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Part 36 -v- Fixed Costs

The insurance industry and the Department of Health have been lobbying hard, (entirely in the interests of the general public, obviously), for fixed costs across vast swathes of civil litigation – even in areas where this would actually cost them more money, such as the recent failed attempt by the insurance lobby to fix the costs of “costs only” proceedings – seemingly in ignorance of the fact that the order made is usually along the lines of “Costs of the Part 8 proceedings be costs in the detailed assessment” and that most of the cases that require costs only proceedings are low value matters subject to the cap imposed on provisional assessment costs. Keeping these costs within the cap rather than fixing them separately means receiving parties do more work for less money (in terms of inter partes recovery). That doctrinal drive, to shift the false economy of fighting every case while represented by the lowest bidder, onto the shoulders of individual claimants, seemingly triumphant under the Jackson reforms, is in danger of foundering.

Following on from the Court of Appeal’s relatively recent decision in Broadhurst & Anor -v- Tan & Anor [2016] EWCA Civ 94 to allow hourly rate costs on the indemnity basis from the last day on which an offer could be accepted, in addition to the relevant fixed costs, where a Claimant beats their own Part 36 offer at trial, a Regional Costs Judge has now allowed a Claimant to recover those same indemnity costs in circumstances where the Claimant’s Part 36 offer is accepted out of time, rather than simply beaten at trial.

While the decision, in Sutherland -v- Khan (Kingston-upon-Hull County Court, 21 April 2016, unreported) is an unsurprising and logical result of Broadhurst (and something we managed to successful predict when commenting upon Broadhurst originally), if upheld by the higher courts it threatens to make Part 36 offers into the weapon that emasculates the predictable tactic of wealthy Defendants “spending up” impecunious Claimants and forcing them to throw in the towel. Logic suggests that this will lead to Claimant firms in low value personal injury matters reversing some recent trends and obtaining expert evidence prior to sending a letter of claim, as generally occurs in the clinical negligence arena, so as to be in a position to make a reasonable Part 36 offer as soon as possible. Either that or racing to obtain expert evidence as soon as the protocol allows them (the writer has a sinking feeling that further lobbying will see portal rules changed so as to inhibit the early quantification of claims).

The step predicted above will probably lead to further “front loading” of costs in personal injury claims, meaning that Jackson may well end up exacerbating the great complaint about the Woolf reforms. Those insurers who agitated for fixed costs across the board may find that they reap what they have sown with early Claimant Part 36 offers, either having to pay a proper rate to their own representatives to evaluate quantum at an early stage or in terms of forking out for indemnity costs where those offers are later bettered, either by acceptance or trial.

Congratulations to John McQuater and his team at Atherton Godfrey and Mr Latham of Counsel for their success in the Sutherland case.