England and Wales High Court (Senior Courts Costs Office) Decisions

IN SUPREME COURT COSTS OFFICE
(FROM THE CENTRAL LONDON COUNTY COURT)

		Clifford's Inn, Fetter Lane London, EC4A 1DQ
		1 September 2009

Master Campbell:

1. This judgment addresses the following preliminary issue which the parties have agreed should be resolved at the outset of the detailed assessment of the Claimant's bill which is payable by the Defendant:-

"The Defendant submits this claim should be subject to the small claims costs provisions. It would be disproportionate to do otherwise (within the meaning ascribed to that word in the case of Home Office v Lownds [2002] EWCA Civ 365)".

2. The background is that on 2 December 2008 the Claimant accepted the sum of £750 pre-issue of any proceedings in full and final settlement of a prospective claim for injuries to her foot, with costs to be assessed on the standard basis if not agreed. These costs, says the Claimant, must be assessed in whatever sum is reasonable and proportionate and has served a bill for £ 6,727.68 including VAT of £792.48. Not so contends the Defendant; it submits that had the claim been issued, it would have been allocated to the small claims track where fixed costs apply. Accordingly, by analogy, the bill should be assessed by reference to that track, albeit that under the terms of the order, the court is not compelled to allow only small claims costs and none other. That is the issue argued before me by Mr Franks for the Claimant and Ms Butler-Cole for the Defendant. At the close of submissions I reserved judgment.

THE LAW

3. Civil Procedure Rule ("CPR") 26.6 provides as follows:–

"(1) the small claims track is the normal track for –

(a) Any claim for personal injury where –

(i) the financial value of a claim is not more than £5,000; and

(ii) the financial value of any claim for damages for personal injuries is not more than £1,000…."

4. In cases to which this rule applies, the costs recoverable are fixed under CPR 27.14(2) as follows:–

"(a) fixed costs attributable to issuing the claim ….

(c) Court fees

(f) £200 for experts under section 7.3 Cost Practice Direction."

5. It follows that if the Defendant is right and the court assesses the costs by reference to the small track fixed costs regime, the Claimant will not recover any costs. On the other hand, if the Claimant is correct, the starting point is £6,727.68 and the amount allowed will be either that figure or such lesser sum as reflects the reasonable and proportionate costs of bringing the claim.

MORE BACKGROUND

6. It is necessary to say more about the facts. The letter of claim written by Russell Jones and Walker Solicitors on behalf of the Claimant is dated 12 June 2007. On 20 November 2008 Defendant's insurers, Zurich, wrote to Russell Jones and Walker in these terms:–

"Dear Sirs,

We accept that our insured is liable for the purposes of this claim.

Pursuant to Part 36 and on the basis of the evidence presented to date, we are prepared to offer £750 in relation to general damages…

Yours faithfully".

7. On 2 December 2008 Russell Jones and Walker replied as follows: –

"We refer to your letter dated 20 November in which pursuant to Part 36 you made an offer of £750 in relation to general damages ….

We confirm that our client accept your offer of £750 in full and final settlement of her claim for general damages arising out of this accident and on the basis that the provisions of Part 36 apply in relation of costs, that is payment of our costs, to be assessed on the standard basis failing agreement.

Your cheque should be made payable to Mrs Carol Stillwell.

We will let you have details of our costs shortly.

Yours faithfully…."

8. On 30 December 2007 Zurich raised and paid its cheque for £750. In February 2009 the Claimant issued "costs only" proceedings under CPR 44.12A and on 10 March 2008 District Judge Trent made an order "that the Defendant do pay the Claimants [sic] costs on a standard basis to be determined by detailed assessment, if not agreed", the Defendant having filed an acknowledgment of service consenting to the making of such an order.
9. I mention this level of detail because in my view (not challenged at the hearing), Russell Jones and Walker's letter of 2 December 2008 was not an acceptance of the Part 36 offer dated 20 November 2008 but a counter-offer because it introduced conditions about costs. That said, before me the parties were in agreement that there had been a valid offer and acceptance under Part 36 and accordingly the costs provisions of Part 36 apply; where a Part 36 offer is accepted within the relevant period the Claimant will be entitled to the costs of the proceedings on which notice of acceptance was served on the offeror (see CPR 36.10 (1)). Before me the parties were agreed that "proceedings" were not limited to issued proceedings and in these circumstances, it is not clear to me why the Costs only proceedings were necessary since the Part 36 acceptance would have provided the appropriate source of the right to a detailed assessment under CPR 47.7.

THE SUBMISSIONS FOR THE DEFENDANT

10. The genesis of the Defendant's case lies in the Points of Dispute served on 5 May 2009. They contend that "this claim should be subject to the small claims provisions….[and] … assessed with the small claims limit in mind i.e. no costs are recoverable inter parties". That argument has undergone a subtle alteration in that Ms Butler-Cole submits that the order does not mean that the court can only award fixed costs under the small claims regime because the Claimant recovered under £1,000. Her case is advanced on the basis that the wording of the order does not fetter or limit the discretion of the court and that it is open to the Costs Judge on assessment to look at the level of damages and to decide that, by analogy, the small claims costs regime should be implemented. Contrary to the Claimant's contention, Ms Butler-Cole submits that this is not an attempt to go behind the terms of the order but rather, it is the correct interpretation of the meaning attributable to the words "assessment" and "standard costs" in the order. She argues that those references do not preclude the court from applying small claims costs if it wishes to do so. When the Defendant agreed to pay costs, it did not do so on the footing that the court dealing with the costs would be precluded from assessing them under that regime, but rather that this would simply be one of the options open to the Costs Judge. Moreover, it would be a perverse result if by negotiating the claim and settling early (as here), the Defendant would be worse off than had it done nothing and let the Claimant issue proceedings. In that event, it was common ground that the claim would have been allocated to the small claims track, in which case by not negotiating under Part 36 until after issue, the Defendant would be not be facing any costs rather than the situation which now exists whereby costs exceeding £6,000 are claimed without any proceedings having been issued.
11. To make good this submission, Ms Butler-Cole relies on O'Beirne v Hudson, Liverpool County Court 23 March 2009 His Honour Judge Stewart QC (unreported). In that case, the Claimant who had been injured in a road accident, issued a claim form seeking over £1,000 but less than £5,000. In default of defence, the court had ordered that the Defendant pay the Claimant damages and costs. On the disposal hearing, by consent, the Claimant entered judgment for £1,103.31 damages plus reasonable costs and disbursements on the standard basis to be subject to detailed assessment if not agreed. On detailed assessment, he contended that that provision was wholly distinct from the application of the fixed costs regime whereas the Defendant argued that the wording did not impose any fetter on the discretion of the court.
12. Below, the District Judge had not accepted the Defendant's submission but, on the contrary, had considered that the order fettered her discretion. On appeal, His Honour Judge Stewart QC overruled the District Judge. He held that the wording was open and entitled the court at the assessment stage, to decide whether or not it should accede to the Defendant's argument that the costs should be assessed by reference [my emphasis] to the small claims track regime.
13. In Ms Butler-Cole's submission, the same point arises here. The effect of the order is not to impose the fixed costs regime on the Costs Judge but, on the contrary, leaves open to him, in the exercise of his discretion, the option of assessing the costs by reference to that regime if it be just to do so. Since it is accepted by both sides that this would have been a small claim had proceedings been issued, Ms Butler-Cole contends that the correct course is for the court to assess the costs by reference to the costs regime applying to such claims.

THE SUBMISSIONS FOR THE CLAIMANT

14. Mr Franks advances the Claimant's case on the footing that under the terms of the Part 36 settlement, the Defendant had entered into a contract to pay the Claimant's costs on the standard basis, to be assessed if not agreed. Accordingly, it is for the court to assess those costs and to allow all such costs save those which have been unreasonably incurred or are unreasonable in amount or which are not proportionate to matters in issue (see CPR 44.4). What the Defendant is seeking to do is to go behind the order by inviting the court to allow only small claims fixed costs when the compromise agreement permits the Claimant to recover costs on the standard basis. Having made a Part 36 offer and knowing the costs consequences, and the Claimant having accepted that offer, knowing the costs consequences, it is not open to the court to allow fixed costs. Mr Franks further submits that the word "assessment" in the order means that the costs cannot not be fixed costs under the small claims regime since, by definition, such costs are incapable of being assessed because they are fixed in exact sums. For these reasons, he contends that there reposes in the court no discretion to allow fixed costs and that no limitation or restriction should be placed on the Claimant to limit her costs to that level. On the contrary, the task of the court is to give effect to the contract of settlement and to assess the costs on the standard basis without reference to the level of costs that would have been allowed under CPR26.6.

DECISION

15. In my view the issue between the parties is this: does the order prohibit the Costs Judge from assessing the costs as if the claim had been issued as a small claim when fixed costs would apply (as Mr Franks contends) or is Ms Butler-Cole correct in her submission that the order does not place any limitation on the ability of the court to apply the small claims regime if it wishes to do so, because, at the end of the day, those are the reasonable and proportionate costs to which the Claimant is entitled?
16. In my judgment, the submissions of the Defendant are correct. The order provides for the costs to be assessed on the standard basis. It follows in my opinion, that if, having heard the arguments on assessment, the court concludes that the reasonably incurred and proportionate costs that it is just to allow are those that would be payable under the small claims regime, then there is nothing in the order which restricts the court from doing so. By the same token, if the court is persuaded that even though the claim settled for as little as £750, significantly more work than would ordinarily have been the case in such a small claim had needed to undertaken, then there is nothing to prevent the court from being more generous and to allow higher costs than those payable under the small claims regime. In both scenarios, the court is exercising its discretion and I respectfully agree with the decision of His Honour Judge Stewart QC in O'Beirne that to do otherwise would be to impose a restriction on that discretion which the order does not contain. Expressed differently, all that the Defendant is seeking to do on this assessment is to argue that the costs should be assessed by reference to the amount that would be allowed had the case been brought as a small claim. It is not Ms Butler-Cole's case that the court must allow the small claim costs without modification. I consider that she is correct and the court is not precluded from assessing the costs with CPR 26.6 in mind.
17. Having said that and although Ms Butler-Cole's submissions have prevailed, the practical result may nonetheless be that for which Mr Franks has carefully argued. Suppose on the assessment, he is able to demonstrate that much more work needed to be done on the case than would be customary in a small claim such as this. In these circumstances the Claimant will in all likelihood recover significantly more than just small claims costs. On the other hand, if the work cannot be justified when subjected to the scrutiny of detailed assessment, the Claimant might find that the costs she recovers are akin to those payable under the small claims regime. It will be for the costs judge assessing the costs to decide, but what, in my judgment, the order does not say or mean is that the Defendant is shut out from arguing that the small claims costs should apply.
18. For these reasons, the preliminary issue is decided in favour of the Defendant.
19. Such a conclusion also sits comfortably with Ms Butler-Cole's allied submission that it would be perverse for a party to recover substantially more by way of costs because proceedings were never issued (and the case was therefore never allocated) than would have been allowed had the proceedings gone to court and been allocated to the small claims track. The view I have reached leaves the matter open. If the Claimant is right and she incurred more costs than would normally be the case in recovering a sum as modest as £750, then on assessment, these will be allowed where proportionate and reasonably incurred, in higher sums than had the case been allocated. On the other hand, if the Defendant satisfies the court that the costs were not reasonably and proportionately incurred, then the likelihood is that they will be assessed and allowed by reference to the sums payable had the case been allocated under CPR 26.6.
20. For completeness, I should add that I was referred to the decision of Master Rogers in Aurangzeb v Walker [2008] EWHC 90134 (Costs). I did not find this case of assistance since the claim involved a minor and CPR 21.10, which was not the case here.

NEXT STEPS

21. The detailed assessment will need to be restored so that the court can decide whether the costs to be allowed will be akin to those that would have been payable under the small claims regime or in such larger sums as may be reasonable having regard to the level of the work reasonably and proportionately undertaken. If the Claimant wishes to apply for permission to appeal and if the matter is to go further, I suggest that the parties consent to the transfer of the proceedings to the High Court so that the appeal is heard by a Judge of the High Court. Subject to that I propose to reserve the costs of the preliminary issue to the detailed assessment.