28 July, 2021
CPR Part 45 section IIIA provides that claims which are initially submitted to the MOJ protocol but then exit the process are subject to fixed costs.
This remains the case even if settlement is agreed in excess of £25,000 provided the matter has not been allocated to the multi-track as made clear in the landmark decision in Qadar & Ors v Esure Services .
The court does have the discretion to override this pursuant to CPR 45.29J which states:
"If it considers that there are exceptional circumstances making it appropriate to do so, the court will consider a claim for an amount of costs (excluding disbursements) which is greater than the fixed recoverable costs ………"
However, two cases from 2019 have shown that the Courts will interpret the rule quite strictly against exercising that discretion.
In the case of Ferri v Gill  settlement was agreed in the sum of £42,000. In the lower court Master McCloud accepted the Claimant's submission that there were exceptional circumstances and ruled that the Claimant's costs should be subject to detailed assessment. This was on the basis the settlement value was considerably outside the boundaries for applying fixed costs and the portal was intended to deal with simple, fast track cases.
Mr Justice Stewart said on appeal that Master McCloud had erred in law on the construction of exceptionality and that the case did not fall within the scope of exceptional circumstances to justify fixed recoverable costs not applying.
"The authorities already cited made clear the policy reasons behind this fixed cost regime in particular, and other similar fixed costs regimes. Exceptionality should not be a low bar."
The matter was remitted for consideration by a different master.
The case of Lovatt v Lew Diecastings Limited  was slightly different as the claim has initially exited the MOJ process not due to the value of the claim exceeding £25,000 but rather the Defendant having not admitted liability. The settlement was ultimately agreed by way of Part 36 offer in the sum of £29,000.
The district judge on the first instance held that because the settlement exceeded £25,000 the Protocol ceased to apply and there should be an assessment of costs.
On appeal, His Honour Judge Sephton QC said that this was the wrong decision.
"The purpose of the revision to the rules was not to impose unfairness upon claimants but to make it clear, first of all, to all concerned what the consequences were likely to be if a claim was started under the protocol, but which ended up being worth more than £25,000."
HHJ Sephton QC held that the Claimant was only entitled to fixed costs.
Not all pre-allocation claims that settle in excess of £25,000 however will be subject to fixed costs. If an exception under CPR 45.29J has been made out fixed costs may be disapplied.
In Jackson v Barfoot Farms  the claim was initially submitted to the MOJ Portal but exited after the value exceeded £25,000 and it became apparent the Claimant's medical evidence was becoming complex. The Claimant ultimately accepted an offer of £350,000 in full and final settlement "plus his costs to be assessed in detail by the Court on the standard basis failing agreement". The Defendant provided no response to this other than to confirm the matter was settled.
The Defendant argued that fixed costs pursuant to CPR 45.29B were applicable for numerous reasons. Proceedings had not been issued, and the matter had not been allocated to the multi-track. The claim had started under the RTA Protocol and therefore CPR 45.29C was applied. The Claimant disagreed.
District Judge Jackson found that an exception under CPR 45.29J had been made out and that there were exceptional circumstances in the case. Fixed costs were not applicable and the Claimant could proceed to have his costs assessed.
"It is difficult to think of a more clear-cut case of exceptional circumstances and in the ordinary event these cases, of course, would never have been referred to the portal in the first instance, it was only because of the way in which the matter unfolded that the circumstances arose" - DJ Jackson
The claim looked modest as it started life in the Portal but the claimant's medical position got worse and the value of the claim grew exponentially. There were eventually reports from multiple medical expert disciplines on both sides. It was, by any description, a complicated case.
Whether a claim falls within the exceptional circumstances rule is for the court to decide. The cases make it clear that the usual rule for claims that start in the MOJ portal but then exit due to the value exceeding £25,000 is that fixed costs are likely to apply unless proceedings are commenced and the matter is allocated to the multi-track.
Unless parties reach an agreement on costs this could encourage Claimants to hold off on settling claims until after allocation to ensure they recover costs commensurate with the work carried out. As a Defendant, it may be appropriate to seek to negotiate something more than fixed costs but less than full standard basis costs if exceptionality seems a possibility, to avoid delays to settlements if the factors in Jackson are likely to apply.