So much for the “old law” on how the court will approach the vexed question of whether a case pleaded at in excess of £10,000 but which settles for £5000, should resulting in limiting the claimant’s costs to Small Claims track costs. What is the position under the “new law” which applies post October 2023, when the costs of cases issued but settled before allocation and assignment take place, fall to be considered?
On the supposition that the case settles by way of a part 36 offer the relevant rule provides:
36.23.—(1) Where a Part 36 offer is accepted within the relevant period, the claimant is entitled to—
(a)the fixed costs in Table 12, Table 14 or Table 15 in Practice Direction 45 for the stage applicable at the date on which notice of acceptance was served on the offeror; and
(b)any applicable additional fixed costs allowed under Section I, Section VI, Section VII or Section VIII of Part 45 incurred in any period for which costs are payable to them.
Interestingly the rule attempts to head off allocation and assignment arguments by stating:
(6) Fixed costs shall be calculated by reference to the amount of the offer which is accepted.
And in relation to disbursements:
(10) The parties are entitled to disbursements allowed in accordance with Section IX of Part 45 incurred in any period for which costs are payable to them.
There is an oddity in the way that the rules will be applied. Suppose a case is worth, realistically £5000, although arguably worth up to £30,000. If the claimant accepts a settlement prior to the issue of proceedings of £5000, the costs consequences will be as follows:
|
(1) Where damages are not more than £5,000 |
£ Nil |
The greater of £681 or £124 + an amount equivalent to 20% of the damages |
£1,136 + an amount equivalent to 17.5% of the damages |
In each case— £2,684 + an amount equivalent to 15% of the damages + £526 per extra defendant |
|
The four columns represent the four complexity bands to which a case might be assigned: and the question of where it might be assigned, can be very much a matter for argument. If the case settles after the issue of proceedings, but before allocation, the case will attract a different table of fees:
|
(1) On or after the date that the court issues the claim, but before the date that the court allocates the claim under Part 26 |
£2,168 |
£1,445 + an amount equivalent to 20% of the damages |
£3,303 + an amount equivalent to 20% of the damages |
£3,097 + an amount equivalent to 40% of the damages + £785 per extra defendant |
|
The rules might thefore be thought to incentivise the issue of proceedings: as even a lowly £5000 Fast Track settlement in a case that only merits assignment to band 1, moves from a non costs bearing position to a costs bearing one simply by virtue of the issue of proceedings.
Of course, there will be many other arguments.
If a claim for rescission is made, is that a claim which takes a £30,000 claim out of the intermediate track, as that is a distinct remedy rather than a claim for debt or damages?
What bands should any given Fast Track or Intermediate Track case be assigned to?
What happens, when a defendant’s part 36 offer is accepted late, so that a liability to pay the defendant’s costs arises?
Is it open to a defendant to argue that a claims has been issued prematurely, and that the court should exercise a discretionary power to discount the claimant’s costs? and if so under what rule? in part 45 CPR or the conduct provisions under part 44 CPR?
And rule 46.13(3) survives in the new rules, raising the interesting point that a case that is pleaded at £100,000 plus and settles for £5000, might be more easily argued to be a small claim, than a case pleaded more modestly which might attract an award of Fast Track fixed costs.
Moreover, what about those cases, where much work has been done in the period prior to October 2023 which settle by way of part 36 now, so that there is a settlement without the issue of proceedings? Are they caught by the new rules at all?
The questions lead to further questions. So far there has been precious little litigation on the scope and application of the fixed costs rules, but the day is surely coming, when the arguments will be made.