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Costs: Fixed costs overridden where parties consent to standard basis assessment

  • 18 February 2019 18 February 2019
  • Insurance

The County Court at Central London recently held that fixed costs did not apply to a case where a consent order had stated that costs were to be assessed on the standard basis, departing from the first instance decision.

Costs: Fixed costs overridden where parties consent to standard basis assessment

Background:

The claim was made following a road traffic collision. Proceedings were issued, and the claim was allocated to the fast track. An application to reallocate the claim to the multi-track was made. Prior to the application being heard, the Defendant made an offer of settlement, also indicating they consented to the application.

The Claimant accepted the Defendant's Part 36 offer of £30,000. The Tomlin Order approved by the Court stated:

"The defendant do pay the reasonable costs of the claimant on the standard basis [emphasis added] to be the subject of detailed assessment if not agreed".

The parties were then unable to agree as to whether or not the fixed costs regime applied; the Claimant sought costs of £42,856.34.

An application was made to resolve the matter. In arriving at this conclusion, DDJ Harvey considered whether the parties could consent to the standard assessment of costs where fixed costs usually applied.

He held that the costs should be decided in line with the fixed costs regime under CPR Part 45.

Appeal

At first instance, the Claimant argued that it was agreed that the claim should be allocated to the multi-track before the Part 36 offer was accepted. DDJ Harvey did not address this issue. His Honour Judge Wulwik did consider this on appeal.

The Claimant argued that DDJ Harvey had no power to vary the parties' contractual agreement.

HHJ Wulwik considered the cases of Solomon v Cromwell Group Plc and Sharp v Leeds City Council. He noted that the Claimant had applied to reallocate the claim to the multi-track, and this had been agreed by the Defendant prior to the Claimant accepting the Part 36 offer and the consent order being drawn up.

The judgement in Solomon had stated "there was no reason in principle why, if parties choose to agree different terms, the agreement should not be enforceable by ordinary process".

The consent order clearly stated that the Defendant would pay the reasonable costs of the claimant on the standard basis. The Defendant had already agreed to the matter's reallocation to the multi-track. It would not, on ordinary reading, be understood as an agreement for costs to be paid on the usual basis of fixed costs.

Judge Wulwik held that "the costs order that was agreed by the parties in paragraph 3 of the consent order was entirely consistent with the parties' agreement that the claim should be reallocated to the multi-track".

The appeal was successful, and the Defendant was ordered to pay costs on the standard basis.

Consistency of decisions?

The success of the appeal was inconsistent with previous case law – Bratek v Clark-Drain Limited being the most recent example:

  • Bratek settled two days before a fast track trial. The consent order provided "…the defendant to pay the claimant's solicitor's costs, inclusive of VAT and disbursements on a standard basis, to be assessed if not agreed"
  • The Defendant argued that fixed costs applied referring to CPR 45.29.
  • CPR 45.29D states that "subject to rules 45.29F, 45.29H and 45.29J, and for as long as the case is not allocated to the multitrack, in a claim started under the EL/PL protocol……. the only costs allowed are fixed costs in rule 45.29E and disbursements in accordance with rule 45.29"
  • CPR 45.29J states: "If it considers that there are exceptional circumstances making it appropriate to do so, the court will consider a claim for an amount of costs (excluding disbursements) which is greater than the fixed recoverable costs referred to in the previous paragraphs". The Judge considered whether CPR Part 45.29J applied but determined that it did not.
  • HHJ Yelton held the only costs allowed were fixed costs and that "it does not seem to me [that the order] can go beyond that, unless there was agreement that section 45.29J applied and neither party directed their mind to that, particularly not the claimant".

What can we learn?

  • The case does not seem to have been argued on the basis of basic contractual principles. Was there a sufficient meeting of minds as to the terms of the contract to say that the parties were ad idem? Also, it is not clear from the Judge's reasoning why an agreement to pay 'standard costs' in a case to which fixed costs would ordinarily apply would mean anything other than fixed costs. If fixed costs are the usual costs for that type of work then would that not be described as 'standard'?
  • In light of the inconsistent decisions, when settling a claim by way of consent or Tomlin Order, practitioners should be mindful of the context surrounding the settlement and of what exactly is being said and agreed, not only in the order itself, but directly prior to settlement.
  • If the fixed costs regime would ordinarily apply, and the parties intend on applying that regime, then this should be clearly expressed. Adelekun has made it clear that any inconsistency could be weighed against defendant arguments. Whilst Judge Wulwik held that "it would have been sensible if the claimant's solicitors had included as a term of the consent order that the claim be reallocated to the multi-track", he still ultimately found in favour of the claimant's submissions on the basis of the evidence available.

The Judgment for Miss Seyi Adelekun -v- Mrs Siu Lai Ho can be found here

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