter-solicitor correspondence in which a Part 36 offer was expressly rejected, and a counter-offer (not pursuant to Part 36) was accepted. In so doing, they must be taken to have been aware that the fixed costs regime can be disapplied by agreement and that an order providing for detailed assessment (without more) entails an assessment on the standard basis per CPR 44.3(4)(a):

… In those circumstances it is difficult to see any basis on which the use of the term “detailed assessment” could bear anything other than its natural and ordinary meaning as discussed above. No matter how strictly enforced the fixed costs regime may be in cases to which it properly applies, and no matter how unlikely it was that the respondent would have been able to escape that regime had the matter proceeded, the parties reached a compromise of the dispute on the basis of a provision as to costs which, on its face, would take the case out of the fixed costs regime and entail assessment on the standard basis. There is no objective reason to believe that the solicitors did not intend the term to bear its natural, ordinary (and in my judgment, obvious) meaning, not least because it would be impermissible (and to no avail) to speculate as to the parties’ respective legal or commercial motivations for reaching a settlement on the terms they did. Indeed, the appellant has not suggested that the use of the term “detailed assessment” was a mistake or otherwise did not reflect the parties’ agreement.