Part 36 beats fixed costs

When are fixed costs not fixed? 

When the claimant is successful at trial with their Part 36 offer, that’s when.  A claim that drops out of the portal is subject to fixed recoverable costs and so the claimant’s solicitor can only recover a fixed fee for the work done.  But what happens if a claimant makes a Part 36 offer that the defendant does not beat at trial?  Do they get costs on an hourly rate on an indemnity basis under Part 36 or fixed recoverable costs under part 45?

This is the question that the Court of Appeal dealt with in Broadhurst v Tan last week.  Their answer was that the claimant should recover costs on an hourly rate under Part 36 and be freed from the restriction of the fixed fees of Part 45.

What does this mean for defendants? 

We may see an increase in the number of early claimant Part 36 offers made.  They will be more realistic than they have historically been in the hope that the defendant rejects it and they beat the offer at trial.  We may see the return to the over optimistic tactical offers from the claimant such as offers to accept 99% for liability.  While the courts are unlikely to look favourably on such tactics, can they reject it on the grounds that it is a purely tactical move to avoid the fixed cost regime? What happens if the offer is to accept 95% for liability - would that be viewed as a genuine concession?  If not where is that line to be drawn? 

Defendants will need to consider claimant Part 36 offers carefully and where they are reasonable, accept them at the earliest opportunity.  Time will tell if claimant lawyers see this as an opportunity to avoid fixed recoverable costs and how much help the courts are willing to give them in doing so.

Read the full judgment