Fixed & Predictable Costs Archives

Pre-Action Solicitor Costs Recoverable Where Insurer Settles Damages But Refuses Costs

Fixed & Predictable Costs, New Costs Blog, Part 36, Personal Injury

The Senior Courts Costs Office’s decision in Alphabet (UK) Limited v AXA Insurance UK plc [2026] EWHC 674 (SCCO) concerned whether a vehicle leasing company acted reasonably in instructing solicitors before issuing proceedings to recover vehicle damage, and whether fixed recoverable costs applied to any resulting costs order.

Background

Alphabet (UK) Limited, a vehicle leasing company forming part of the BMW Group, was the registered owner of a Citroën van leased to Acorn Engineering Limited (“Acorn”). The van was insured by AXA Insurance UK plc under a policy taken out by Acorn. On 8 February 2023, the van was seriously damaged in a road traffic accident and was subsequently written off as uneconomical to repair. Regulations 2 and 3 of the European Communities (Rights Against Insurers) Regulation 2002 permitted Alphabet to pursue a claim directly against AXA in respect of the loss.

By 28 March 2023, solicitors had been instructed on behalf of Alphabet. On that date, the solicitors wrote to AXA notifying them of their instruction, nominating motor engineers to value the van and its salvage in the event of any dispute, and making a Part 36 offer to settle the claim for vehicle damage at £12,408.70. The letter made clear that costs were also being sought. On the same day, AXA’s agent, Copart UK, responded asserting entitlement to credit for a £500 policy excess and offered £11,909.88 in settlement of the damages claim. No mention was made of costs in that counter-offer. Alphabet subsequently delivered a bill for its costs totalling £1,006.80 plus VAT. AXA declined to pay those costs.

Proceedings were issued in the Civil National Business Centre on 12 March 2024 under Part 7 of the Civil Procedure Rules. The issue arising was understood to concern costs only and District Judge Worthington, sitting in the County Court in Willesden, transferred the matter to the SCCO on 29 May 2025. At a directions hearing on 3 September 2025, Costs Judge Brown, sitting as an ex officio District Judge of the County Court, determined that the principal issue was whether a costs order should be made at all, rather than merely the quantum of costs, and that the matter should therefore remain in the County Court.

The substantive hearing took place on 16 January 2026, with a further hearing on 13 March 2026. Benjamin Williams KC appeared for Alphabet, instructed by Clifford James Consultants Limited. Elahe Youshani appeared for AXA, instructed by Kennedys Law LLP. The judgment was handed down on 23 March 2026.

An earlier argument advanced by AXA—that the claim had been settled before the commencement of proceedings without costs—was withdrawn at the directions hearing. A further question as to whether the Part 36 offer had been accepted was also raised but was quickly resolved; it was clear that no such acceptance had taken place.

Costs Issues Before the Court

Three distinct costs issues fell to be determined. The first was whether the proceedings themselves constituted an abuse of process, AXA’s position being that it was abusive to issue Part 7 proceedings solely for the purpose of obtaining a costs order where there was no genuine dispute as to the underlying damages claim. The second, and more substantively argued, issue was whether it had been reasonable for Alphabet to instruct solicitors at all, given the prompt settlement of the damages claim and Alphabet’s status as a sophisticated commercial entity with regular experience of such matters. The third issue—which emerged as perhaps the most technically complex—was the basis upon which any costs order should be framed, specifically whether the fixed recoverable costs (FRC) regime under CPR Part 45 applied, and if so, what sum was recoverable.

The FRC point arose in an unusual way. Prior to the January 2026 hearing, both parties had proceeded on the common assumption that any costs would be assessed on the standard basis. Shortly before that hearing, it was argued that the FRC regime under CPR 45 applied, on the basis that the normal track for the claim was the fast track and that it would be assigned to complexity band 1, producing a fixed costs figure of £599. Mr Williams KC then contended that the January hearing itself constituted a “trial” for the purposes of the FRC regime, which would entitle Alphabet to the full fixed costs for a trial, including an advocate’s fee—a significantly higher sum. Neither party had addressed this point in their earlier submissions, and the judge requested further clarification before the March 2026 hearing.

The judge also raised, of his own motion, the question of whether the costs of the proceedings themselves could be dealt with proportionately, noting that the current dispute did not sit easily within the FRC framework as drafted, and querying whether the matter might have been more appropriately brought under Part 8 rather than Part 7.

The Parties’ Positions

Alphabet (Claimant)

Alphabet’s position was that the claim as a whole had not settled, because although there had been no dispute as to the value of the damages, AXA had not agreed to pay costs in circumstances where Alphabet had made clear, before AXA’s offer was made, that no complete agreement existed. Alphabet relied on the witness evidence of Mr Jackson, its Used Car Operations Manager, who explained that the company habitually engages solicitors to recover its losses in claims exceeding £10,000, and that it aims to recover the costs of doing so. Mr Jackson’s evidence set out a number of reasons why solicitor instruction was a reasonable and necessary part of Alphabet’s business operations: insurers frequently attempt to under-settle, raise liability issues, and seek to retain salvage to which they have no entitlement; insurers commonly make offers limited to the remaining finance rather than the pre-accident value less salvage; and the appointment of lawyers enables Alphabet to operate on equal terms against major insurers with in-house legal expertise. Mr Jackson also noted that the prompt instruction of solicitors had in fact led to an expeditious resolution of the claim, and that solicitor involvement enabled Alphabet to police the terms on which vehicles are written off and their salvage disposed of by licensed agents—a matter of public safety importance.

On the FRC point, Mr Williams KC argued that the normal track for the claim was the fast track, and that the FRC regime therefore applied. He submitted that the existence of a fixed costs provision for claims of this nature in Table 12 of CPR 45 was itself indicative that the instruction of solicitors in such claims was reasonable—otherwise there would be no provision for fixed costs at all. He further submitted that the January 2026 hearing constituted a “trial” or “final hearing” for the purposes of CPR 45.45(1)(d), relying on Bird v Acorn [2017] 1 WLR 1915, such that Alphabet was entitled to the full fixed costs for a trial together with an advocate’s fee.

On the abuse of process point, Alphabet relied on Birmingham City Council v Lee [2008] EWCA Civ 891, Ayton v RSM Bentley Jennison [2018] EWHC 285, and Moreira v French (HHJ Stewart, CC, 30 September 2008), all of which supported the proposition that where a defendant refuses to pay pre-action costs, the claimant’s only remedy is to issue proceedings.

AXA (Defendant)

AXA advanced two principal arguments. First, it contended that the proceedings were an abuse of process, there being no real dispute as to the damages claim which had already been paid. This argument was not ultimately pressed with any vigour at the hearing, and Ms Youshani appeared to acknowledge the force of the authorities relied upon by Alphabet.

Second, and more substantively, AXA argued that it had not been necessary for Alphabet to instruct solicitors. The submission was essentially that Alphabet, as a sophisticated commercial body dealing with such matters on a regular basis, had been too quick to instruct solicitors and should have allowed time for the matter to resolve itself. As events demonstrated, had Alphabet waited, an offer would have been received without the need for legal representation. Ms Youshani pointed to the fact that arrangements were already being made to deal with the damaged vehicle, and that agents had been appointed to deal with uninsured losses arising from the accident. The test, she suggested, was whether it had been necessary to instruct solicitors, rather than merely reasonable to do so.

On the FRC point, AXA’s position was that if a costs order were made, the applicable sum under the FRC regime would be £599, on the basis that the claim would normally be allocated to the fast track and complexity band 1.

Abuse of Process

Costs Judge Brown rejected the abuse of process argument. It was well-established that where a defendant refuses to pay costs properly incurred in the pre-action process, a claimant may issue proceedings to recover them. This was recognised by the Court of Appeal in Birmingham City Council v Lee, where Hughes LJ explained the importance of ensuring that defendants cannot evade liability for pre-action costs by strategically conceding damages only. Similarly, in Ayton v RSM Bentley Jennison, May J held that when a defendant tendered damages but refused to pay the claimant’s pre-action costs, “the only option left to a claimant” was to issue proceedings. This reasoning was echoed in Moreira v French, where the court observed that absent agreement, a claimant would have to issue proceedings for a nil-damages claim merely to recover costs.

There was an obvious problem with AXA’s position. In many claims—the judge gave the example of damages claims by victims of mesothelioma—the instruction of solicitors is plainly reasonable. Many such claims are settled before proceedings, and parties are encouraged in various pre-action protocols to settle their claims without the need for litigation. If AXA were right, an unscrupulous defendant could simply pay damages which are claimed and refuse to pay costs, and there would be no remedy for the claimant.

Further, the provisions of Part 36 contemplate that a claim may be settled before issue with the benefit of a costs order (see CPR 36.7). The rules anticipate that in respect of a claim where the normal track is the fast track for a claim for vehicle damage arising out of a road traffic accident, in the event of the claim being settled before proceedings are commenced the claimant would ordinarily be entitled to costs of £599. The judge reasoned that where there is an entitlement to an order for payment of this amount there must be a means of obtaining it. Accordingly, and in the absence of any other apparent means of doing so, a claimant whose claim for damages is settled before proceedings are commenced must be able to issue proceedings for an order for costs.

Reasonableness of Instructing Solicitors

The judge turned to the more substantive issue: whether it had been reasonable for Alphabet to instruct solicitors. Neither party had provided any authority which provided any principled or binding determination on this issue. The judge was not satisfied that the test was, as Ms Youshani suggested, whether or not it was necessary for Alphabet to instruct lawyers. There appeared to be no basis in law for such a high hurdle. If she were right it would be open to a losing party to argue that it would have been possible for someone to represent themselves (in many cases that may be so) and that the costs they actually and reasonably incurred would not be recoverable. The question was whether it was reasonable for solicitors to be instructed, albeit that test inherently imports at least some element of need.

The judge accepted that the line drawn in Table 12 was at least indicative for this purpose, so that in a claim for in excess of £10,000 it was prima facie reasonable to instruct solicitors. The judge did not think that merely because Alphabet was a commercial organisation, possibly of some size, with a degree of sophistication or that they would be dealing with these matters on a regular basis, made it unreasonable to instruct solicitors. Just because the company had experience and expertise in car leasing did not mean it had the expertise to deal with a claim for damages. Such a claim might involve consideration as to whether there is responsibility as a matter of law for an accident. Moreover the higher the value of the claim the more important the claim can be assumed to be, and the more important and complex it may be.

Perhaps recognising the force of these points, Ms Youshani’s emphasis was on the assertion that it was premature to instruct solicitors even if it were reasonable in general to instruct solicitors in a claim such as this. True it was that arrangements were being made to deal with the damaged vehicle and agents were appointed to deal with uninsured losses arising out of the accident. However much of the material she relied on was not known by Alphabet at the material time. Moreover, there was no admission of liability by the date of instruction and it seemed to the judge not unreasonable for Alphabet to instruct lawyers from the outset of any potential claim.

On the limited information available, the judge was unable to conclude that there was any degree of certainty that AXA would accept liability or make an offer in the amount claimed. In the event AXA made an offer for the full sum Alphabet said was due on same day as the various letters sent by Alphabet’s solicitors, and this happened very rapidly after solicitor’s instruction. Had Alphabet delayed instruction they may not have received an offer so quickly. In fact liability was somewhat transiently put in doubt at some point thereafter. It appeared that whilst AXA acted promptly once solicitors were instructed, whether they would have acted so quickly if no solicitors were instructed and costs were not payable was perhaps a matter of speculation.

The judge noted that he could readily understand that if there were a protocol or mutual understanding by which insurers were required unilaterally to inform interested parties, such as the owner of the vehicle, if liability is disputed and make a suitable offer within a certain period, things might be different. He was not however made aware of any such protocol or understanding. Alphabet was entitled to proceed with the claim promptly and the judge could see why the prompt resolution of these claims was important for their business. It was not suggested that it was improper or unreasonable for them to press for an admission of liability.

The judge accepted Mr Jackson’s witness evidence as to the reasonable business need to instruct solicitors. There had been no cross-examination of Mr Jackson on the contents of his witness statement. Ultimately it should benefit insurers to have claims presented with the benefit of some legal assistance. For these reasons the judge accepted that it was reasonable to instruct solicitors.

Application of Fixed Recoverable Costs

Before turning to the FRC analysis, the judge noted that having looked at the bill of costs, the costs claim had the appearance of being unreasonably high. He was concerned that before any Part 36 offers were made the parties should first have been clear that a dispute arose. Further, it was difficult to justify any involvement of a Grade A fee earner, and it struck the judge that if payable in principle it was difficult to see how the reasonable cost might have exceeded a very modest sum. It seemed that before the FRC regime came in, it would have been at the very least doubtful that a claim would have been made by the claimant to recover any costs.

The judge noted that where a party represents itself, the FRC do not apply (see CPR 45.4). This exception might be relevant where it is said that no representation was reasonable.

The judge agreed that the normal track for this claim was the fast track. A District Judge may have allocated this matter to the small claims track having regard to the factors in CPR 26.13. The claim may have had limited complexity. But merely because that might have happened was not relevant for the purposes of CPR 45.43. For these purposes the term “normal track” is a term of art, relying on the unreported decision of Costs Judge Haworth in Thaxton v Goodman (23 November 2010).

The judge addressed a conceptual difficulty: it appeared from Table 12 that even if there is settlement of the claim before issue, some view must be taken as to whether the claim “would normally be” allocated to the fast track. Plainly at that stage nobody would have known how long the trial would be, or indeed as to whether there might be the need for expert evidence, so the parties and the court cannot ascertain whether it was the normal track for the purposes of allocation under CPR 26.9(5). CPR 45.43 assumes that the “normal track” can be ascertained even in a claim which settles before issue. It seemed to the judge that the drafter of the rules must have assumed that in deciding whether the Table 12 fixed costs apply to claims which settle pre-issue, the parties and the court should look to the amount of the claim and the nature of the claim but not the provisions of CPR 26.9(5) (length of trial etc.) in deciding the track to which the claim would normally be allocated.

The judge added that he was not sure that it was open to AXA to complain that the costs were too high in this case, albeit the work actually done was very modest. It is in the nature of a fixed costs regime that there will be instances where the payment exceeds that which would be assessed as being reasonable; but there may be other more difficult cases where the fixed costs payable are less than would be reasonable. If the judge were to parse back the costs so that only reasonable costs were allowed it would undermine the ‘swings and roundabouts’ nature of the scheme.

It followed that if the claim was treated as having settled, Alphabet was entitled to £599. Had AXA accepted that in principle that would have been the end of the matter.

The Costs of the Proceedings

The question of what order to make as to the costs of the proceedings themselves emerged as perhaps the more difficult element of the dispute between the parties. Both parties, at least in their written submissions following the hearing in January, appeared to indicate that if the judge were to accept Alphabet’s case on the above two points, it ought to follow that the FRC apply and indeed that that hearing should be treated a “trial” for these purposes. Reference was made to CPR 45.45(1)(d) which provides that the reference in Table 12 to a ‘trial’ is a reference to a ‘final hearing’, and to Bird v Acorn [2017] 1 WLR 1915.

As both advocates observed, the current dispute did not sit easily within the FRC as drafted. The difficulty was perhaps not so obvious in this case given the sums involved but if in principle Alphabet were right about this, and the costs of these proceedings can only be awarded on the basis that the hearing that took place were a ‘trial’, then the costs payable in similar circumstances involving a Complexity Band 4 case might be said to be highly disproportionate (c. £10,000 plus VAT). It might be questioned whether Parliament can have intended such an outcome.

Ms Youshani made it clear that she was not arguing that Alphabet acted unreasonably when issuing the claim under Part 7. The judge was told that in other cases insurers appear to have equated the position to that which applies in Costs-only proceedings, when there is an agreement that costs are payable (see CPR 46.14). Here there was no agreement that costs were payable. But since, on one view, the only real issue was about costs the judge raised the question as to whether this claim could be dealt with under the more general provisions of Part 8. If there is, as the parties agree, a discretion as to whether pre-issue costs are payable then it might be said that there must be a proportionate way of resolving any issue that might arise as to the exercise of that discretion.

The judge determined that it was not necessary or appropriate to determine the issue as to the order as to costs at that stage. He stated that his comments were not intended to do anything more than indicate some concern, not binding determinations. The matter was reserved for further submissions.

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Fixed & Predictable Costs, Housing, New Costs Blog

The Senior Courts Costs Office’s decision in Smith v Wigan Borough Council [2026] EWHC 660 (SCCO) concerned whether a claimant’s recoverable costs should be restricted to Small Claims Track levels following settlement of a housing disrepair claim for £1,000 plus repairs.

Background

The Claimant, Gillian Smith, an elderly and vulnerable tenant, brought a claim against her landlord, Wigan Borough Council, for disrepair of her residential premises and associated damages. The parties reached settlement during pre-action correspondence in accordance with the Pre-Action Protocol for Housing Disrepair Cases. The Defendant’s final Part 36 offer (dated 30 January 2025) provided for specified repairs to be completed within 56 days and payment of £1,000 in damages, plus the Claimant’s reasonable legal costs to be assessed if not agreed. Following a clarifying phone call on 4 February 2025 confirming the costs term was “on a standard basis”, the Claimant accepted the offer. The Claimant subsequently commenced detailed assessment proceedings via a Part 8 costs-only claim, resulting in an order for costs to be assessed on the standard basis. Following provisional assessment by a costs officer, who rejected the Defendant’s argument that costs should be restricted to Small Claims Track levels, the Defendant requested an oral review. That review was ultimately confined to a single issue: whether CPR 46.13 required restriction of costs to those allowable on the Small Claims Track.

Costs Issues Before the Court

The sole issue was whether, pursuant to CPR 46.13, the court should restrict the Claimant’s recoverable costs to those allowable on the Small Claims Track. This required a hypothetical retrospective analysis of whether the underlying disrepair claim would have been allocated to the Small Claims Track had proceedings been issued rather than settled pre-action. The determination turned on the application of CPR 26.9(1)(b), which provides that the Small Claims Track is the normal track for tenant disrepair claims where “the cost of the repairs or other work to the premises is estimated to be not more than £1,000” and “the value of any other claim for damages is not more than £1,000”. The Defendant contended the £1,000 settlement sum was highly persuasive, if not definitive. The Claimant argued the true value of the damages claim exceeded £1,000 and that the Defendant’s conduct in making Part 36 offers demonstrated acceptance that the claim would not be allocated to the Small Claims Track.

The Parties’ Positions

The Defendant’s Position: Mr Munro submitted that CPR 46.13 entitled the Defendant to argue for Small Claims Track costs notwithstanding the earlier costs order on the standard basis. He contended the court must conduct the CPR 46.13 exercise by examining the evidence, with the agreed settlement sum of £1,000 being a highly persuasive factor. He argued that as the Claimant had provided no evidence to support a pleaded value exceeding £1,000, the court should find the claim would have been allocated to the Small Claims Track. He distinguished Birmingham City Council v Lee [2008] EWCA Civ 891 on the basis it did not address the specific retrospective analysis required by CPR 46.13.

The Claimant’s Position: Mr Poole accepted the settlement sum had some relevance but argued it could not be the sole consideration. He placed significant weight on the Defendant’s conduct during settlement negotiations, specifically its use of three formal Part 36 offers, each referring to costs “to be assessed if not agreed”. As Part 36 does not apply to small claims under CPR 27.2(1)(g), he submitted this demonstrated the Defendant’s implicit acceptance that the claim would not be allocated to the Small Claims Track. He further argued that, based on the duration of disrepair (from December 2023), the Claimant’s vulnerability, and applicable rent diminution principles, the true value of the damages claim would have been pleaded at over £1,000. He relied on the Claimant’s detailed contemporaneous calculation of £1,304.96 to support this valuation.

The Court’s Decision

Costs Judge Nagalingam upheld the costs officer’s decision and rejected the Defendant’s CPR 46.13 argument. The court’s reasoning was multi-faceted.

First, the judge noted that CPR 46.13 is discretionary (“it may restrict”) and requires a holistic, hypothetical assessment using the language of “would have” and “if”, not a mechanistic application of the settlement figure. Significantly, the judge observed at paragraph 80 that “There is no reference to the settlement sum within the rule, and one observes that such a provision would likely have been included by the legislature were the settlement sum intended to be a definitive measure of retrospective allocation.” The judge found that “where parties agree a financial dispute by way of compromise, the settlement sum may be one measure of value but it is not definitive”.

Second, the court conducted a detailed analysis of the pre-action correspondence and the circumstances of the claim. The Claimant was an elderly, vulnerable tenant with multiple health issues, acknowledged as such by the Defendant. The disrepair persisted for over a year, during which the Claimant paid full rent. The judge calculated that the £1,000 settlement, when spread over the 69-week period of disrepair, represented compensation of £14.49 per week from the £80 weekly rent—a diminution of around 18%. At paragraph 79, the judge noted the Defendant had provided no “cogent explanation” as to why the court should accept the claim would have been allocated to the Small Claims Track, save for the settlement sum agreed. Crucially, the judge found at paragraph 91 that the Claimant’s contemporaneous damages calculation of £1,304.96, based on rent diminution principles and the Claimant’s circumstances, was “compelling contemporaneous evidence” that was “uncontradicted by any valuation evidence from the Defendant”.

Third, the court attached importance to the Defendant’s conduct. The making of three Part 36 offers, each stating costs would be “to be assessed if not agreed”, was incompatible with Small Claims Track procedure and, as the judge found at paragraph 56, “might reasonably lead one to conclude that the Defendant acknowledged the likelihood of this case being allocated to the Fast Track had it been issued”. The judge found at paragraph 54 that the Defendant’s wording “likely led to the Claimant assuming that no form of fixed costs argument would be advanced”, and at paragraph 88 that the final offer’s terms “strongly inferred no intention to argue costs on the basis of allocation to the Small Claims Track”. Allowing the Defendant to resile from this position would, the judge stated at paragraph 89, “imperil future settlements” and encourage the “undesirable practice” of parties trading offers which “either by pennies or a few pounds exceed the threshold to escape ‘would-be’ allocation to the Small Claims Track”. The judge linked this directly to the overriding objective, observing at paragraph 90 that it “is not best served by an approach to litigation which, in effect, requires Claimants to issue proceedings in order to achieve certainty as to costs recovery”.

Applying CPR 26.9(1)(b), the judge was satisfied that, based on the evidence of the claim’s circumstances and value at the time, it would not have been allocated to the Small Claims Track. At paragraph 87, the judge concluded: “I am in no doubt that the facts and circumstances as at the date of acceptance were such that had proceedings instead been commenced, this claim would not have been allocated to the Small Claims Track on the basis that pursuant to CPR 26.9(1)(b)(iii) the Small Claims Track would not have been the normal track for a ‘claim which includes a claim by a tenant of residential premises against a landlord’ where the value of the claim for damages would have reasonably been pleaded at more than £1,000 based on the circumstances presented at the time.” The provisional assessment was therefore finalised, with the Defendant ordered to pay the Claimant’s costs of the assessment and the oral review.

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The High Court’s decision in Motor Insurers’ Bureau v Santiago [2026] EWHC 513 (KB) addresses whether interpreter fees provided through a company related to the claimant’s solicitors must be broken down to identify recoverable disbursement elements in fixed costs cases.

Background

The respondent, Mr Raphael De Lima Santiago, sustained injuries in a motorcycle accident on 22 May 2018 involving an uninsured driver. Consequently, the Motor Insurers’ Bureau (MIB) was joined as second defendant to the claim. The substantive claim settled on the first day of trial for £20,000 plus costs, with the case falling under the fixed recoverable costs regime.

Mr Santiago required Portuguese interpretation services. His solicitors, Bond Turner, served a costs schedule dated 8 August 2022 claiming £924 for an interpreter’s fee at trial. The supporting invoice was issued by Professional and Legal Services Ltd (PALS), a company related to Bond Turner. On provisional assessment, the MIB contended that interpreter fees were not recoverable as a disbursement under the then applicable CPR 45.29I. A Deputy District Judge accepted this argument. The claimant successfully appealed this point directly to the Court of Appeal, which held that an interpreter’s fee was a recoverable disbursement. The matter was then remitted to His Honour Judge Dight, the Designated Civil Judge for London, to assess the quantum of that fee.

Before Judge Dight, the MIB argued that the PALS invoice likely contained an irrecoverable agency or profit element and sought a breakdown. The claimant resisted providing a breakdown, maintaining the fee was reasonable. Judge Dight, in a reserved judgment dated 21 February 2025, assessed the recoverable fee at £794.40 (being £662 plus VAT). The MIB appealed that assessment, and permission was granted by Sir Stephen Stewart on 4 August 2025.

Costs Issues Before the Court

The appeal concerned the correct approach to assessing a disbursement for interpreter services within a fixed costs case. The central issues were: first, whether the receiving party was required to provide a detailed breakdown of an invoice from a service provider company (particularly one related to the solicitors) to identify and potentially strip out any agency fee or outsourced profit cost; second, whether, in the absence of such a breakdown, the fee should be assessed at nil; third, whether the Judge’s methodology for assessing a reasonable and proportionate fee was erroneous in law.

The Parties’ Positions

The appellant, the MIB, represented by Mr Robert Marven KC, advanced three principal arguments. First, it submitted that the element of the fee retained by PALS was irrecoverable in principle, being characterised as a disguised solicitors’ profit cost or an impermissible agency fee outside the fixed costs regime. A breakdown was therefore essential to identify what could be recovered. Second, it argued that a breakdown was necessary as a matter of procedural fairness to enable a proper assessment. Third, it contended that the Judge’s assessed figure of £794.40 was too high, suggesting a lower figure should have been applied, potentially aligned with the evidence of an interpreter’s direct fee of £300.

The respondent, Mr Santiago, represented by Mr Benjamin Williams KC, opposed the appeal. He submitted there was no general rule requiring a breakdown of a disbursement invoice. He argued that the fee for interpretation services, provided via a company, was a proper disbursement, drawing an analogy with fees charged by expert consultancies. He maintained that the Judge had all necessary evidence to assess reasonableness and that his conclusion was within the range of his legitimate discretion.

The Court’s Decision

Mr Justice Moody dismissed the appeal. On the first issue, the court rejected the argument that a breakdown was required as a matter of principle to separate an agency component. It approved the distinction from Crane v Cannons Leisure Centre that a disbursement is characterised by work for which the solicitor does not bear personal responsibility to the client. Interpretation services fell into this category. The court held there was nothing wrong with such services being provided via a company, noting potential advantages such as providing cover for illness or a range of interpreters of differing levels of expertise and experience. The fact that PALS and Bond Turner were related did not of itself render the arrangement unlawful or necessitate a breakdown. The court noted that the Legal Services Act 2007 expressly permits procuring services from a related company. The analogy with an expert report from a consultancy firm was considered helpful; the full fee charged would be a disbursement without needing to dissect the expert’s internal remuneration.

The court acknowledged that there may be cases where a breakdown is needed to investigate abuse or establish reasonableness. The court noted that its attention had been drawn to County Court cases requiring breakdowns for medical agency invoices and to commentary in Cook on Costs that deprecated that practice. However, the court held there was no rule of law or practice that requires a breakdown in every case where a litigation service is provided through a company. On the facts, the evidence before the Judge provided sufficient information for the assessment. This included Mr Dean’s evidence that the specific interpreter, Mr Alvarenga, would charge £300 directly, and Mr Ryder’s evidence of alternative quotes for interpreter services. With this information, no breakdown was required and the fee was not to be assessed at nil.

On the second issue, the court found no error in the Judge’s assessment of a reasonable and proportionate fee. The Judge had correctly directed himself by reference to CPR 44.3 and the market-based approach endorsed in Callery v Gray. His decision to take the mean of the quoted figures provided by the claimant’s costs draftsman was an evaluative judgment reached by an experienced judge who would himself have conducted summary assessments after trials in London including claims for interpreters’ charges. The appeal court emphasised that this was a paradigm case for appellate restraint and would not interfere with the first-instance judge’s assessment.

Accordingly, the Judge’s assessment of £794.40 was upheld and the appeal dismissed.

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The Court of Appeal’s decision in Attersley v UK Insurance Limited [2026] EWCA Civ 217 resolves an important question about the interplay between Part 36 costs consequences and the fixed costs regime for claims that exit the Pre-Action Protocol for Low Value Personal Injury Claims in Road Traffic Accidents.

Background

The claim arose from a road traffic accident on 9 March 2018. The claimant, Laura Attersley, initiated her claim under the Pre-Action Protocol for Low Value Personal Injury Claims in Road Traffic Accidents (the RTA Protocol) on 19 March 2018, valuing it at up to £10,000. The claim exited the protocol on 9 April 2018 after the defendant, UK Insurance Limited, disputed liability pending enquiries. Liability was subsequently admitted on 29 April 2019.

Shortly before limitation expired, the claimant issued a Part 7 claim form on 13 February 2021, now valuing the claim at up to £150,000 with reference to ongoing physical and psychological issues. The defendant filed a defence admitting liability on 4 March 2021 and, on the same day, made a Part 36 offer of £45,000. The 21-day relevant period for acceptance expired on 25 March 2021.

The case was allocated to the multi-track at a case management conference on 5 January 2022. A costs management order was made. It was agreed by the parties at the CMC that the case was suitable for the multi-track given the quantum claimed, the expert evidence required, and the time estimate for trial. On 8 July 2022, the claimant accepted the defendant’s Part 36 offer, which had not been withdrawn. The acceptance was late, occurring well after the expiry of the relevant period. A dispute arose as to the correct basis for assessing the claimant’s costs up to the date of acceptance, leading to a costs hearing.

Costs Issues Before the Court

The central issue was determining the costs consequences of the claimant’s late acceptance of the defendant’s Part 36 offer. The dispute turned on which rule in CPR Part 36 governed the situation. The claimant argued that because the case had been allocated to the multi-track by the date of acceptance, the fixed costs regime in Section IIIA of Part 45 was disapplied, and therefore her costs fell to be assessed on the standard basis under CPR 36.13. The defendant contended that the claim, having started under the RTA Protocol, was governed by the specific costs consequences for such cases set out in CPR 36.20, which provided for fixed costs even on late acceptance. The court had to decide whether allocation to the multi-track retrospectively ousted the application of rule 36.20.

The Parties’ Positions

The defendant argued that its construction was dictated by the plain wording of the rules. Rule 36.20(1) applied where a claim no longer continued under the RTA Protocol, which was the case here. Rule 36.20(4) specifically addressed late acceptance, entitling the claimant only to fixed costs for the stage applicable when the relevant period expired. It was submitted that rule 36.20 was a specific provision dealing with ex-Protocol claims, which should prevail over the more general rule 36.13. The defendant argued that the claimant’s interpretation would create a perverse incentive to delay accepting offers to try and secure a more favourable costs regime upon later allocation, undermining the purpose of Part 36 to encourage early settlement.

The claimant’s primary argument relied on the Court of Appeal’s decision in Qader v Esure Services Ltd [2016] EWCA Civ 1109. She submitted that the effect of allocation to the multi-track was to disapply the fixed costs regime in Section IIIA of Part 45 entirely. Consequently, the claim no longer fell within the scope of rule 36.20, and the default position in rule 36.13 applied, with costs to be assessed on the standard basis. The claimant emphasised that her claim was always suitable for the multi-track and she was not seeking a windfall, but rather the costs appropriate to such a case. She also advanced an alternative argument that even if rule 36.20 was engaged, rule 36.13(3) (“except where the recoverable costs are fixed by these Rules”) meant standard costs applied because allocation had disapplied the fixed costs.

The Court’s Decision

The Court of Appeal allowed the defendant’s appeal, restoring the order that the claimant was entitled only to fixed costs. Lord Justice Miles, giving the leading judgment with the agreement of Lady Justice Falk and Lord Justice Lewison, held that rule 36.20 applied and that the claimant was restricted to the fixed costs applicable at the date the relevant period expired.

The court found that the natural and straightforward reading of the rules was that where, on the date the relevant period of a Part 36 offer expired, the claim was still within the Section IIIA fixed costs regime (i.e., not yet allocated to the multi-track), the consequences of acceptance were governed by rule 36.20. Rule 36.20(4) expressly fixed the claimant’s entitlement by reference to the costs stage applicable at the expiry date of the relevant period. In this case, that date (25 March 2021) was long before allocation to the multi-track (5 January 2022).

The court confined Qader to its context and rejected the claimant’s broad proposition that it had retrospective effect for all purposes, including Part 36. It held that Qader decided that the fixed costs regime should not apply to a case once it was allocated to the multi-track, but it did not establish that allocation operated to treat the case as if it had never been within the regime for all purposes, retrospectively. The words “for so long as the case is not allocated to the multi-track” in rule 45.29B had a temporal meaning; the regime ceased to apply prospectively from allocation, not retrospectively. The court noted that Qader did not have to consider the interplay with other rules or the question of potential retrospective effect of allocation for other purposes.

The court emphasised that this interpretation promoted certainty and coherence with the purpose of Part 36. Drawing on the reasoning in Qader itself, where Briggs LJ had explained that requiring parties to guess whether a case which settled prior to allocation was subject to fixed costs would introduce damaging uncertainty, the court held that the claimant’s interpretation would similarly bring undesirable uncertainties into the operation of Part 36. It ensured that a defendant’s liability for costs was anchored to the costs environment applicable during the period when the claimant was deciding whether to accept the offer. It would be surprising and potentially unjust if a claimant could improve their costs position by accepting late, based on a subsequent allocation outside the defendant’s control. This would undermine the regime’s aim of encouraging early settlement.

The court rejected the claimant’s alternative argument based on rule 36.13(3). It gave two reasons: first, rule 36.13 is expressed to be “subject to” rule 36.20, so it was necessary to determine whether rule 36.20 applied before considering the specific wording of rule 36.13(3); and second, where a case continued to come within the fixed costs regime on the date when the relevant period ended, the recoverable costs were indeed “fixed” by the rules for the purposes of rule 36.13(3).

The court concluded there was no conflict between the rules, but if there were, the specific rule 36.20 would prevail over the more general rules in Part 45. The court also noted that the Rules Committee may wish to consider scenarios where a Part 36 offer is made after multi-track allocation or where the relevant period expires after such allocation, as the existing rules do not yield entirely straightforward answers in such cases. The court noted that at first instance, Stacey J had found that the claim was “always likely to be allocated to the multi-track” once the Part 7 form was issued, yet the court reached its decision favouring fixed costs even in such a case, underscoring the strength of the rule-based and policy reasoning.

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Court of Appeal Limits Pre-Transfer Costs To IPEC Scale Where No Good Reason to Depart From Transferring Judge’s Indication

CPR & Practice Directions, Fixed & Predictable Costs, New Costs Blog

The Court of Appeal’s decision in Salts Healthcare Limited v Pelican Healthcare Limited [2026] EWCA Civ 93 clarifies the costs consequences of transferring proceedings from the Intellectual Property Enterprise Court to the Patents Court, establishing that a trial judge who departs from the transferring judge’s indicated costs regime without good reason commits an error of principle.

Background

The underlying dispute was a patent infringement and validity claim concerning UK Patent No. 2569212 for an ostomy appliance. The Claimant, Salts Healthcare Limited, alleged that the Defendant, Pelican Healthcare Limited, had infringed the patent by marketing its ModaVi range of ostomy bags. Pelican denied infringement and counterclaimed for revocation. The claim was commenced in IPEC but was subsequently transferred to the Patents Court.

The procedural history relevant to costs began on 24 May 2023 when Pelican applied to transfer the claim. On 11 July 2023 HHJ Hacon acceded to the application and ordered the transfer for the reasons given in his judgment [2023] EWHC 2232 (IPEC). A recital in HHJ Hacon’s order stated that the court had indicated “that costs prior to transfer should be assessed in accordance with the usual IPEC scale cost caps pursuant to CPR r.46.21 and Practice Direction 46 albeit costs were reserved and this was an issue for the judge making the assessment”. Paragraph 2 of the order provided simply: “Costs reserved”.

The substantive trial took place in the Patents Court before Ian Karet OBE, sitting as a Deputy High Court Judge. In a judgment dated 5 March 2025, the judge dismissed Salts’ claim for infringement, declared claim 8 invalid as granted, and granted permission to amend. The judge addressed costs in a consequential judgment on 1 April 2025, in which he declined to order that Pelican’s pre-transfer costs be assessed in accordance with the IPEC scale cost caps.

Costs Issues Before the Court

The primary costs issue before the Court of Appeal was whether the costs incurred by Pelican during the period when the claim was proceeding in IPEC, prior to its transfer to the Patents Court, should be assessed subject to the IPEC scale costs caps. IPEC operates a distinctive costs regime under Section VII of Part 46 of the CPR. Rule 46.20(1) provides that “this Section applies to proceedings in the Intellectual Property Enterprise Court”. Rule 46.21(1) imposes a cap on total recoverable costs of £60,000 on the final determination of a claim in relation to liability. The only express exceptions are where a party has abused the process of the court or the claim concerns a patent, registered design, or trade mark the validity of which has been certified in earlier proceedings. In the Patents Court, by contrast, costs are assessed on the standard basis without pre-determined caps.

The dispute turned on the interaction between these provisions and the power to set terms on transfer under Practice Direction 30, paragraph 9.2(1).

The Parties’ Positions

Salts contended that the IPEC scale cost caps applied to all costs incurred while the proceedings were in IPEC, irrespective of the subsequent transfer. Its primary argument was that rule 46.20(1) governed costs for work done in that court, and that the only bases for exceeding the caps were those in rule 46.20(2), neither of which applied. Salts relied on the purpose of the IPEC scale as articulated in Westwood v Knight [2011] EWPCC 11: to provide certainty about costs exposure from the outset, enabling potential litigants and their advisers to predict their costs exposure before any action is commenced. In the alternative, if the judge had a discretion, Salts argued its exercise was flawed because he failed to give proper weight to HHJ Hacon’s indication and provided no good reason to depart from the IPEC scale.

Pelican argued that the IPEC scale cost regime applied only to proceedings that both started and concluded in IPEC. It relied by analogy on CPR 27.15(1), which expressly provides that where a claim is allocated to the small claims track and subsequently re-allocated, costs are assessed as if allocated to the new track from the outset. Pelican submitted that the absence of an equivalent provision for IPEC supported its interpretation. It also contended that the judge had correctly exercised his discretion, emphasising that the pre-transfer work formed an integral part of the overall litigation in the Patents Court.

The Court’s Decision

The Court of Appeal (Lord Justice Arnold, with whom Lord Justice Miles and Lord Justice Newey agreed) allowed Salts’ appeal on the costs issue. The court’s reasoning proceeded in three stages.

Interpretation and Discretion: The court held that rule 46.20(1) did not provide a clear answer to the question of what happens to pre-transfer costs after transfer. It rejected Salts’ primary argument that the IPEC caps applied as of right. However, it equally rejected Pelican’s interpretation that the caps only applied to cases that finished in IPEC. The court observed that Pelican’s reliance on CPR 27.15(1) was, if anything, a point against its own case, precisely because there was no equivalent provision for IPEC.

The key to the issue was found in paragraph 9.2(1) of Practice Direction 30, which provides that when ordering a transfer to or from IPEC, the court may “specify terms for such a transfer”. The court approved the earlier decision of HHJ Birss QC (as he then was) in Comic Enterprises Ltd v Twentieth Century Fox Film Corp [2012] EWPCC 13, which confirmed that this power includes the ability to order that pre-transfer costs be assessed on the IPEC scale in any event. The court agreed that it lies in the discretion of the judge making a transfer order whether to make such an order. It followed that, where no such order is made, the receiving court retains a discretion as to whether to apply the IPEC scale to pre-transfer costs.

The Purpose of the IPEC Scale: In reaching this conclusion, the court endorsed the statement of purpose given by HHJ Birss QC in Westwood v Knight, describing the scale costs regime as one of the key reforms implemented to improve access to justice for individuals and SMEs in intellectual property disputes. However, the court considered that the rationale for scale costs did not apply “at least with full force” to claims started in IPEC but then transferred to the Patents Court, since transfer inherently means the parties will no longer be protected by the scale costs provisions for future costs. The court expressly reserved for future consideration the question whether there is a residual discretion to depart from scale costs even in cases that remain in IPEC.

Flaw in the Exercise of Discretion: The Court of Appeal found that the trial judge’s exercise of discretion was flawed. The judge had concluded that it was “not an invariable rule” that pre-transfer costs were capped and that, because the IPEC work was integral to the Patents Court dispute, Pelican should recover its costs in the court in which the matter was determined. The appellate court held that this was the wrong approach. The recital in HHJ Hacon’s transfer order contained a clear indication that pre-transfer costs “should” be assessed under the IPEC caps. The discretion therefore fell to be exercised on the basis that HHJ Hacon’s indication should be departed from “if, but only if, there was a good reason to do so”. The trial judge had not identified any such reason. Rather, he had treated the pre-transfer costs as being at large, subject to the ordinary Patents Court costs regime.

Re-exercise of Discretion: Having found the exercise of discretion flawed, the Court of Appeal re-exercised it. The court noted that HHJ Hacon, as the IPEC judge who heard the transfer application, was well placed to assess the parties’ conduct during the IPEC phase. Pelican’s arguments about Salts’ pre-transfer conduct — the same arguments it had advanced before HHJ Hacon — did not persuade the court to take a different view. The court therefore varied the costs order to limit Pelican’s recoverable pre-transfer costs in accordance with the IPEC scale.

The court added, per curiam, that although its analysis referred to transfers from IPEC to the Patents Court, the same principles apply to transfers of copyright and trade mark claims from IPEC to the High Court.

Key Takeaway

This decision establishes that where IPEC indicates at the point of transfer that pre-transfer costs should be assessed on the IPEC scale, a receiving court may only depart from that indication for good reason. Practitioners acting in IPEC proceedings that may face transfer should ensure that the question of pre-transfer costs is expressly addressed in the transfer order — and, where appropriate, that a binding term under PD 30 paragraph 9.2(1) is sought rather than a mere indication in a recital.

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Wrongful Interference With Goods Against Police Mandates Multi-Track Allocation | Part 36 Acceptance Does Not Oust Fixed Costs (31/01/2026)

Costs Judge Whalan held that a claim against the police for wrongful interference with goods fell within CPR 26.9(10)(e)(i) as it included an intentional tort, mandating multi-track allocation and excluding fixed recoverable costs. The court also held (obiter) that Part 8 costs-only proceedings issued after 1 October 2023 trigger FRCs for legacy settlements, and that Part 36 acceptance does not constitute “contracting out” under CPR 45.1(3).

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CPR 26.9(10)(e) | Wrongful Interference With Goods Against Police Mandates Multi-Track Allocation | Part 36 Acceptance Does Not Oust Fixed Costs

Actions Against Police, Fixed & Predictable Costs, New Costs Blog, Part 36

Background

The case concerned a claim brought by the Executors of the Estate of Kenneth Collins against the Chief Constable of Thames Valley Police. In July 2015, police officers arrested Mr Collins and, during a search of his property, seized thirteen guns and ammunition [§2]. He was later convicted of related offences in February 2017, and a destruction order was made for some of the items [§3]. Following revocation of his shotgun certificate, requests for the return of the remaining guns to his partner were refused. On 6 November 2018, the police informed Mr Collins that the guns had been destroyed [§4].

Mr Collins instructed Brabners LLP to pursue a claim in negligence and/or wrongful interference with goods, with losses quantified at approximately £228,000. A Letter of Claim was sent on 12 July 2019 [§5]. The Defendant’s response on 28 October 2020 indicated it could identify no defence to liability in principle [§5]. Mr Collins died on 15 April 2022, and the claim was continued by his estate [§6]. Both parties obtained expert valuation evidence.

On 11 January 2023, the Claimant made a Part 36 offer of £50,000 [§7]. On 17 January 2023, the Defendant made a Part 36 offer of £32,500 using Form N242A, which included a term that acceptance within 21 days would render the Defendant liable for the Claimant’s costs in accordance with CPR 36.13 [§8]. The Claimant accepted this offer on 1 February 2023, within the relevant period.

Costs were not agreed. On 31 December 2024, the Claimant issued Part 8 costs-only proceedings [§9]. The Defendant contested the making of an order for assessed costs, leading to the hearing before Costs Judge Whalan.

Costs Issues Before the Court

The sole issue for determination was whether the Claimant was entitled to an order for costs to be assessed on the standard basis, or whether their recovery was limited to fixed recoverable costs under the extended regime introduced by the Civil Procedure (Amendment No. 2) Rules 2023. This turned on three alternative questions [§10]:

1. Whether FRCs were excluded because the substantive claim fell within the scope of CPR 26.9(10)(e), requiring mandatory allocation to the multi-track.
2. Whether FRCs did not apply because the claim was a non-personal injury claim that settled without proceedings being issued, per the transitional provisions of the 2023 Rules.
3. Whether FRCs were ousted by the express terms of the Part 36 settlement agreed in February 2023.

The Parties’ Positions

The Claimant’s Position: Counsel, Mr Waszak, submitted that FRCs did not apply for three reasons. First, the claim fell within CPR 26.9(10)(e)(i) as a “claim against the police which includes a claim for… an intentional or reckless tort” [§13]. The Letter of Claim referenced “wrongful interference with goods”, which encompassed the intentional torts of conversion and trespass to chattels [§14-16]. The destruction of the guns was, by nature, a deliberate act [§17]. This would have mandated multi-track allocation, taking the claim outside the FRC regimes.

Second, on the transitional provisions, Mr Waszak argued that FRCs only applied to non-personal injury claims where substantive “proceedings are issued” on or after 1 October 2023 [§21]. The phrase “proceedings” referred to the substantive claim, not subsequent Part 8 costs proceedings. As the substantive claim settled pre-issue, it was not caught. He cited a Q&A supplement to the White Book in support [§24] and invoked the presumption against retrospective legislation, arguing it would be “manifestly unjust” and “absurd” to apply FRCs retrospectively to a claim conducted under a different costs regime [§26].

Third, he argued that the Part 36 agreement itself expressly ousted FRCs. The Defendant’s offer stated costs would be payable “in accordance with rule 36.13”, which provides for assessment on the standard basis. This constituted an express agreement that costs would not be fixed, per CPR 45.1(3) [§35].

The Defendant’s Position: Counsel, Mr Hogan, submitted that FRCs applied. On the first issue, he contended the claim was, in legal and factual reality, solely in negligence. The Letter of Claim’s language was “redolent of negligence” and contained no elaboration on intentional torts [§18]. The Defendant’s admission of liability was based on negligence.

On the transitional provisions, Mr Hogan argued that the word “claim” in the rules included Part 8 costs-only proceedings. A “claim” remained in being until all elements, including costs, were concluded [§28]. Therefore, issuing costs proceedings after 1 October 2023 triggered the FRC regime for all costs incurred. He cited the county court decisions in Asmat Bi v Tesco Underwriting Ltd [§32] and Bek v Simsek [§33] which reached this conclusion. He also noted that procedural changes are not subject to the rule against retrospectivity [§30].

On the third issue, he submitted that acceptance of a Part 36 offer did not amount to “contracting out”. It merely conferred an entitlement to costs determined by the rules as a whole, which included the potential for FRCs [§36]. Part 36 is a procedural code, not a contractual agreement to oust other rules.

The Court’s Decision

Costs Judge Whalan held that the Claimant was entitled to an order for costs to be assessed on the standard basis.

On Issue 1 (CPR 26.9(10)(e)): The court found that the substantive claim did fall within CPR 26.9(10)(e)(i). The provision required only that the claim “included” a claim for an intentional tort — the provisions were “not exclusive but inclusive” [§19]. The reference to “wrongful interference with goods” in the Letter of Claim “sensibly and inevitably” suggested an alternative claim in conversion and/or trespass to chattels. The destruction of the firearms was “self-evidently the consequence of an intentional act” on the part of the Defendant [§19]. Therefore, the claim would have been mandatorily allocated to the multi-track, placing it outside the scope of FRCs under CPR 45. This finding was determinative in the Claimant’s favour.

On Issue 2 (Transitional Provisions): The court concluded that, had Issue 1 been decided differently, FRCs would have applied by virtue of the transitional provisions [§34]. It rejected the Claimant’s narrow interpretation. The court held that “claim” in the 2023 Rules included Part 8 costs-only proceedings issued to obtain a costs order. There was a single, continuing claim until all elements were concluded. No material distinction should be drawn between the substantive claim and costs-only proceedings. The changes were procedural and not subject to the rule against retrospectivity. The court found the scheme created a “bright line” demarcation and noted the Claimant had eight months to issue costs proceedings before the 1 October 2023 commencement date. It found the county court decisions of Asmat Bi and Bek “reassuring”, though not binding. The court expressly declined to place any reliance on the CPRC Minutes of 3 November 2023 [§34].

On Issue 3 (Contracting Out via Part 36): The court rejected the argument that the Part 36 agreement ousted FRCs [§37]. Offer and acceptance under Part 36 invoked a procedural, not a contractual, process. The entitlement to costs under CPR 36.13 was expressly subject to the proviso “Except where the recoverable costs are fixed by these Rules”. Therefore, it could not be construed as an agreement that costs would not be fixed if the Rules otherwise provided for FRCs.

Implications for Costs Practice

This decision has two significant implications for practitioners.

First, it establishes that claims against the police for wrongful interference with goods — even where framed primarily in negligence — will include an element of intentional tort (conversion or trespass to chattels) sufficient to engage CPR 26.9(10)(e)(i). Such claims must be allocated to the multi-track and are therefore excluded from the FRC regime regardless of value. Practitioners handling claims against the police should carefully consider whether any intentional tort element is present, as this provides an escape route from fixed costs.

Second, the court’s analysis of the transitional provisions is strictly obiter — the claim having already been excluded from FRCs on the intentional tort ground — but it represents the first SCCO-level endorsement of the approach taken by the county courts in Asmat Bi and Bek v Simsek, and is therefore of considerable practical significance. Notably, the court reached this conclusion on the proper construction of section 2(1) of the Civil Procedure (Amendment No. 2) Rules 2023 without placing any reliance on the CPRC Minutes of 3 November 2023, which practitioners had previously been citing as the primary authority for the position that Part 8 costs-only proceedings constitute “proceedings” for the purposes of those transitional provisions. The fact that the SCCO arrived at the same result through independent statutory analysis makes the reasoning considerably more robust. For any legacy non-PI claims that settled pre-issue before October 2023 but where Part 8 costs-only proceedings were issued after that date, this confirms that FRCs will apply. Practitioners with such cases still in the pipeline should take note.

Third, the court’s finding that acceptance of a Part 36 offer does not constitute contracting out of FRCs under CPR 45.1(3) is also technically obiter, but has implications well beyond police claims. The judgment confirms that Part 36 is a self-contained procedural code, and that the entitlement to costs under CPR 36.13 is expressly subject to the proviso “Except where the recoverable costs are fixed by these Rules.” Practitioners relying on Part 36 settlements to escape FRCs will need to seek express contractual language — a standard Part 36 acceptance, on its own, will not suffice.

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Court Of Appeal Overrules Mundy | 90:10 Liability Offers Valid Under Part 36 — But Only Where Liability Is Determined

Fixed & Predictable Costs, New Costs Blog, Part 36, Personal Injury

The Court of Appeal’s decision in Smithstone v Tranmoor Primary School [2026] EWCA Civ 13 overrules Mundy v TUI and confirms that 90:10 liability Part 36 offers are valid in principle, while clarifying that such offers only trigger CPR 36.17(4) where there is a determination of liability rather than a global monetary settlement.

Background

The claim arose from a minor injury sustained by Jayden Smithstone, a ten-year-old pupil, when his fingers became trapped in a door at Tranmoor Primary School on 25 September 2018 [§2]. A claim in negligence and under the Occupiers’ Liability Act 1957 was submitted via the Claims Notification Form into the Portal on 31 October 2018 [§3], bringing it into the Low Value Personal Injury Protocol and the associated fixed costs regime.

On 13 December 2018, before any medical report had been served, the claimant made a Part 36 offer to settle liability on a 90/10 basis in his favour [§4]. This offer was rejected by the defendant on 19 December 2018. Proceedings were subsequently issued. The defendant denied liability and raised issues of contributory negligence in its Defence [§5]. The case was allocated to the fast track and listed for trial. A further without prejudice offer to settle the entire claim for £3,500 was made by the claimant on 18 March 2020, which was not accepted [§6-7].

The matter was listed for a fast track trial before Deputy District Judge Ruwena Khan on 26 November 2020 [§8]. On the day of trial, the defendant’s witness failed to attend and the parties negotiated a settlement of the claim in the global sum of £2,650 [§8-9]. The settlement was put before DDJ Khan for approval pursuant to CPR r.21.10, as the claimant was a child. The judge approved the settlement sum [§10].

The parties were unable to agree on costs. The claimant argued that the case should be taken outside of the fixed costs regime due to the consequences of its Part 36 offer on liability, invoking CPR r.36.17 [§10]. The defendant contended that fixed costs applied. DDJ Khan ruled that the fixed costs regime applied, stating there was nothing exceptional about the case and that the settlement sum was lower than the claimant’s previous offers [§12]. An order was sealed on Form N24 recording the approval of the £2,650 settlement and ordering the defendant to pay the claimant’s fixed costs, summarily assessed at £7,114.50 [§13].

Permission to appeal was granted more than three years later [§14]. His Honour Judge Baddeley heard the appeal on 19 August 2024. The defendant relied heavily on the High Court decision in Mundy v TUI UK Ltd [§14]. HHJ Baddeley, considering himself bound by Mundy, dismissed the appeal [§21]. The claimant then appealed to the Court of Appeal.

Costs Issues Before the Court

The central dispute concerned the recoverable costs following settlement of a fast track personal injury claim initially subject to fixed costs. The Court of Appeal was required to determine four specific issues [§27]:

1. 1. Whether the court-approved settlement constituted a “judgment” for the purposes of engaging CPR r.36.17.
  2. Whether, as a matter of principle, a claimant’s Part 36 offer to settle liability on a 90/10 basis (without specifying a monetary sum) could be effective to trigger the enhanced costs consequences under CPR r.36.17(4).
  3. If so, whether on the facts of this case the settlement outcome was “at least as advantageous to the Claimant” as the proposals in his 90/10 liability offer.
  4. If the answer to issue 3 was no, whether it would be “unjust” to confine the claimant’s solicitors to recovering fixed costs.

The Parties’ Positions

The Appellant/Claimant’s Position: The claimant argued that DDJ Khan had erred in law by not awarding the consequences under CPR r.36.17(4) when there was a “judgment” which was “at least as advantageous” as the terms of the Part 36 offer, and no finding that such consequences would be unjust [§23(1)]. It was submitted that the decision in Mundy v TUI, which the first appeal judge felt bound by, was decided per incuriam and should be overruled [§23(2)]. In the alternative, it was argued that the defendant’s conduct in running the case to a full trial on liability without making any offer on liability constituted circumstances justifying the use of the escape clause in CPR r.36.17 where it would be “unjust” to confine the claimant to fixed costs [§23(3)].

The Respondent/Defendant’s Position: The defendant advanced two primary arguments [§24]. First, it contended that the court-approved settlement was not a “judgment” for the purposes of CPR r.36.17, as it was a consensual agreement placed before the court for approval under CPR r.21.10. Second, should the court find there was a judgment, the 90/10 liability offer could not engage CPR r.36.17(4) because: (a) for a money claim, “more advantageous” is defined in money terms under CPR 36.17(2); (b) the offer made no monetary proposal and was therefore incapable of comparison; (c) the offer sought a liability concession which was never given; and (d) the settlement sum was less than 90% of the claimant’s own monetary offer [§24(ii)]. The defendant argued the 90/10 offer was not a genuine offer of concession but a tactical step, relying on AB v CD [§25]. In the further alternative, the defendant submitted it would be “unjust” to apply CPR r.36.17(4) in the context of a low value money claim where liability was not subject to separate determination [§26].

The Court’s Decision

The Court of Appeal (Bean LJ giving the lead judgment, with Phillips and Stuart-Smith LJJ agreeing) dismissed the appeal [§38-40].

On the first issue, the court held definitively that the court order approving the settlement was both a judgment and an order [§30]. Relying on Vanden Recycling Ltd v Kras Recycling BV [§29], the court found that the Form N24, which ordered the defendant to pay both damages and costs, was in substance and effect a final decision on the claim. Attempts to distinguish between the terms “judgment” and “order” were misconceived in this context [§30].

On the second and pivotal issue of principle, the Court of Appeal overruled the High Court decision in Mundy v TUI [§35]. Bean LJ found it “unfortunate” that Mundy had been decided without reference to binding Court of Appeal authority, specifically Huck v Robson, and indeed that save on the separate question of set-off, “no authorities are referred to at all” [§34]. In Huck, the Court of Appeal had held that a claimant’s 95/5 liability offer was effective for Part 36 costs consequences [§32]. The policy of the Civil Procedure Rules was to encourage settlement, including of discrete issues like liability [§34]. A 90/10 offer could constitute a genuine offer to compromise, reflecting a claimant’s legitimate desire for certainty over the ordeal of trial, and was not inherently incompatible with the mechanism of CPR r.36.17 [§32, §34]. The “generous outcome” for a claimant who beats their own Part 36 offer was consistent with the policy of the rule as affirmed in Broadhurst v Tan [§33]. Bean LJ also referred to Hill J’s observation in Chapman v Mid and South Essex NHS Foundation Trust that the factual context of Mundy was important [§34].

On the third issue – application to the facts – the claimant’s case failed [§36]. The court held that while a 90/10 liability offer could in principle engage CPR r.36.17, it did not do so on the facts of this case. For the offer to be triggered, the judgment needed to be “at least as advantageous” as the offer’s proposals. Here, liability was never determined [§36]. If the defendant had admitted liability, or DDJ Khan had tried the case and found the defendant 100% liable, there would have been a potential basis for awarding the claimant, pursuant to CPR 36.17, costs relating to the issue of liability from the date of the 90:10 offer [§36]. But that was not what happened. It was therefore impossible to say that the outcome of the case was a finding, even on liability, more advantageous to the claimant than a 90/10 apportionment of liability [§36]. Consequently, CPR r.36.17(4) did not apply.

On the fourth issue, the court rejected the argument that it was unjust to confine the claimant to fixed costs [§37]. Citing Webb v Liverpool Women’s NHS Foundation Trust, Bean LJ noted that the burden of showing that the usual consequences of Part 36 will be “unjust” presents a “formidable obstacle” [§37]. The defendant’s conduct in defending the claim to trial was not, in itself, a sufficient reason to depart from the fixed costs regime. Conversely, the court noted that had the claimant triggered CPR r.36.17, it would equally not have been unjust to require the defendant to pay the enhanced costs [§37].

As the claimant failed on the third issue, the order for fixed costs made by DDJ Khan was upheld and the appeal was dismissed [§38].

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Fixed Recoverable Costs Are Not The Benchmark For Fair Solicitor-Client Remuneration

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The Senior Courts Costs Office’s decision in Perrett v Wolferstans LLP [2026] EWHC 50 (SCCO) confirms that fixed recoverable costs do not establish the benchmark for fair remuneration between solicitor and client.

Background

The proceedings involved a claim under the Solicitors Act 1974 by Mr Ryan Perrett against his former solicitors, Wolferstans LLP. The claim concerned the assessment of costs billed under a conditional fee agreement (CFA) relating to a personal injury claim. The profit costs in the solicitor’s statutory bill, dated 13 April 2022, were claimed at £4,800 (including VAT), with an additional success fee of £1,775.85. The recoverable costs from the opponent in the underlying claim were fixed at £900 [§7].

A reserved judgment on preliminary issues was delivered on 17 January 2025 [§1]. A subsequent hearing on 21 May 2025 dealt with the remaining “line by line” items of the bill [§1]. Following that detailed assessment, the profit costs were reduced from the claimed figure to a sum in the region of £3,850 to £4,000 (including VAT), with the success fee being allowed in full [§1]. For the purposes of the final issue, the court treated the assessed figure as £3,864 [§2].

The sole remaining issue for determination was a holistic one. The court needed to “step back” and consider whether the sum arrived at after the item-by-item assessment was, in all the circumstances, a fair and reasonable sum for the purposes of the Solicitors’ (Non-Contentious Business) Remuneration Order 2009 (“the 2009 Order”) [§3]. This required an overall evaluation of the costs, taking into account the factors listed in Article 3 of the 2009 Order and any other relevant circumstances.

Costs Issues Before the Court

The core costs issue was whether the profit costs assessed at £3,864 (treated as the assessed figure for simplicity), having been found reasonable on an item-by-item basis, should be subject to a further reduction to reflect broader considerations of fairness. The claimant’s central argument was that the costs were unreasonable because they vastly exceeded the fixed recoverable costs of £900 that could be recovered from the opponent [§10]. He contended that the solicitors had a duty to clearly inform him of this potential shortfall and that their failure to do so meant the higher charges were not fair and reasonable remuneration.

The issue engaged the proper approach to assessing non-contentious business costs under the 2009 Order, specifically the weight to be given to the time spent versus other factors, and the relevance of the level of inter partes recoverable costs to the solicitor-client assessment.

The Parties’ Positions

The Claimant’s Position: Mr Carlisle, for the claimant, argued that the court should make an overall assessment of a fair and reasonable sum. He submitted that the fixed recoverable costs regime represented a “swings and roundabouts” scheme intended to provide fair remuneration for solicitors when taken as a whole, citing Nizami v Butt and Kilby v Gawith [§4–6]. The claimant contended that a solicitor’s failure to clearly warn a client that costs incurred at hourly rates would likely exceed the fixed recoverable sum was a failure to look after the client’s interests [§10]. He drew an analogy with the duty identified in St James v Wilkin Chapman regarding costs management and budget overspends [§10–11]. The claimant argued that such a failure rendered the costs “unusual or unreasonable” [§11]. He also relied on the outcome in Belsner v Cam Legal Services, where the Court of Appeal allowed only slightly more than fixed recoverable costs, as providing context for where the court should intervene [§8–9].

The Defendant’s Position: Mr Brighton, for Wolferstans LLP, submitted that the claimant’s arguments largely pertained to preliminary issue 5, which had already been decided [§13]. On the substantive point, he argued there was no proper analogy between costs budgeting and fixed recoverable costs, as the latter’s final figure is only known at the end of the case [§14]. The defendant maintained that the client care documentation, which included a clear 25% cap on deductions from damages, provided sufficient information for informed consent, relying on the decision in Swann v Slater & Gordon LLP [§15]. He emphasised that the hourly rates charged were at or below the guideline hourly rates and that the claimant was aware of the contractual terms, having signed a confirmation upon settlement [§17]. The defendant’s position was that the contractually agreed terms should govern and that the sum assessed was fair.

The Court’s Decision

Senior Costs Judge Rowley dismissed the claimant’s arguments and held that the sum of £3,864 was fair and reasonable remuneration under the 2009 Order [§26].

The court first reiterated the methodology set out in its January judgment. Where a retainer is based on hourly rates, the starting point is to assess the reasonableness of the time spent and the rates charged. Only after completing that exercise should the court “step back” to consider if the resulting figure requires adjustment in light of all the circumstances, particularly the factors in Article 3 of the 2009 Order [§18–19]. The judge distinguished the 1970s authorities like Treasury Solicitor v Regester, where other factors such as property value “dwarfed” the time spent, finding them inapplicable to the present case [§19].

The court rejected the claimant’s core proposition that inter partes fixed recoverable costs represented the benchmark for fair solicitor-client remuneration. It held that the “swings and roundabouts” fairness described in Nizami and Kilby related to the scheme of recovery between litigating parties, not to the contractual relationship between solicitor and client [§22–23]. It noted the obiter remarks of Lavender J in SGI Legal LLP v Karatysz that what is usual between solicitor and client is a very different question from what is recoverable inter partes [§23–24]. The court further observed that the concept of “unusual costs” under CPR 46.9 relates to contentious business and cannot simply be transferred to non-contentious business to create a presumption of unreasonableness based on exceeding recoverable costs [§24].

The court found that the budgets/fixed costs analogy advanced by the claimant was not sustainable. Budgets are prepared by solicitors who have a reasonable idea of costs at the outset, whereas the level of fixed recoverable costs is only known at the conclusion of the case [§14].

The judge found that the requirement to keep the client informed was satisfied by the clear contractual term capping the claimant’s liability at 25% of damages [§25]. The court had previously found the claimant understood this term. While more detailed explanation of the potential shortfall would have been preferable, its absence did not render the ultimately charged costs unfair or unreasonable. The judge considered the hourly rates and reduced the junior fee earners’ rates. Some time was also disallowed on the item-by-item assessment [§20]. These matters having already been addressed, it would be incorrect to take them into account again in deciding whether the resulting figure ought to be adjusted further [§20].

Consequently, having factored in the relevant considerations through the detailed assessment, no further global adjustment was warranted. The sum of £3,864 was determined to be fair and reasonable to both the solicitor and the client [§26].

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CPR 45.8 Fixed Costs Apply To Interim Applications From Date Of Provisional Track Allocation

CPR & Practice Directions, Fixed & Predictable Costs, New Costs Blog

The High Court’s decision in Mazur & Anor v Charles Russell Speechlys LLP [2025] EWHC 2341 (KB) confirms that CPR 45.8 fixed costs apply from the moment of provisional Intermediate Track allocation.

Background

The case originated from a claim brought by the Respondent law firm, Charles Russell Speechlys LLP, to recover unpaid legal fees totalling £54,263.50 from the Appellants, Mrs Julia Mazur and Mr Jerome Stuart. Goldsmith Bowers Solicitors (GBS) was instructed to pursue the debt recovery. A claim was issued, and the Appellants subsequently filed a Defence and Counterclaim. The Claim Form was signed by GBS, and the Particulars of Claim were signed by Peter Middleton, identified as the “Head of Commercial Litigation” at GBS.

The Appellants raised an issue regarding Mr Middleton’s authorisation, as he did not hold a current practising certificate. They applied for directions, seeking an order that the Respondent replace Mr Middleton with a qualified solicitor. The application was opposed. Acting on his own motion, Deputy District Judge Campbell ordered a stay of proceedings. He found evidence that Mr Middleton was engaging in “reserved activity” under the Legal Services Act 2007 by conducting litigation. The order required any application to lift the stay to be supported by a statement from a partner providing a full explanation. If no application was made within three months, the claim would be struck out automatically.

The Respondent applied to lift the stay. The matter came before His Honour Judge Simpkiss. The initial hearing was adjourned, and further submissions were heard on 17 December 2024. In the interim, on 2 October 2024, Mr Middleton’s involvement ceased, and he was replaced by Lisa Adkin, a qualified solicitor. On 18 November 2024, a director at GBS, Mr Robert Ashall, made a self-report to the Solicitors Regulation Authority (SRA) concerning Mr Middleton’s employment. The SRA decided not to investigate on 2 December 2024.

Costs Issues Before the Court

The primary costs issue before the court was whether the Appellants should be liable for the Respondent’s costs of the application to lift the stay, which had been summarily assessed at £10,653. This award was made following the judge’s decision to lift the stay. The appeal raised two core costs-related issues: firstly, whether the judge erred in his interpretation of the Legal Services Act 2007, which formed the basis for finding the Appellants’ challenge unsuccessful and thus liable for costs; and secondly, whether the judge had the power to award costs in that amount given that the claim had been allocated to the Intermediate Track, which attracts a fixed costs regime for interim applications.

The Parties’ Positions

The Appellants argued that the judge erred in law by concluding that Mr Middleton was entitled to conduct litigation under the supervision of an authorised solicitor. They contended this misinterpretation of the Legal Services Act 2007 was the foundation for the costs order against them. They further submitted that the case was subject to CPR Part 45 as it had been allocated to the Intermediate Track. Consequently, the recoverable costs for an interim application were fixed at £333 plus a court fee of £303, pursuant to CPR 45.8. They also argued the Respondent had failed to comply with CPR 45.63 by not filing a completed Precedent U form.

The Respondent argued that the judge was entitled to make the costs order as they were the successful party on the application. They contended the fixed costs regime under CPR Part 45 did not apply because the claim was only formally allocated to the Intermediate Track at the conclusion of the hearing before HHJ Simpkiss. They also submitted that their costs statements, though not on a Precedent U form, substantially complied with the rules.

The Court’s Decision

The High Court allowed the appeal and quashed the costs order. On the first issue, the court found that HHJ Simpkiss had erred in law by relying on the SRA’s letter and concluding that section 21(3) of the Legal Services Act 2007 permitted an employee to conduct litigation under supervision. The court held that the LSA draws a clear distinction between authorised persons and their employees. An employee is not entitled to conduct a reserved legal activity merely by virtue of their employment by an authorised entity; they must themselves be authorised or fall within a specific exemption. The SRA’s interpretation in its letter was incorrect, and the judge’s reliance on it was a legal error that vitiated the basis for the costs award.

On the second issue, the court held that the case was subject to the fixed costs regime in Section VII of CPR Part 45 because it had been provisionally allocated to the Intermediate Track. CPR 45.8 therefore applied, limiting the recoverable costs for an interim application to the fixed sum of £333 plus the court fee of £303. The judge had not identified any “exceptional circumstances” under CPR 45.9 that would justify departing from this fixed cap. The award of £10,653, which was based on counsels’ fees, therefore exceeded the court’s powers. While the Respondent’s costs statement was found to be in substantial compliance, this did not alter the application of the costs cap.

The court rejected the appellants’ argument that no costs should be payable due to non-compliance with CPR 45.63. Although the respondent had not used a Precedent U form, their cost statements provided sufficient detail. The court found substantial compliance with the rule, noting the appellants suffered no disadvantage from the alternative format.

The court varied the order of HHJ Simpkiss to “no order as to costs” to reflect the fact that while the application to lift the stay was correctly granted (as Mr Middleton was no longer involved), the Respondent’s primary legal argument on the point had been erroneous. The court declined to make any other orders, such as striking out the claim or referring individuals to the SRA, leaving any further regulatory action to the SRA’s discretion.

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