BEATING YOUR PART 36 OFFER DOESN’T MEAN YOU GET MORE THAN THE PROVISIONAL ASSESSMENT CAP

BEATING YOUR PART 36 OFFER DOESN’T MEAN YOU GET MORE THAN THE PROVISIONAL ASSESSMENT CAP

There is a conceptual difference between fixed costs and capped costs such that as opposed to the decision in Broadhurst v Tan [2016] 1 WLR 1928 which found that an award of costs on the indemnity basis would effectively dis-apply the fixed costs, where there is a cap on recoverable costs, it would continue to apply even where indemnity basis costs were awarded.

So decided Lady Justice Asplin (with agreement from the other members of the Court of Appeal) in the matter of W Portsmouth and Company Ltd v Lowin [2017] EWCA Civ 2172.

In that case, the issue to be determined was the relationship between CPR 47.15 (5) and CPR 36.17 (4). In other words, whether the cap on the amount of costs which can be allowed in respect of the costs of a provisional assessment still applies where a receiving party (as a consequence of bettering his or her Part 36 offer) is awarded costs on the indemnity basis.

The Respondent had made a Part 36 offer of £32,000 in relation to the costs of the claim. On provisional assessment, Master Whalan assessed the costs at £32,255.35. In accordance with the penal provisions of CPR 36.17 (4), enhanced interest was allowed, the 10% additional amount was also allowed and indemnity basis costs awarded. However, the Master found:

“Assessment of the claimant’s costs of the assessment can properly be undertaken pursuant to CPR 36.17(4)(b)/(c) but this does not, in my judgment, dislodge the effect of CPR 47.15(5) which has the effect of capping the ‘maximum amount the court will award’ to the receiving party to £1,500 plus VAT plus court fees which in [this] case was £1,005”.

The Master’s decision was appealed to the High Court who overturned it. By analogy with the decision in Broadhurst, the High Court found that there was a conflict between the two provisions and this arose because 47.15 (5) potentially derogated from the entitlement to have costs assessed on an indemnity basis which was conferred by Part 36. However, given the lack of an express provision in that regard, it followed that the provisions of Part 36 should apply and that they should not be displaced by the provisions of 47.15 (5).

On further appeal to the Court of Appeal, the decision of the Master was reinstated. The Lady Justice found that Broadhurst was not relevant in this case because it was concerned with a direct conflict between provisions as to fixed and assessed costs and with completely different CPR provisions. What is now CPR 36.21 makes express reference to the precise circumstances where a claim no longer proceeds under the RTA or EL/PL protocols which are subject to the fixed costs regime. By contrast CPR 47.20 merely applies Part 36 to the costs of detailed assessment proceedings with certain modifications and no express reference is made to the relationship between rules 47.15 (5) and 36.17 (4).

The approach of the Master was therefore entirely correct and consistent with the policy behind both rules. It did not undermine the intention to encourage the quick and cheap resolution of the assessment of costs in cases in which the costs claimed were £75,000 or below. Nor does it deprive the successful party of the not inconsiderable benefits of 36.17 (4).

It remains perfectly possible to undertake an assessment on the indemnity basis subject to the maximum overall cap. If the costs claimed were below the capped figure, then it might be expected that a more generous outcome might be received than if those costs were to be assessed on the standard basis.

This decision may come as something of a surprise to many, given the juggernaut like progress which the dominance of Part 36 seems to have made in recent times. However, despite limiting the recovery of the costs of assessment as such, a receiving party who betters his or her own Part 36 offer will still be entitled to the other benefits which flow from that and in particular the 10% additional amount. It remains good practice therefore for a receiving party on any assessment to make a competitive Part 36 offer at an early stage.