Reversal of ruling on part 36 offers in fixed-costs cases – Regional Costs Judge Besford changes his mind.
Regular readers of this blog (and indeed civil practitioners as a whole) will doubtless not have failed to notice that the Civil Procedure Rules have, since their inception and throughout the (currently 92) amendments, been riddled with lacunae, for which there has been no easy or quick fix, leaving many of the judiciary having to on occasions be rather creative or, alternatively, provide permission to appeal in order for such issues to be determined at a higher, binding level.
It is therefore with little surprise that the writer can report the latest scenario in which a Regional Costs Judge, District Judge Besford, changed his mind with regard to Part 36 offers in fixed cost cases, having previously ruled that late acceptance of a Part 36 offer automatically entitled the claimant to an award of indemnity costs, thus escaping the cap of otherwise fixed costs.
Previously, his view had been set out in the widely reported decision of Sutherland v Khan (21 April 2016, Kingston upon Hull, Case No – A81YM424). That matter was a low value road traffic accident claim, in which the claimant had made a Part 36 offer, compliant with the rules, and in respect of which the defendant elected to accept the same approximately one month after the expiry of the 21 day period for acceptance, without the court’s permission. Given the imposition of otherwise fixed costs, the court was asked to determine the extent, if any, of any additional benefits to which the claimant would be entitled as a result of such late acceptance, and particularly whether the claimant was limited to recovering fixed costs, possibly otherwise standard basis costs or, indeed, indemnity costs.
Having considered the submissions of both parties, District Judge Besford concluded (adopting the principles in the matter of Broadhurst) that as a claimant who beat a Part 36 offer in a matter which proceeded to trial was entitled to escape fixed costs, was equally entitled in a matter which did not proceed to trial but was settled by acceptance of the Part 36 offer outside of the 21 day “relevant” period. The rationale behind such a finding was that, whilst CPR36 was silent as to whether or not fixed, standard or indemnity basis costs would apply in fixed cost cases in which acceptance been provided late, there was reference under CPR 36.17, and such an approach would provide parties with additional encouragement to settle before trial.
Needless to say, since that judgement, there have been appeals (to circuit judge level) which have provided conflicting results, however most recently, in the County Court at Stoke-on-Trent, District Judge Etherington awarded indemnity costs against the defendant that had accepted the claimant’s part 36 offer 10 months out of time, but before trial.
In the matter of Car Craft Test Centre and Martin v Trotman & Advantage Insurance Company (3 February 2017, Stoke-on-Trent County Court, District Judge Etherington, unreported) the defendant argued that prevalent and established case law, including Excelsior Industrial and Commercial Holdings v Salisbury Hammer Aspden and Johnson  EWCA Civ 879 precluded an award of indemnity costs save in circumstances where there had been both late acceptance and “severe misconduct” on the part of the offeree. The claimant, however, argued that if the defendant was correct, indemnity costs could only be awarded in the most exceptional circumstances, effectively rendering CPR36.13(5)(b) almost, if not actually redundant which would, potentially in turn, lead to a sharp rise both in issued cases and missed trial dates.
District Judge Etherington concurred with the claimant that CPR 36.13(5) should be the starting point, such that consideration must be given as to whether it would be unjust to make such an award, but that there was, further, assistance to be found from CPR36.13(6) in this regard, in considering the factors listed, in that matter consider that it would not have been unjust to make the order requested by the claimant, thus he did so.
It is against this background that District Judge Besford has now determined that his decision in the matter of Sutherland “…is unsupported and can no longer stand.”
Ruling in the matter of Whalley v Advantage Insurance (5 October 2017, Kingston upon Hull, Case No – B58YM864), District Judge Besford reversed his earlier decision that there was, in effect, an automatic right to indemnity costs, concluding following a very detailed analysis of the wealth of conflicting views and rules that, unless there were “exceptional circumstances” or conduct which justified an award of indemnity costs against defaulting party, the fixed costs regime applied where any Part 36 offers had been accepted out of time.
This ruling, once more, highlights the still remaining uncertainties within the rules which cause problems not only for practitioners, but also the judiciary, on a daily basis.
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