The Court of Appeal has overturned a decision which 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. The Court agreed with the first instance decision that the fixed costs regime should apply, as the case remained in the fast track at the time of settlement.
This road traffic injury claim was allocated to the fast track. An application to re-allocate the claim to the multi-track due to an increase in the value of the claim was outstanding when the Defendant made a Part 36 offer of settlement by letter ("the offer letter"). In a subsequent email, the Defendant consented to the re-allocation.
Before the matter was reallocated, the Claimant accepted the Defendant's Part 36 offer. The Tomlin Order approved by the Court stated: "The defendant do pay the reasonable costs of the claimant on the standard basis to be the subject of detailed assessment if not agreed".
The parties were unable to agree as to whether the fixed costs regime applied. At first instance, DDJ Harvey held that the costs should be decided in line with the fixed costs regime under CPR Part 45.
His Honour Judge Wulwik granted the Claimant's appeal. He noted that the Claimant's application to re-allocate the claim to the multi-track had been agreed by the Defendant prior to the Claimant accepting the offer. He referred to the judgment in Solomon v Cromwell Group PLC, which stated "there was no reason in principle why, if parties choose to agree different terms, the agreement should not be enforceable by ordinary process".
Based on the wording of the Tomlin order, HHJ 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 Defendant was ordered to pay costs on the 'standard basis'. The Defendant appealed.
Court of Appeal
The parties focused their submissions on the content of the offer letter, and the claimant argued that the claim should have been re-allocated to the multi-track, with "an order applying the costs rules applying to that track retrospectively." Two issues were to be addressed by the Court:
The interpretation of the letter required an assessment of the objective meaning of the language, per Wood v Capita Insurance Services. The Defendant's interpretation was clear, that it intended to convey an intention to pay fixed costs.
The Claimant argued the opposite, submitting that:
The Claimant acknowledged that the Tomlin Order had the effect of staying the claim prior to the re-allocation being confirmed. However, Counsel for the Claimant submitted that "the question whether the claim should be re-allocated with a view to disapplication of the fixed costs regime is one 'of costs…relating to the proceedings' and so unaffected by the stay."
The appeal was granted. Lord Justice Newey, giving the leading judgment, held in respect of the two issues:
Newey LJ held the offer letter "correctly construed, did not offer to pay conventional rather than fixed costs". In reaching this conclusion, he found:
HHJ Wulwik had previously dismissed this argument. The Court of Appeal agreed. The terms of the Tomlin Order made no reference to re-allocation and/or disapplication of the fixed costs regime, and it was not open to DDJ Harvey or HHJ Wulwik to consider it.
If it was open for them to do so, then they would have been entitled to decline re-allocation as "it was no part of the agreement that the parties had reached that the fixed costs regime should be displaced, to make an order subsequently having that effect would run counter to the agreement."
What can we learn?