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Fixed costs and accepting a Part 36 offer: Hislop v Perde

Fixed costs (and how to avoid them) have been a hot topic in recent months. Earlier this year, in Bratek v Clark-Drain Ltd, the High Court found that it was not possible to contract out of the fixed costs regime attaching to the Road Traffic Accident (RTA) and Employers’ Liability/Product Liability (EL/PL) protocols by providing for standard basis costs in a consent order. This followed a pattern of evolving fixed costs jurisprudence which was sought to limit avenues to disapply fixed costs and allow a receiving party to have their costs assessed.

Last month another of those avenues came before the Court of Appeal. In the case of Hislop v Perde, the question was whether late acceptance of a Part 36 offer by a defendant could entitle the claimant to costs in the indemnity basis and thus allow them to escape fixed costs for the period following the expiry of the offer in question.

The principle was said to be analogous with the well know case of Broadhurst v Tan, in which the Court of Appeal had previously found that a claimant who successfully equalled or beat a Part 36 offer at trial would receive costs on the indemnity basis by virtue of CPR 36.17(4)(b) and would not therefore be limited to fixed costs.

Hislop involved an RTA portal matter, during the life of which the claimant had made a Part 36 offer which the defendant initially rejected, but then accepted over 18 months later, a week before trial was due to begin. The claimant sought indemnity costs from the expiry of the Part 36 offer, whilst the defendant argued that only fixed costs were payable. At first instance the claimant was unsuccessful, with the district judge considering that the case contained no abnormality or exceptionality that justified an order for indemnity costs. Merely accepting a Part 36 offer late was not enough.

On appeal to the High Court, Walden-Smith HHJ was still not inclined to order indemnity basis costs, but nonetheless overturned the district judge’s decision and awarded the claimant’s costs to be accessed on the standard basis following the expiry of the Part 36 offer. The defendant, in turn, brought the matter before the Court of Appeal.

The Court of Appeal noted the previous decision in Sharp v Leeds City Council, which expressed the primacy of the fixed costs regime in CPR 45 (but for limited exceptions) and Solomon v Cromwell Group PLC, in which CPR 45 had been found to take precedence over Part 36. The court then turned to Broadhurst, which differed from Hislop in that the claimant had beaten a Part 36 offer at trial and been awarded indemnity costs as a result.

The issue was whether the same result could be said to arise as a result of a late acceptance of an offer; the justices were unanimous in their view that it could not. The relevant sections of Part 36 at the time relating to the acceptance of offers in cases to which CPR 45 applied were CPR 36.10 and CPR 36.10A (now CPR 36.20), and neither made provision for the claimant to receive costs on the indemnity basis by virtue of the defendant’s late acceptance. The court noted that in some cases it may be possible for the claimant to argue that a defendant’s late acceptance was “exceptional” within the meaning of CPR 45.29J. However, that was not considered applicable to Hislop.

In reaching this conclusion, the Court of Appeal has closed another route which may have allowed an escape from fixed costs and in so doing have taken some of the sting out of Part 36 for defendants in these cases.

It is now potentially open to a defendant to ignore a Part 36 offer until the eve of trial, with little risk of having to pay anything other than the fixed costs that would have had to have been paid if it been accepted within the relevant period. For claimants this is yet another reason to keep a close eye on any offers made throughout the claim, and to ensure they are withdrawn if they cease to be competitive.

Association of Costs Lawyers David Wright

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