Indemnity costs recoverable in successful RTA portal claims
The Court of Appeal has ruled that costs awarded to successful Part 36 claimants in RTA portal claims can be recovered on the indemnity basis and not limited to the less generous fixed costs regime.
Broadhurst & Anor v Tan & Anor [2016] EWCA Civ 94 (23 February 2016)
Background
In these two joined cases, the claimants had claimed damages for personal injuries (PI) arising out of road traffic accidents. Both claims were pursued under the RTA protocol; both claimants made a Part 36 offer that was rejected by the defendant; and both claimants ultimately obtained judgments that were more advantageous than the Part 36 offers they made (para 3).
Dispute
This dispute centred on the apparent tension between the fixed cost regime for most lower value PI claims, as set out in section IIIA of Part 45 of the CPR on the one hand, and the provisions in Part 36 which specifically apply to such claims on the other. Although the rules have been renumbered and modified since these cases commenced, the dynamics between the two provisions remains in place in the wording of the current version of Part 36 (para 1).
Under rule 45.29B, there is a general rule that the only costs that can be awarded under section IIIA cases are fixed costs – a provision also carried over into rule 36.14A (para 12). Additionally, Rule 45.29C provides that the amount of fixed costs in the RTA Protocol are set out in Table 6B (para 7). However, Rule 36.14 (3) remained in place for situations where the the claimant had made a successful Part 36 offer. In such circumstances, costs are to be awarded on an indemnity basis (para 12).
In Broadhurst, one of the two joined cases, HHJ Robinson had held that Rule 36.14 (3) was applicable in section IIIA cases, where a successful Part 36 offer had been made. However, he also said that – in such situations – there was no difference between profit costs assessed on the indemnity basis and the fixed costs prescribed by table 6B of rule 45.29C (para 4). Meanwhile in Smith, the second joined case, HHJ Freedman had separately decided that rule 36.14 (3) applied in section IIIA cases where the claimant makes a successful Part 36 offer. However, unlike HHJ Robinson in Broadhurst, HHJ Freedman did not also equate indemnity costs with fixed costs (para 5).
In the Court of Appeal, the claimants’ counsel, Benjamin Williams QC, claimed that the fixed fee changes made to rule 36.14A had not been carried over into Rule 36.14 (3). Therefore, the claimants’ right to have their costs assessed on an indemnity basis was preserved (para 11). Appearing on behalf of the defendants, James Laughland endorsed the “equiparation” of fixed costs and indemnity costs approach taken by HHJ Robinson in Broadhurst. And, while he also acknowledged the tension between the various CPR provisions on this point, Mr Laughland submitted to the Court of Appeal that this tension should be resolved in favour of the fixed fee regime (para 21).
Decision
In delivering the sole Court of Appeal judgment in both joined cases, Lord Dyson MR stated that he would allow an appeal in the case of Broadhurst, but dismiss the appeal in the case of Smith – largely for the reasons set out by Benjamin Williams QC (para 22). Rule 45.29B “does not stand alone”, he said. “The need to take account of Part 36 offers in section III cases was recognised by the draftsman of the rules” (para 23). Where a claimant makes a successful Part 36 in a section IIIA case, he said, they “will be awarded fixed costs to the last staging point provided by rule 45.29C and table 6B.” From that point on, Lord Dyson MR explained, “the successful claimant will then be awarded costs to be assessed on the indemnity basis in addition from the date that the offer became effective.” (para 31).
Specifically addressing the point made by HHJ Robinson in Broadhurst, who decided that there was no difference between profit costs awarded on the indemnity basis and the fixed costs regime set out in table 6B of rule 45.29B, Lord Dyson MR stated that: “fixed costs and assessed costs are conceptually different”. “Fixed costs are awarded whether or not they were incurred, and whether or not they represent reasonable or proportionate compensation for the effort actually expended. On the other hand, assessed costs reflect the work actually done. The court examines whether the costs were incurred, and then asks whether they were incurred reasonably and (on the standard basis) proportionately,” he said (para 30). Further, Lord Dyson MR stated that he was not “persuaded that the problems identified by Judge Robinson, if they exist at all, are so serious that they cast doubt on the interpretation which I favour or that they justify the surprising conclusion that fixed costs are to be equated with assessed costs” (para 33).
Explaining the outcome of his decision, Lord Dyson MR acknowledged that it would lead to a “generous outcome for the claimant”, because “this does not require any apportionment”. However, he did not regard this “outcome as so surprising or unfair to the defendant that it requires the court to equate fixed costs with costs assessed on the indemnity basis.” The entire purpose of rule 36.14 (3) was to provide claimants with “generous incentives to make offers, and defendants with countervailing incentives to accept them” (para 31).
This will come as a welcome decision to claimant solicitors given the current push towards a largely fixed costs regime.
This will be seen as a welcome decision by many given the current push towards a largely fixed costs regime.