Escaping fixed recoverable costs.
Amidst no little angst as to whether the costs recoverable under the new RTA and EL/PL protocols were sufficient to make conduct of such claims economically viable, there has perhaps been little attention paid to the provisions within the rules for escaping the application of fixed recoverable costs.
In particular here we refer to the provisions for fixed recoverable costs where claims no longer continue under the protocols, as set out in CPR 45.29.
That rule sets out the various fixed recoverable costs which are recoverable where Part 7 proceedings have to be issued in order to conclude the claim. Different amounts of costs are specified for each protocol with various sums recoverable depending upon the value of the claim and the stage reached by the time of settlement.
However, by CPR 45.29J, if the Court considers “there are exceptional circumstances” it will consider a claim for an amount of costs greater than those specified. Where such an application is made, the Court may either summarily assess the costs or make an Order for them to be subject to Detailed Assessment (which may be Provisional Assessment).
The Court will then undertake an assessment on either the standard or the indemnity basis. It might perhaps be expected that the vast majority of assessments will be on the standard basis.
By CPR 45.29K, if on such an assessment the Court assesses the costs at a sum “less than 20% greater than” the amount of the fixed recoverable costs, the Court will make an Order for the party making the claim to be paid the lesser of the fixed recoverable costs or the assessed costs.
The wording of the rule is strained, but the effect is that provided on the Assessment the costs which the Court allows are 20% greater than the fixed recoverable costs applicable, then the party will receive those costs as assessed. Failure to reach this 20% “uplift” obviously leaves the receiving party in the position of probably receiving fixed recoverable costs and having to pay the costs of the assessment process.
Bearing in mind the sums provided for within the rule, taken together with the fact that before entertaining such an application the Court must be satisfied that there are exceptional circumstances, it might reasonably be thought that the prospects of the assessed costs exceeding the fixed costs plus 20% figure would be relatively high.
Clearly, just because the costs incurred are in excess of the fixed recoverable costs will be highly unlikely to be sufficient grounds. There is a swings and roundabouts element to the scheme such that some claims will be over compensated and some under compensated by the application of the rules.
However, we are all aware of cases which may not be of particularly high value, but which are nevertheless very involved and where the fixed recoverable costs are going to obviously be woefully inadequate.
It would therefore be well worth practitioner’s bearing in mind this possibility.
Some commentators have indicated that the number of such applications will be extremely limited. We tend to concur with that view. It is highly unlikely that the Judiciary will effectively undermine the scheme by adopting too liberal an approach to this escape mechanism.
One further aspect which should give pause for thought is the application, on a standard basis assessment, of the rules of proportionality. As you will all be aware (in general terms) work done after the 1st April 2013 is subject to a more wide ranging test on proportionality than was the case prior to the rule changes. Thus, after having conducted an Assessment to determine the costs reasonably incurred and reasonable in amount, the Court will take a step back and then consider whether the overall costs are proportionate. As we have set out in previous posts, there is great uncertainty as to how a particular Judge might apply these principles in practice. Undoubtedly however, this aspect adds an extra layer of difficulty in assessing whether, on an assessment, the fixed costs plus 20% figure will be achieved.
We are aware of cases which have already been determined on the previous protocols where the Defendant raised issues as to the reasonableness of the manner in which the claim had been conducted. Where the Court finds that some tactical step has been taken in order to avoid fixed costs, then it has been prepared to follow the principles in cases such as O’Beirne v Hudson such that when undertaking an Assessment regard has been had to the amount that would have been payable under the fixed costs when determining the reasonable amount which the Defendant should pay.
Even anecdotal evidence on the application of the principles to this area of law is scarce. No doubt practitioners will undertake a risk/reward analysis before contemplating such an application. However, particularly if the matter is to proceed to Provisional Assessment, it may be thought that the costs risks would be sufficiently low in some cases to certainly warrant an attempt to procure more appropriate costs