This is a very interesting case where BLM successfully acted for the defendant. Although the substantive claim was in respect of a low value road traffic accident claim, the court was required to consider the costs issues that are relevant to casualty claims in respect of late acceptance of Part 36 offers.

The facts

In this case, liability was disputed and the claimant issued proceedings in August 2015. On 7 December 2015, the claimant made a Part 36 offer to split liability on an 85/15 basis in her favour. The relevant period for accepting the offer expired on 30 December 2015. The defendant accepted the Part 36 offer on 29 January 2016 but the parties disagreed about the claimant’s entitlement to costs.

The claimant argued that the defendant’s admission of liability entitled her to enter judgment for damages to be assessed, and judgment being entered would automatically result in the claimant having the right to claim indemnity costs under CPR, r. 36.17 for the time after the relevant period had expired up until the date of the defendant’s late acceptance.

Prior to the hearing the claimant agreed to claim costs assessed on the standard basis. The issue was whether the fixed costs regime applied to the entire claim, or whether costs incurred during the period of late acceptance could be assessed. Further, the court was required to consider whether the defendant’s late acceptance could allow an award for indemnity costs in absence of any conduct issues.

The decision

Judge Besford stated that his conclusion in Sutherland v Khan in respect of the court being able to award indemnity costs, even where there was no finding that the defendant was guilty of inappropriate behaviour, was unsupported and could no longer stand.

It was held that the fixed costs regime under CPR, r. 45.29A applied to the entire claim. Also, there was no justification or legal basis for entering judgment because the parties had negotiated quantum following the liability agreement being reached and damages being paid. It was stated that the availability of seeking judgment was reserved to situations where payment remained outstanding.

In this case, the remaining parts of the claim had been settled outside the Part 36 procedure and Judge Besford concluded that the availability of seeking judgment was reserved to situations where payment remained outstanding. Also, it was stated that the CPR was deliberately silent as to the costs arising from late acceptance, which meant that costs fell for determination under the fixed costs regime. As a result, it was held that unless there were “exceptional circumstances” in accordance with CPR, r. 45.29J or “out of the norm” conduct to justify indemnity costs then the fixed costs regime would apply.

What this means for you

This is a welcome judgment which clarifies once and for all that claimants will only be awarded fixed costs in cases of late acceptance, unless there are issues in respect of conduct or other “exceptional circumstances” to justify an award for indemnity costs.

Here, the claimant conceded that late acceptance of a Part 36 offer does not automatically trigger an entitlement to indemnity costs. Also, Judge Besford made clear that his earlier decision in Sutherland v Khan could no longer stand in respect of the court having discretion to award indemnity costs where there have been no conduct issues. Hopefully this decision will bring an end to claims for additional costs beyond the prescribed fixed costs regime, where there has been late acceptance by a defendant of a claimant’s Part 36 offer.

It can be seen that the decision not to award indemnity costs is fair and just in the circumstances. Currently in fixed costs cases, the costs which a defendant receives for late acceptance is the difference between the fixed costs at the date of acceptance and the fixed costs the claimant is entitled to on the date when the relevant period expired. In some cases, the defendant may not receive any costs if the fixed costs stage, at the time of the claimant’s late acceptance, is the same as the stage which the claim was at when the relevant period for accepting the offer expired.

As a result, it would be unfair for the claimant to receive increased costs for a defendant’s late acceptance when defendants do not receive the same benefits. Also, it can be seen that the “rough and ready” approach of the fixed costs regime can work just as much in favour of a claimant as a defendant and if an issue of conduct arises the discretionary power to award costs, including indemnity costs, is exercisable under CPR, r. 44.2.

Further, the carrot and stick effect of Part 36 offers still remains as defendants are encouraged to settle before trial without unfair costs consequences but the fixed costs payable by a defendant will increase during each stage of the litigation so more costs could be payable in cases of late acceptance. Also, if the claimant obtains judgment against the defendant which is at least as advantageous to them as the terms of their Part 36 offer then indemnity costs will likely be awarded under CPR, r. 36.17(4)(b).