Broadhurst v Tan; Taylor v Smith  EWCA Civ 94: Claimants will be entitled to recover costs on the indemnity basis where they beat their own Part 36 offer in personal injury cases which no longer proceed under the RTA Protocol (and will not be restricted to recovering fixed costs under r.45.29B and r.45.29C).
Lord Dyson MR gave the lead judgment in this case which concerned (a) the tension between recovering fixed costs within the Part 45 s.IIIA regime, and being entitled to costs on the indemnity basis under r.36.17(4).
It was confirmed by the Court of Appeal (b) that fixed costs are distinct from indemnity costs, and (c) the proper approach was set out for assessing costs involving a successful Part 36 offer by a Claimant in a low value RTA personal injury case which leaves the RTA Protocol.
The judgment centred on the CPR provisions in force up until 5 April 2015. The numbering of the Part 36 sections is now different, but the substance of the rules remains the same. This article will use the Part 36 provisions as they are currently numbered (since 6 April 2015) for ease of reference.
Within Part 45 s.IIIA, r.45.29B provides that for claims started under the RTA Protocol with a Claim Notification Form submitted on or after 31 July 2013, “the only costs allowed are… the fixed costs in rule 45.29C..”.
In apparent tension with r.45.29B, are rules 36.17(4) and 36.21.
Rule 36.17(4) allows a Claimant who has made a successful Part 36 offer to recover their costs on the indemnity basis, as well as being entitled to an increased rate of interest on the award and costs, and an additional sum of 10% of the award (where the award is up to £500,000).
Rule 36.21 specifically governs costs following judgment where s.IIIA of Part 45 applies (i.e. where the claim has left the RTA Protocol). Among other things, r.36.21 operates to modify r.36.17(3) by defining which of the Part 45 fixed costs the Claimant may recover or be required to pay in the event that the Claimant fails to beat the Defendant’s Part 36 offer. But crucially, r.36.21 does not modify r.36.17(4).
Two Claimants had successfully obtained judgments that were more advantageous than their own Part 36 offers, in cases where Part 45 s.IIIA applied Ms. Smith’s case had seen HHJ Freedman apply r.36.17(4) in awarding indemnity costs to the Claimant.
In HHJ Robinson’s judgment in Ms. Broadhurst’s case, r.36.17(4) had also been applied. Furthermore, it had been said that there was no difference between assessing profit costs on the indemnity basis, and fixed costs prescribed by r.45.29C, subject to the possibility of awarding a greater sum than fixed costs pursuant to r.45.29J (where “exceptional circumstances [make] it appropriate to do so”).
The Court of Appeal’s ruling (a): r.36.17(4) will prevail in Part 45 s.IIIA cases
Lord Dyson noted that s.IIIA of Part 45 does not expressly make provision in r.45.29F for what should happen where a Claimant beats their own Part 36 offer (at para. 23). However, he said (at para. 25) that the effect of reading rules 36.17 and 36.21 together was that:
“where a Claimant makes a successful Part 36 offer, he is entitled to costs assessed on the indemnity basis”.
Since r.36.17(4) has not been modified by r.36.21:
“[r.36.17(4)] continues to have full force and effect. The tension between rule 45.29B and rule [36.21] must, therefore, be resolved in favour of rule [36.21]”.
Therefore, Claimants will not be restricted to recovery of their fixed costs alone where they beat their own Part 36 offer in cases to which s.IIIA of Part 45 applies, but will enjoy the benefit of entitlement to costs on the indemnity basis.
The Court of Appeal’s ruling (b): fixed costs and assessed costs are distinct
The Master of the Rolls stated that fixed costs and assessed costs are conceptually different, saying at para. 30:
“Fixed costs are awarded whether or not they were incurred, and whether or not they represent reasonable or proportionate compensation for the effort actually expended. On the other hand, assessed costs reflect the work actually done. The court examines whether the costs were incurred, and then asks whether they were incurred reasonably and (on the standard basis) proportionately.”
The Court of Appeal’s ruling (c): the approach to assessing costs for Claimants who have made successful Part 36 offers where Part 45 s.IIIA applies
Although there may be some difficulties in assessing costs which are to be partly fixed and partly assessed, the approach (as set out at para. 31) where the Claimant beats his own Part 36 offer in a s.IIIA case will be:
As ever, Part 36 offers must be carefully made and considered
Following this decision, it is clear that Claimants and Defendants alike need to take a judicious approach to Part 36 offers in Part 45 s.IIIA cases.