Part 36 and fixed costs outside the Portal

Published 2 March 2016

The apparent inconsistency between the provisions governing fixed costs for personal injury claims which fall out of the Low Value Protocols and the costs penalties arising from Part 36 Offers was considered by the Court of Appeal in Broadhurst & Taylor v Tan & Smith, a judgment which provides clarity and emphasises the objective of the Civil Procedure Rules to encourage parties to settle claims where possible.

When claims commence within the Low Value Protocols (this case involved a RTA claim, but the decision will also apply to non-disease EL and PL claims) and then exit the Portal, they fall within the fixed costs regime of CPR 45.29A which only provides for the recovery of fixed costs and disbursements. 

Under CPR 36, if the Claimant fails to beat a Defendant's Part 36 Offer at trial, the Claimant will recover his fixed costs up to the stage in which the Defendant's offer became effective and will be penalised by paying the Defendant's fixed costs from the date when the offer became effective.  However, if (as the Defendants maintained) the Claimant is only entitled to recover fixed costs if he beats his own Part 36 Offer at trial, the Defendant would not be penalised for declining the offer and the Claimant would not be rewarded for making a realistic settlement proposal. 

Following this judgment, the position when a Claimant beats his own Part 36 Offer at trial has been clarified.  The Claimant will receive his fixed costs up to the stage in which his offer became effective and will then receive costs to be assessed on the indemnity basis from the date when his offer became effective. 

The judgment incentivizes Claimants to make realistic settlement proposals and Defendants to accept them.  We can expect to see an increase in Part 36 Offers from Claimants in claims which will be subject to fixed costs and also earlier offers, enabling them and their solicitors to maximise the period during which indemnity costs apply.  Defendants' insurers and their solicitors should give careful consideration to such offers and the potential costs consequences of proceeding to trial.