Conduct, fixed costs and part 44 CPR

There is  an established cottage industry in respect of costs arguments which arise from the operation of various Protocols applicable to low value personal injury claims and those claims which are withdrawn from the Portal, or perhaps are never submitted  and what costs may be recoverable, should substantive proceedings follow. Very few cases however go to appeal.

A point which arises with some frequency, is when a party does not comply with the relevant Protocol and issues proceedings using the part 7 procedure and seeks an award of standard basis costs, when the case settles without a trial. How does the paying party then seek to argue that the court should take into account the unreasonable failure to follow the protocol?

A variation on the theme occurs when the receiving party does not utilise a relevant Protocol at all, perhaps contending that it was reasonably believed that the value of the claim exceeded £25,000. When a case settles for less than £25,000 is it then open for a paying party to dispute the entitlement to standard basis costs that might arise under a part 36 compromise?

In the latter case even if it is plain as a pikestaff that the case would have fallen out of the MOJ Portal in any event, due to eg a dispute over liability, the paying party may yet gain value from the argument: if the case should have been commenced on the Portal but was not and then settles without being allocated to the Multi-track there will be an argument that the receiving party should be limited to the fixed costs entitlement in part 45 CPR.

In the case of Williams v Secretary of State for Business etc [2018] EWCA Civ 852 the court considered the appropriate approach to costs when a claimant unreasonably failed to follow a Pre-action Protocol which allowed for the recovery of fixed costs and disbursements only where the claim was settled before the commencement of proceedings.

The case was an NIHL claim. There was an issue as to whether it was properly a case where multiple defendants could be pursued:

13. Subsequently, on 19 January 2015, the claimant’s solicitors confirmed to them that a claim was not pursued against British Tissues. Thereafter on 13 February, the defendant’s solicitors took the point that, because there was no reasonable prospect of British Tissues being a defendant and/or that there was no reasonable prospect of the claimant successfully pursuing a claim against British Tissues, the relevant exception to the EL/PL Protocol (that it did not apply to a claim where there was more than one employer defendant) was not triggered and that, in consequence, the defendant was only liable for the fixed costs that would have been payable under the EL/PL Protocol.

The Court of Appeal concluded:

37. The Part 36 regime is a self-contained procedural code for the making of and acceptance of settlement offers. In the present case, the offer was made in accordance with Part 36. It was accepted in accordance with Part 36, so CPR Part 36.13(1) and 36.13(3) applied. The EL/PL Protocol had not been used at any time, so Part 36.20 did not apply, and would not have applied anyway because r.45.29A(1) (to which it refers) did not apply to disease claims. Therefore, as Judge Godsmark QC found, the starting point under Part 36 was that the claimant was prima facie entitled to its costs assessed in accordance with the usual rules (i.e. not by reference to fixed costs).

38. The Judge indicated that, if the defendant had wanted to limit its Part 36 offer to fixed costs, because of the argument about the viability of the claim against British Tissues, then it could have said so expressly in their offer letters. Of course, there may then have been arguments as to whether, in those circumstances, it was a Part 36 offer at all: that qualification may have made it a Calderbank letter instead. It might also have meant that the offer was less likely to be accepted. But certainty is impossible where there are arguments about whether or not the Protocol was not reasonably followed, and such a letter would at least have made the point openly at the relevant time, rather than it arising after the claim had been settled. As the Judge said, it would have provided some costs protection to the defendant.

39. Rule 45.24 does cover the position if a claim should have been brought under the EL/PL Protocol but was not. It cannot therefore be said that this was an eventuality that the CPR ignored. On the contrary, r.45.24 is a detailed provision dealing with the costs consequences where the claim was either not made or not continued under the EL/PL Protocol.

40. However, as Judge Godsmark QC found, r.45.24 does not apply to the facts of the present case. There have been no Part 7 proceedings. There has been no judgment. Although Mr Hutton QC sought to argue that in some way the requirement for Part 7 proceedings and a final judgment were simply examples of when the court could exercise its discretion under r.45.24, I am unable to accept that submission. It is clear that r.45.24 is dealing with specific circumstances where the court may exercise its discretion to order the payment of no more than fixed costs. Those circumstances (where there are Part 7 proceedings and a judgment) are not examples, but pre-conditions which have to exist before the rule can be applied.

41. Moreover, it is unsurprising that r.45.24 assumes the existence of proceedings and a judgment. It is part of a wider scheme. With the exception of r.45.23A (which was itself a later addition to fill a perceived gap in the Rules), all of Section III of Part 45, starting at r.45.16 and including r.45.24, applies where proceedings have been commenced and been pursued to judgment. That in turn is consistent with the principal function of the CPR: to govern the conduct of proceedings once they have commenced.

However the court went onto consider how part 44CPR ran in parallel to and did not displace rule 45.24:

52. These provisions contain numerous ways in which a party whose conduct has been unreasonable can be penalised in costs (what I shall call “the Part 44 conduct provisions”). In my view, the Part 44 conduct provisions provide a complete answer to a case like this. They provide ample scope for a District Judge or a Costs Judge, when assessing the costs in a claim which was unreasonably made outside the EL/PL Protocol, to allow only the fixed costs set out in the EL/PL Protocol.

53. Mr Carter sought to argue that it was somehow inherent in r.45.24 that Part 44 would not apply at all in cases like this. He argued that, if the same result could be achieved by way of Part 44, then r.45.24 was otiose.

54. I do not accept those submissions. Since r.45.24 does not apply to this case, its existence cannot be relied on as excluding rules which, on their face, do apply. Moreover, r.45.24 would not necessarily be rendered otiose by the provisions of Part 44: it would always depend on the facts. In any event, a situation where, depending on the circumstances, the CPR may provide more than one route to the same result, is hardly uncommon.

55. More widely, Part 44 provides important general rules about costs and the sorts of matters which, in the exercise of its discretion, a court may wish to take into account when assessing costs. For Part 44 to be disapplied (in whole or in part), as Mr Carter urges, there would have to be clear words setting out the nature and scope of any such disapplication. There are none here. Accordingly, I consider that Part 44 applies to this case. The unreasonable failure by the claimant to follow the EL/PL Protocol, as found by the DDJ, triggers the Part 44 conduct provisions.

56. In my view, it is at this point that paragraphs 2.1, 3.1 and the warning at 7.59 of the EL/PL Protocol, become relevant. Taken together, those paragraphs comprise a clear indication that, if a claim should have been started under the Protocol but was not, and it was unreasonable that the claim was not so started, then by the operation of the Part 44 conduct provisions, the claimant should be limited to the fixed costs that would have been recoverable under the EL/PL Protocol.

Coulson LJ then referred to the case of O’Beirne which I fondly remember arguing before the circuit judge on the first appeal:

57. I consider that support for this approach can be found in O’Beirne v Hudson [2010] EWCA Civ 52; [2010] 1 WLR 1717. In that case, there was a claim for general damages just above the small claims track limit of £1,000 and the claim settled for £400. The judge said that there was nothing in the consent order which precluded the costs being assessed by reference to the small claims track. The Court of Appeal agreed, holding that, even where a consent order provided for costs to be assessed on a standard basis, Part 44 meant that the assessment of costs could proceed on the basis that, in respect of each item, the costs judge asked whether it was reasonable for the paying party to pay more than would have been payable had the case been allocated to the small claims track.

58. Mr Hutton QC sought to distinguish this case on the basis that there was no unreasonable avoidance of a Protocol. In my view, whilst that might a difference on the facts, it does not affect the applicability of Part 44 to any case where the payee might otherwise recover more than is reasonable in all the circumstances. Indeed, in another case relied on by the defendant (Javed v British Telecommunications PLC [2015] EWHC 90212 (Costs)), where the claimant had failed to follow a Protocol, Master Simons, Costs Judge, again approached the assessment under Part 44 and found at paragraph 42 that “had the claimant acted reasonably then her solicitors would not have been entitled to recover any more than fixed recoverable costs and it seems to me that it would create injustice if they were to profit as a result of their unreasonable conduct”.

59. In both O’Beirne and Javed, the assessment was to be undertaken by reference to what is now Part 44.4 (which, at the time of both those cases, was Part 44.5), namely by having regard to all the circumstances of the case, including conduct. It seems to me that, in a case where a claim was not reasonably made under a Protocol, Part 44.11 (Misconduct) is of equal, if not more, importance. It will very often be because of misconduct on the part of the claimant or the claimant’s legal representatives that a claim was made which unreasonably avoided the relevant Protocol altogether. In addition, I note that, whilst O’Beirne favoured an item by item approach to the assessment, Master Simons in Javed said that that was unnecessary in these sorts of circumstances. For my own part, I prefer the approach of Master Simons. If the judge has concluded that, as a result of unreasonable conduct, the relevant fixed costs represent the maximum recovery, then an item by item approach is unnecessary.

60. Mr Hutton QC accepted that Part 44 provides a mechanism which achieves the result he seeks. His principal complaint was that it was a less certain remedy than the automatic application of the fixed costs regime. I have already said that that criticism is unrealistic: any dispute about whether or not the EL/PL Protocol should have been used, and whether its non-use was unreasonable, will inevitably introduce a level of uncertainty which cannot be cured by the CPR, at least until that dispute has been resolved.

61. For these reasons, I consider that Part 44 provides a complete answer to the issues raised on this appeal. In a case not covered by r.45.24, such as this one, a defendant can rely on the Part 44 conduct provisions to argue that only the EL/PL Protocol fixed costs should apply.

It follows that where an attempt is made to “game” the Protocol to avoid fixed costs consequences, rule 45.24 CPR will be largely irrelevant given that most cases settle and do not go to judgment: but it doesn’t matter because of the broad merits based approach which can be taken to conduct under part 44 CPR.

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