The Court of Appeal gave further guidance on which costs scheme will apply where are disputes over the same and, consequently, the approach that should be taken when drafting settlement orders.
Full judgment, dated 19 November 2019
The parties to an RTA protocol claim now running on the fast-track with fixed costs, settled the claim at the same time as agreeing on re-allocation to the multi-track and in terms that referenced the standard basis for costs and detailed assessment thereof.
Nevertheless, the Court of Appeal held that the agreement had been to pay fixed costs.
This case arose out of a road traffic accident. The claim began in the pre-action protocol for low value RTAs, but dropped out after the Appellant failed to admit liability within time. The claim was initially allocated to the fast-track, but the Respondent then issued an application for re-allocation to the multi-track on the basis of increased value. Shortly before the hearing of the application, the Appellant sent the Respondent a letter offering £30,000 in full settlement and (if the offer was accepted) “to pay your client’s legal costs in accordance with Part 36 Rule 13 of the Civil Procedure Rules such costs to be subject to detailed assessment if not agreed.“
The next day, the Appellant’s solicitors also emailed the Respondent saying that they consented to the matter being re-allocated to the multi-track.
A Tomlin order was therefore drawn up which provided that the Appellant pay the Respondent’s costs “on the standard basis to be the subject of detailed assessment if not agreed.”
Later, the parties disputed the costs entitlement of the Respondent. The Appellant argued that the Respondent was only entitled to fixed costs, while the Respondent argued it was entitled to costs on the standard basis (as the order said). The district judge at first instance ruled that the costs were fixed, but was overturned on appeal to the circuit judge. The Appellant appealed.
Newey LJ gave the judgment of the court. From paragraph 9 he set out the rules of the fixed costs regime in part 45. He then made reference to Hislop v Perde  EWCA Civ 1726, Solomon v Cromwell Group plc  EWCA Civ 1584 and Sharp v Leeds City Council  EWCA Civ 33 as authority for the proposition that the fixed costs scheme is a comprehensive one, aimed at ensuring rough and ready certainty as to costs that ensured fairness overall (though not necessarily overall). (11)
He then set out CPR rules 36.1, 36.13 and 36.20.
He then went on to CPR 44.1, 44.3 and 44.6 which define “assessment” and explain the difference between summary and detailed assessments and the standard and indemnity bases of costs. He cited Aldred v Cham  EWCA Civ 1780 as holding that fixed costs could require both a provisional and oral assessment, but also cited Moore-Bick LJ in Solomon as saying that the assessment under fixed costs was not “on the standard basis”. He also referred to Broadhurst v Tan  EWCA Civ 94 as emphasising that the fixed and assessed costs schemes were fundamentally different – the first simply awards a set sum whether or not work was actually done to earn that sum, whereas the latter compensates only (but also all) work done by the solicitor. (19-20)
Finally, he quoted CPR 46.13, which confirms that any track-specific costs provisions apply until a case is re-allocated.
From paragraph 26, he addressed the issue of the offer letter itself. Obviously the Respondent argued that the offer letter offered conventional, rather than fixed, costs. Reliance was placed on CPR 36.5(1)(c) as putting the onus on the offeror to identify either CPR 36.13 or 36.20 as the costs scheme to be bound by, but the court rejected that, holding that it was only the period of 21 days or less that the offeror was required to specify. (28-29)
In fact, the judge found that the reference to part 36 helped the Appellant, because part 36 itself states that the fixed costs regime applies to offers made under part 36 where the claim no longer continues under the protocol because of rule 45.29A(1). Accordingly, the fact that the offer was expressed as a part 36 offer gives rise to the presumption that it intended to follow the costs rules of part 36. (30)
Perhaps less convincingly, the judge found that, because fixed costs can be subject to an assessment of some kind, the reference to detailed assessment did not evince an intention to displace the fixed costs regime (31). One might think that is a very generous reading of the Appellant’s letter.
The judge then went further and posited, probably obiter, that CPR 45.29B means that when a case is re-allocated from one track to another, that does not automatically change the costs basis from the start of the litigation. He submitted that instead it only meant that “the fixed costs regime ceases to apply prospectively, not in relation to past costs, incurred when the case was in the fast track.” (33) The fact that the case had not been re-allocated (despite the Appellant’s indication of their agreement to re-allocation) meant that fixed costs still applied.
This took the judge on to the second ground of appeal, that the case should have been and should now be retrospectively re-allocated with the fixed costs regime retrospectively disapplied. The circuit judge had ruled this an impermissible piggy-backing on CPR 36.14 and in any event contrary to the terms of the consent order. Newey LJ agreed.
The appeal was therefore dismissed.
Males LJ then added an addendum that cautioned against vague settlement drafting in terms of costs and against use of the term “assessment” when intending to settle on the fixed costs basis. (43-44).
This is obviously yet another shot across the bows of Claimant lawyers, who need to be on their toes and make no assumptions about the basis on which costs are to be paid. Settlement orders in this context should probably specifically particularise whether the fixed costs or multi-track costs will apply and re-allocation hearings should now probably deal with whether or not the fixed costs scheme is disapplied retrospectively or simply prospectively.