Parsa v (1) DS Smith Plc and (2) QBE Insurance Europe Ltd, Birmingham County Court (8/9/2017) 

The facts

The claimant sought assessed or indemnity costs arising from the defendant’s late acceptance of their Part 36 offer. The claim was in respect of a low value road traffic accident that was governed by the fixed costs regime. The claim had originally proceeded under the pre-action protocol for low value personal injury claims but exited the portal when the defendant denied liability.

The relevant (21 day) period for acceptance of the claimant’s offer expired on 8 December 2016. On 27 January 2017, the defendant’s solicitor indicated that he had advised the defendant to settle but the Part 36 offer was not accepted until 31 March 2017.

The court was required to determine:

  1. Whether the defendant’s conduct justified an award of indemnity costs;

  2. Whether there were exceptional circumstances for the purposes of CPR, r. 45.29J allowing costs in excess of fixed costs;

  3. Whether CPR, r. 44.2 gave the court discretion to override the fixed costs regime to allow an award of indemnity costs in relation to a party’s conduct;

  4. Whether the assumption under CPR, r. 36.13 for assessed costs (standard or indemnity basis) for late acceptance of a Part 36 offer was modified by the portal specific provision under CPR, r. 36.20.

The decision

In respect of question 1, it was held that the defendant’s conduct was outside the “norm” and justified an award of indemnity costs, if available.

In respect of question 2, it was stated that CPR, r. 45.29J applied where exceptionally more money had to be expended on a case by way of costs than would otherwise have been the case. It was stated that this was not the situation here because although the defendant’s conduct would justify indemnity costs, if available, this was a very long way from being an exceptional circumstance in accordance with CPR, r. 45.29J.

In relation to question 3, it was held that CPR, r. 45.29B was the specific provision in respect of fixed costs cases and CPR, r. 44.2 was the general rule that applied in all cases of assessed rather than fixed costs. As a result, CPR, r. 44.2 was governed and overridden by the explicit terms of CPR, r. 45.29B.

In respect of question 4, the court held that it made no sense for CPR, r.36.20 to offset a claimant’s fixed costs up to expiry of an offer against a defendant’s capped fixed costs until acceptance, but when defendants accepted claimants’ offers late, for CPR, r. 36.13 to apply assessed costs from when the claimant’s offer expired. It was held that CPR, r. 36.20 deliberately did not make specific provision for late acceptance by defendants of Part 36 offers, so the relevant fixed costs applied. It was held that there was no costs windfall for claimants otherwise governed by the fixed costs regime unless CPR, r. 45.29J applied.

What this means for you

In this case, it can be seen that the court reached a sensible decision as there was no evidence of any misconduct or other “exceptional circumstances” to warrant an award for indemnity costs.

Here, the court considered that “exceptional circumstances” could be in cases where exceptionally more money had to be expended on a case by way of costs than would otherwise have been the case. It can be seen that this had to be costs that were outside the norm as costs naturally increase during the course of litigation.

This case preceded the BLM case of Whalley v Advantage Insurance Co Ltd where regional costs judge Besford held that his conclusion in Sutherland v Khan could no longer stand in respect of the court being able to award indemnity costs, where there was no finding that the defendant was guilty of inappropriate conduct.

It can be seen that the tide is now turning in favour of defendants not being liable to pay indemnity costs in cases of late acceptance, if there are no issues as to conduct or other “exceptional circumstances” justifying such an award.