Court of Appeal endorses fixed costs avoidance

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Court of Appeal endorses fixed costs avoidance

Published 10 August 2022

In a surprising decision, the Court of Appeal in Doyle v M&D Foundations & Building Services Ltd [2022] EWCA Civ 927 have endorsed avoidance of fixed recoverable costs if parties agree a costs provision that refers to ‘detailed assessment’ in the absence of agreement. The decision serves as a warning to all personal injury lawyers dealing with cases within the scope of the personal injury low value protocols (portals) and is another reminder that very careful scrutiny needs to be undertaken when costs provisions are proposed in orders to settle cases.

Outcome

By determining that the parties had contracted out of fixed costs, the claimant’s bill of costs was assessed in excess of the amount of fixed costs despite the fact that it was a claim that had started off in the personal injury portal and was clearly in scope of the fixed recoverable costs scheme that applied to such cases, with damages agreed at £5,000.

Background

The defendant made a Part 36 offer to settle the claim in the sum of £5,000 three days before the Fast Track trial. The claimant responded by indicating that quantum could be agreed at £5,000 but the offer was not accepted due to the lateness of the offer and therefore an order would be needed to ‘finalise matters’. An order was therefore proposed and agreed that made no reference to Part 36 or fixed costs and provided for costs to be subject to detailed assessment if not agreed. In the circumstances, the parties were determined to have contracted out of fixed costs; the plain and ordinary interpretation of ‘costs being subject to detailed assessment if not agreed’ displaces the application of fixed costs.

The key points

  • The ‘conceptual difference’ between fixed costs and assessed costs has been reinforced. The often cited decision of Master Leonard of Nema v Kirkland was endorsed, acknowledging that whilst the parties could agree to apply detailed assessment to fixed costs disputes, the default position should be that fixed costs disputes should be resolved by an interim application and not a detailed assessment.
  • It will always be assumed that parties represented by solicitors will understand the importance of settling a case and agreeing an order that costs are to be subject to detailed assessment. The only objective interpretation of such an agreement is to contract out of fixed costs; parties intending to apply fixed costs should state that in any agreed order.
  • Settlements within Part 36 are not impacted by this decision; the fact that the matter was not agreed with reference to the acceptance of a Part 36 meant that the costs provisions were ‘open season’ and down to what the parties agreed.

What this means

Any agreement to pay costs on cases within scope of the personal injury portals need to be carefully considered. Paying parties needs to be wary of attempts to avoid fixed recoverable costs by proposing unnecessary orders or terms to settle cases. Three key points arise from this decision:

  1. If a Part 36 offer refers to r.36.13 then fixed recoverable costs will still apply (assuming the case is in scope of the portal) due to the signpost to r.36.20 (which only provides for fixed recoverable costs) even if the offer refers to detailed assessment (as was the outcome in Ho v Adelekun [2019] EWCA Civ 1988).
  2. If Part 36 is not referenced but detailed assessment is, following Doyle, the danger is that it will be found to be a contract out of fixed recoverable costs.
  3. Acceptance of a Part 36 offer which only refers to r.36.20 will presumably now bind the parties to an agreement to ‘opt-in’ to fixed recoverable costs, even if the case is not otherwise in scope of the portal. Could this be the ‘unintended consequence’ of Doyle?

Future impact

It is anticipated that cases within the scope of fixed recoverable costs will continue to expand, with the implementation to intermediate cases valued up to £100,000 expected next year. This case highlights the need to ensure the process for resolving disputed sums on fixed recoverable costs cases is clearly set-out, whether it be by detailed assessment or a different method. In the absence of certainty, there will be more cases where parties end up paying costs they did not expect.

For more information or advice, please contact one of our experts in our Costs Team.

Authors

Adam Burrell

Adam Burrell

Birmingham

+44(0)121 698 5322

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