23 August, 2018
Mercel Hislop v Laura Perde : Kundan Kaur v Committee (For The Time Being) Of Ramgarhia Board Leicester (2018) EWCA Civ 1726
The Court of Appeal determined that a claimant was not entitled to standard or indemnity costs where a defendant accepted a Part 36 offer out of time but before trial.
The issue before the court concerned the correct approach to costs in cases under the fixed costs regime in Section IIIA of Part 45 (low value road traffic accident and employers' liability/public liability claims), where the defendant eventually accepts a claimant's Part 36 offer out of time and the case does not then go on to trial. In those circumstances the Court considered whether the case should remain within the fixed costs regime, or whether the claimant should recover standard or even indemnity costs from the date that the offer became effective?
The claimant sought to argue that following the Jackson reforms and the 'carrot and stick' effect of the new rules that the courts should be much quicker to conclude that a defendant who delays accepting a Part 36 offer should be liable for indemnity costs.
The Court disagreed and found that the fixed costs regime is mandatory unless there is an express exception. The recent case of Broadhurst v Tan was distinguished. The Broadhurst case concerned whether a claimant was entitled to indemnity costs where he had beaten his own Part 36 offer at trial. The Court deemed that different rules applied to that situation because CPR 36.21 provides an additional exception and deals expressly with what should happen when a defendant beats a Part 36 offer after judgment.
The Court therefore concluded that the fixed costs regime applies to low value claims. Where a defendant accepts a claimant's offer late, indemnity or standard basis costs will not be awarded to the claimant unless there is an express exception. The Court did concede that in an exceptional case of delay, it may be possible for the claimant to escape the fixed costs regime and as a result there remains a clear incentive for a defendant not to delay in accepting a claimant's Part 36 offers.
This is an extremely significant case for defendants and the decision will affect the costs outcome in many other cases. The judgment seeks to preserve the autonomy of Part 45 and the fixed costs regime. Going forward parties will only be able to escape fixed costs in exceptional circumstances. This provides certainty to defendants and guarantees that costs incurred in low value claims will remain proportionate.