I have very fond memories of part 45: right from the start of the introduction of fixed recoverable costs, it has proved a bone of contention and a fruitful source of satellite litigation. I am therefore unsurprised to note that the modern post 2013 incarnation is continuing to create problems.
The principal problem at the moment, concerns the relationship between part 36 and the fixed costs for claims which fall out of the various Portals, and which are prescribed by part 45.
If a claimant succeeds in beating his own part 36 offer at trial, is he still limited to the fixed costs prescribed by the rules, or does he receive indemnity costs, calculated and summarily assessed on the familiar hourly rate basis?
There is an intriguing ambiguity in the rules.
Rule 36.17 provides as follows:-
(1) Subject to rule 36.21, this rule applies where upon judgment being entered—
(a) a claimant fails to obtain a judgment more advantageous than a defendant’s Part 36 offer; or
(b) judgment against the defendant is at least as advantageous to the claimant as the proposals contained in a claimant’s Part 36 offer.
(Rule 36.21 makes provision for the costs consequences following judgment in certain personal injury claims where the claim no longer proceeds under the RTA or EL/PL Protocol.)
(2) For the purposes of paragraph (1), in relation to any money claim or money element of a claim, “more advantageous” means better in money terms by any amount, however small, and “at least as advantageous” shall be construed accordingly.
(3) Subject to paragraphs (7) and (8), where paragraph (1)(a) applies, the court must, unless it considers it unjust to do so, order that the defendant is entitled to—
(a) costs (including any recoverable pre-action costs) from the date on which the relevant period expired; and
(b) interest on those costs.
(4) Subject to paragraph (7), where paragraph (1)(b) applies, the court must, unless it considers it unjust to do so, order that the claimant is entitled to—
(a) interest on the whole or part of any sum of money (excluding interest) awarded, at a rate not exceeding 10% above base rate for some or all of the period starting with the date on which the relevant period expired;
(b) costs (including any recoverable pre-action costs) on the indemnity basis from the date on which the relevant period expired;
(c) interest on those costs at a rate not exceeding 10% above base rate; and
(d) provided that the case has been decided and there has not been a previous order under this sub-paragraph, an additional amount, which shall not exceed £75,000, calculated by applying the prescribed percentage set out below to an amount which is—
(i) the sum awarded to the claimant by the court; or
(ii) where there is no monetary award, the sum awarded to the claimant by the court in respect of costs—
| Amount awarded by the court | Prescribed percentage |
|---|---|
| Up to £500,000 | 10% of the amount awarded |
| Above £500,000 | 10% of the first £500,000 and (subject to the limit of £75,000) 5% of any amount above that figure. |
(5) In considering whether it would be unjust to make the orders referred to in paragraphs (3) and (4), the court must take into account all the circumstances of the case including—
(a) the terms of any Part 36 offer;
(b) the stage in the proceedings when any Part 36 offer was made, including in particular how long before the trial started the offer was made;
(c) the information available to the parties at the time when the Part 36 offer was made;
(d) the conduct of the parties with regard to the giving of or refusal to give information for the purposes of enabling the offer to be made or evaluated; and
(e) whether the offer was a genuine attempt to settle the proceedings.
(6) Where the court awards interest under this rule and also awards interest on the same sum and for the same period under any other power, the total rate of interest must not exceed 10% above base rate.
(7) Paragraphs (3) and (4) do not apply to a Part 36 offer—
(a) which has been withdrawn;
(b) which has been changed so that its terms are less advantageous to the offeree where the offeree has beaten the less advantageous offer;
(c) made less than 21 days before trial, unless the court has abridged the relevant period.
(8) Paragraph (3) does not apply to a soft tissue injury claim to which rule 36.21 applies.
(Rule 44.2 requires the court to consider an offer to settle that does not have the costs consequences set out in this Section in deciding what order to make about costs.)
Rule 36.21 which must be read in conjunction with rule 36.17 reads:
(1) Where a claim no longer continues under the RTA or EL/PL Protocol pursuant to rule 45.29A(1), rule 36.17 applies with the following modifications.
(2) Subject to paragraphs (3), (4) and (5), where an order for costs is made pursuant to rule 36.17(3)—
(a) the claimant will be entitled to the fixed costs in Table 6B, 6C or 6D in Section IIIA of Part 45 for the stage applicable at the date on which the relevant period expired; and
(b) the claimant will be liable for the defendant’s costs from the date on which the relevant period expired to the date of judgment.
(3) Subject to paragraphs (4) and (5), where the claimant fails to obtain a judgment more advantageous than the defendant’s Protocol offer—
(a) the claimant will be entitled to the applicable Stage 1 and Stage 2 fixed costs in Table 6 or 6A in Section III of Part 45; and
(b) the claimant will be liable for the defendant’s costs from the date on which the Protocol offer is deemed to be made to the date of judgment; and
(c) in this rule, the amount of the judgment is less than the Protocol offer where the judgment is less than the offer once deductible amounts identified in the judgment are deducted.
(“Deductible amount” is defined in rule 36.22(1)(d).)
(4) In a soft tissue injury claim, if the defendant makes a Part 36 offer or Protocol offer before the defendant receives a fixed cost medical report, paragraphs (2) and (3) will only have effect in respect of costs incurred by either party more than 21 days after the defendant received the report.
(5) In this rule “fixed cost medical report” and “soft tissue injury claim” have the same meaning as in paragraph 1.1(10A) and (16A) respectively of the RTA Protocol.
(6) For the purposes of this rule a defendant’s Protocol offer is either—
(a) defined in accordance with rules 36.25 and 36.26; or
(b) if the claim leaves the Protocol before the Court Proceedings Pack Form is sent to the defendant—
(i) the last offer made by the defendant before the claim leaves the Protocol; and
(ii) deemed to be made on the first business day after the claim leaves the Protocol.
(7) A reference to—
(a) the “Court Proceedings Pack Form” is a reference to the form used in the Protocol; and
(b) “business day” is a reference to a business day as defined in rule 6.2.
(8) Fixed costs must be calculated by reference to the amount which is awarded.
(9) Where the court makes an order for costs in favour of the defendant—
(a) the court must have regard to; and
(b) the amount of costs ordered shall not exceed,
the fixed costs in Table 6B, 6C or 6D in Section IIIA of Part 45 applicable at the date of judgment, less the fixed costs to which the claimant is entitled under paragraph (2) or (3).
(10) The parties are entitled to disbursements allowed in accordance with rule 45.29I incurred in any period for which costs are payable to them.
So far so straightforward: it would seem to suggest that where a case has fallen out of the Protocol, that indemnity costs will apply, unless the court deems it unjust that they do so.
However, if one turns to the latter rules of part 36, one notes that curiously, if a claimant beats his offer at a stage 3 hearing, that he does not get indemnity costs but only fixed, costs, per rule 36.29:
(1) This rule applies where, on any determination by the court, the claimant obtains judgment against the defendant for an amount of damages that is—
(a) less than or equal to the amount of the defendant’s Protocol offer;
(b) more than the defendant’s Protocol offer but less than the claimant’s Protocol offer; or
(c) equal to or more than the claimant’s Protocol offer.
(2) Where paragraph (1)(a) applies, the court must order the claimant to pay—
(a) the fixed costs in rule 45.26; and
(b) interest on those fixed costs from the first business day after the deemed date of the Protocol offer under rule 36.26.
(3) Where paragraph (1)(b) applies, the court must order the defendant to pay the fixed costs in rule 45.20.
(4) Where paragraph (1)(c) applies, the court must order the defendant to pay—
(a) interest on the whole of the damages awarded at a rate not exceeding 10% above base rate for some or all of the period starting with the date specified in rule 36.26;
(b) the fixed costs in rule 45.20;
(c) interest on those fixed costs at a rate not exceeding 10% above base rate; and
(d) an additional amount calculated in accordance with rule 36.17(4)(d).
Yet, section II of part 36 is plainly only applicable to cases which conclude within the Protocol, as otherwise rules 36.17 and 36.21 could have no utility.
This would seem to suggest that there are two classes of part 36 offer: part 36 offers properly so called and Protocol offers, and the question of which applies to a case will hinge on the chances of it leaving the Protocol.
It follows that part 36 has a powerful incentive built into it: if a claimant can correctly pitch a part 36 offer prior to trial, then he will succeed in recovering indemnity costs: at least from the point 21 days after the offer is made.
This in turn raises the interesting question of how an entitlement to fixed costs to that point can be married up, with summarily assessed indemnity costs in the period up to trial.
Paying parties will doubtless point to the primacy of the restrictions in part 45 which might be thought to trump part 36 and argue this should have the effect of restricting costs to fixed costs in any event, but even those rules have an escape route based on exceptionality.
Other problems exist under part 45: for example where an action is brought by three jointly represented claimants eg: three passengers in the same vehicle. If their claims conclude at trial, do they get three lots of fixed costs as they would have under the former part 45 or only one set?
In practical terms on the Fast Track, calculating part 36 offers on litigated cases have now taken on an even greater imperative.