Protecting the Integrity of Fixed Costs and reinforcing the Power of Part 36: The Court of Appeal’s Decision in Attersley v UK Insurance

The Court of Appeal’s judgment in Attersley v UK Insurance marks a significant reaffirmation of two core features of the modern costs landscape: the importance and predictability of the fixed recoverable costs (FRC) regime, and the vital role of Part 36 as a mechanism to incentivise the early settlement of litigation. For defendants, this decision restores clarity and certainty in an area where the High Court’s ruling had threatened to introduce inconsistency and undermine the very purpose of both frameworks.

At the heart of the appeal was a simple but important question:

In a case which started within the FRC regime but was later removed upon allocation to the multitrack, and where a defendant makes a Part 36 offer which expires pre allocation, should a claimant be limited to FRC or receive costs assessed on the standard basis if they accept the offer out of time and after allocation?

HHJ Dudderidge at first instance held that the claimant was limited to fixed costs pursuant to CPR 36.20. Stacey J in the High Court reversed that decision, holding that because the case had eventually been allocated to the multitrack, fixed costs fell away entirely and the claimant was entitled to standard basis costs under CPR 36.13. The Court of Appeal has now restored the original ruling and reaffirmed the defendant’s interpretation of the rules.

1. Reasserting the primacy of CPR 36.20 in ex fixed costs cases

The Court of Appeal’s reasoning is clear: CPR 36.13 is expressly subject to CPR 36.20. That provision governs the costs consequences of accepting a defendant’s Part 36 offer in claims to which Section IIIA of Part 45 “applies”. The claim in Attersley indisputably fell within Section IIIA at all times until its allocation to the multitrack. Crucially, the relevant period of the Part 36 offer expired before allocation occurred.

Accordingly, the Court held that the correct point in time for determining the applicable costs regime is the date on which the relevant period expired, not the later date of acceptance. As the case was within FRC on that date, the claimant was entitled only to the fixed recoverable costs set out in Table 6B.

This restores legal coherence and ensures defendants can safely rely on Part 36 offers made in exFRC cases without the risk of an unforeseen shift into standard costs caused by later procedural steps such as allocation.

2. Protecting defendants from windfalls

A key theme in the defendant’s submissions - accepted by the Court - was the avoidance of perverse incentives. Had the claimant’s argument succeeded, a claimant who delays acceptance of an offer could recover more costs than one who accepts promptly within the relevant period. Such an outcome would undermine the core purpose of Part 36 as a “carrot and stick” mechanism encouraging early settlement and cost control.

The Court recognised the incoherence of allowing future developments - allocation, directions, or case management steps - to retrospectively transform the costs regime that applied during the relevant period. To be effective, Part 36 must allow a defendant to “anchor” its liability to the cost environment in place when the offer should reasonably have been accepted. Defendants must be able to make offers with confidence that they will not be exposed to increased costs because of procedural developments happening long after the offer’s expiry.

The impact on cost exposure was demonstrated starkly in this case, with a clear difference between the applicable fixed costs (totalling approximately £50,000) and the standard costs claimed (over £100,000).

3. Maintaining the structure and predictability of fixed recoverable costs

The claimant had relied heavily on Qader v Esure to argue that allocation to the multitrack automatically and retrospectively removes a case from the FRC regime “for all purposes”. The Court firmly rejected that interpretation. Qader dealt solely with the prospective application of the FRC regime in the context of costs management - not with retrospective consequences, and certainly not with the specialised and self contained code of Part 36.

The Court’s approach preserves the predictability of FRC and avoids a scenario in which the recoverability of fixed costs would hinge on uncertain future events such as the timing of case management hearings or court administrative delays.

By declining to allow the FRC regime to be undermined in this way, the Court has ensured that defendants retain the benefit of the fixed costs structure that Parliament and the Rules Committee intended for exFRC cases.

4. Enhancing the effectiveness of Part 36 for defendants

The decision significantly strengthens the tactical power of Part 36 offers in ex Protocol personal injury litigation. Defendants can once again deploy Part 36 with confidence that:

• a claimant who delays acceptance does not obtain a windfall;
• fixed costs remain fixed at the point where the claimant should reasonably have accepted the offer;
• and Part 36 operates consistently with its overarching purpose of encouraging early settlement and discouraging unnecessary litigation costs.

This clarification aligns with the public policy objective of controlling litigation expense and ensures that claimants cannot manipulate the timing of acceptance - or rely on subsequent procedural steps - to escape the FRC regime.

Conclusion

The Court of Appeal’s decision in Attersley is a welcome recalibration of the rules in favour of clarity, coherence, and fairness against a background of significant fixed costs reform. For defendants, it restores the predictability offered by fixed recoverable costs and reinforces the strategic value of well pitched Part 36 offers.

By confirming that costs consequences attach at the point the relevant period expires - not at some later procedural juncture - the Court has ensured that the litigation landscape remains predictable and that defendants remain safeguarded from unwarranted escalation in costs.

This decision will resonate across personal injury litigation and strengthen the foundational principles of both the FRC regime and Part 36.

Paul Wainwright, Partner & Lindsey Bartling, Legal Director represented the defendant insurer, Direct Line Group.