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

IN THE SENIOR COURTS COSTS OFFICE
(BROMLEY COUNTY COURT)

		Supreme Court Costs Office Clifford's Inn Fetter Lane London EC4A 1DQ
		20 August 2010

MASTER HAWORTH:

1. This is an application on transfer from the Bromley County Court. It relates to a Part 8 claim arising from a road traffic accident which occurred on 27 April 2006. The claimant claimed damages for loss and personal injury. The claim was settled without proceedings being commenced as a result of the claimant accepting the defendant's pre-action offer in the sum of £4,100.
2. The written offer and acceptance are the key documents in this case. The offer is dated 3 February 2009. It is headed "Part 36 Offer. Without prejudice, save as to costs". It goes on to say:

"The defendant hereby makes a Part 36 offer in the sum of £4,100. This offer (1) is to settle the whole of your client's claim; (2) is intended to have the consequences of Part 36; (3) has a relevant period of 21 days during which the defendant will be liable for the claimant's costs in accordance with CPR 36.10 if the offer is accepted within that period; (4) is inclusive of interest until the expiry of the relevant period; (5) is made on the basis that there are currently no repayable benefits and the certificate of repayable benefits is valid throughout the relevant period; (6) does not take into account any counterclaim."

3. The acceptance of that offer is dated 10 February 2009 and is in the following terms:

"We write further to your Part 36 offer dated 3 February 2009 in the sum of £4,100, which we confirm is accepted. Please make the cheque payable to MTA Solicitors. We also attach a report of Mr Ernshaw, dated 7 January 2009, for your file. Acceptance is subject to payment of our reasonable costs and disbursements, to be assessed if not agreed. Acceptance specifically excludes any credit hire or credit repair claim which could be pursued separately on behalf of our client."

4. Thereafter, there followed other correspondence disputing that the defendant was only liable for predictable costs pursuant to Part 45 of the Civil Procedure Rules.
5. The claimant's position is that there is a valid Part 36 offer engaging Rule 36.10 CPR (the costs consequences of Part 36), which entitles him to his reasonable and proportionate costs pursuant to Part 44 of CPR. Accordingly, if I find for him, the Claimant would be entitled to the usual order allowing him to such a detailed assessment.
6. This case deals in detail with the provisions of Part 36. It was pointed out by the defendant that Part 36 provides a statutory procedure for the settlement which is complete in its own right.
7. In the recent case of Gibbons v Manchester City Council [2010] EWCA Civ 726, Moore-Bick LJ said this:

"5. Part 36 is drafted as a self-contained code. It prescribes in some detail the manner in which an offer may be made and the consequences that flow from accepting or failing to accept it. In some respects those consequences reflect broadly the approach the court might be expected to take in relation to costs. In others they do not. For example, rule 36.14(3) allows the court to award a claimant who has obtained a judgment at least as advantageous an offer interest in the sum for which he has obtained judgment at an enhanced rate of up to 10 per cent over base rate, costs on the indemnity basis and interest on those costs at an enhanced rate as well.

6. The basic concepts of offer and acceptance clearly underpin Part 36, but it is inevitable, given that it contains a voluntary procedure under which either party may take the initiative to bring about a consensual resolution of the dispute. Such concepts are part of the landscape in which everybody conducts their daily life. It does not follow, however, that Part 36 should be understood as incorporating all the rules of law governing the formation of contracts, some of which are quite technical in nature. Indeed, it is not desirable that it should do so. Certainty is as much to be commended in procedural as in substantive law, especially perhaps in a procedural code which must be understood and followed by ordinary citizens who wish to conduct their own litigation. In my view Part 36 was drafted with these considerations in mind and is to be read and understood according to its terms, without importing other rules derived from the general law, save where that was clearly intended."

Whilst Part 36 is a separate and procedural code, the rules therein must be strictly complied with. General rules of contract law, whilst in the main are imported into Part 36, it is a self-contained code which cannot be looked at simply in terms of contractual niceties.

8. So far as this offer is concerned, was it a compliant Part 36 offer? It seems to me that, pursuant to Rule 36.2, it was. It contained all the relevant previsions. Paragraph 3 contains a specific provision that the Claimant has a period of 21 days during which the defendant will be liable for the claimant's costs in accordance with CPR 36.10 if the offer is accepted.
9. In my judgment the position is this. By 36.3(2)(a) a Part 36 offer may be made at any time, including before the commencement of proceedings. That is the case here. The offer was accepted before the commencement of proceedings. I was referred to footnote 36.3.1 on page 1039 of the White Book with regard to the ambiguity left by the wording of the current Part 36. It is somewhat unclear as to what the costs consequences might be of a Part 36 offer which is made, then accepted before proceedings are commenced. Rule 36(10) and (11) are both written in anticipation of there being extant proceedings. It is submitted that parties wanting to make Part 36 offers in advance of proceedings should do so in terms whereby the offer expressly states that it is made on the basis and in the event of acceptance before the commencement of proceedings, that the cost provisions of Part 36 will apply, thereby binding those terms into any settlement contract.
10. Miss Barnes for the defendant says that the problem with paragraph 3 of the offer letter is that it is not clear. It does not set out that the defendant will be liable for the claimant's costs of the pre-proceedings in accordance with the provisions of Part 36.10. It simply refers to the fact that the Defendant will be liable for the Claimants costs in accordance with 36.10. Rule 36.10 provides:

"(1) Subject to paragraph (2) and paragraph (4)(a), where a Part 36 offer is accepted within the relevant period the claimant will be entitled to the costs of the proceedings up to the date on which the notice of acceptance was served on the offeror.

(2) ....

(3) Costs under paragraphs (1) and (2) of this rule will be assessed on the standard basis if the amount of costs is not agreed."

11. The claimant's argument is that the offer was accepted on the basis of Part 36.10 and that as such 36.10(3) permits me to assess the costs of the pre-issue proceedings on the standard basis.
12. The difficulty with 36.10(1) is that there is a clear reference to the costs of the proceedings. There were no proceedings in this case. In his reply, Mr Thomas referred to Re Gibsons Settlement Trusts which stated that pre-issue costs, for example, can be included within the costs of proceedings. The difficulty here is that proceedings never started. As both advocates are well aware, different costs regimes can apply both in relation to the way in which courts deal with costs pre-issue and post-issue of proceedings. The way in which the rules deal with costs-only proceedings in relation to pre-issue matters is set out in rule 44.12(A) which sets out a procedure, where the parties to a dispute have reached an agreement on all issues, confirmed in writing, but have failed to agree the amount of those costs and no proceedings have been started.
13. Mr Thomas submitted that section 17.11 of the Costs Practice Direction does not prevent a person from issuing a claim form under Part 7 or Part 8 to sue on an agreement made in settlement of a dispute, where that agreement makes provision for costs, nor from seeking an order for costs or a specific sum in respect of costs. That, he submitted, is what the claimant has done in this case. He commenced a Part 8 claim to sue on the agreement made in settlement of the dispute where he says he is entitled to his costs to be assessed on the standard basis pursuant to 36.10(3).
14. Had proceedings been issued in this case prior to the acceptance of the offer, I would have no hesitation in coming to the conclusion that Mr Thomas' submissions are correct. However, the fact is that no proceedings were issued when the offer was accepted. In addition, the acceptance by the claimant's solicitors on 10 February makes no reference to the engagement of Part 36.10 but simply refers to the fact that "acceptance is subject to payment of our reasonable costs and disbursements". On the one hand, it could be said that that brings into play a new term or condition in relation to the offer and acceptance, but in that respect I do not believe I need to go that far. I accept the submission made to me by Miss Barnes that rule 36.10 cannot be engaged in this case. The reason it cannot be engaged is that the claimant would be entitled to the costs of the proceedings. Sub-rule (3) specifically refers to the fact that costs under paragraph 1 of the rule, to which I have just referred, will be assessed on the standard basis if the amount of costs is not agreed. That can only be a reference to the costs of the proceedings. As proceedings have not been commenced, the question of the pre-issue proceedings is not relevant in those circumstances.
15. Had the defendant's offer contained the words to which Miss Barnes referred me, namely "that the defendant would be liable for the claimant's costs, including the costs pre-issue of proceedings in accordance with CPR 36.10," then in those circumstances the matter would have gone the other way.
16. The point, with which I started and to which I return, is that Part 36 is a self-contained code. The rules of Part 36 must be complied with to the letter for the costs consequences of Part 36 to be engaged. In my judgment in this case they are not. Therefore the claimant's costs in relation to the proceedings in which they have brought their Part 8 claim fall to be dealt with under 44.12A and the consequences of that are that the matter must be dealt with in accordance with 45.7, which sets out the costs to be allowed in costs only proceedings under the procedure set out in 44.12A. This section applies where the dispute arises from a road traffic accident and the agreed damages are less than £10,000. In those circumstances that section sets out the amount of fixed, recoverable costs. In my judgment that deals with the first element of the claimant's submission, which is that the Part 36 regime as such is not engaged.
(Counsel went on to make submissions on his second point)

MASTER HAWORTH:

17. Under rule 45.12 the court will entertain a claim for an amount of costs, excluding any success fee or disbursements greater than the fixed recoverable costs, but only if it considers that there are exceptional circumstances making it appropriate to do so.
18. I must be satisfied that there are exceptional circumstances in this case to take it outside the predictive costs regime. I do not assess the costs at this stage, I simply consider whether there are exceptional circumstances.
19. The dictionary definition of "exceptional" is "unusual or not typical". In the skeleton argument at paragraph 7 the defendant says that only "truly exceptional cases" will fall outside the scheme. That is not how I read 45.12. It says "exceptional circumstances".
20. I accept what was said by Simon J in Nasami v Butt, approved by the Court of Appeal in Lamont v Burton, which is referred to in paragraph 50 of the defendant's skeleton. The predicted costs regime is an agreed scheme of recovery which is certain and easily calculated. This was done by providing fixed levels of remuneration which might over-reward in some cases and under-reward in others, but which is regarded as fair when taken as a whole. That is fair enough in the normal run-of-the-mill case.
21. The difficulty that the claimant has is that, even if I find that there are exceptional circumstances, 45.13 is engaged in that at detailed assessment they must do better by 20 per cent than the predicted costs that they would otherwise have received. There is therefore a sting in the tail for them in that respect.
22. Looking just at the factors in this case, are their exceptional circumstances? I have seen a witness statement from the claimant's solicitors and I have been referred to a bundle correspondence. I have also been referred by the defendant's side to an extremely lengthy chronology relating to the events that took place over the two years and eight months before this case settled. I am told that there are no authorities in relation to what an "exceptional circumstances". It seems to me that each case must be considered on its merits. It is impossible to say with any certainty that what might be exceptional in one case is exceptional in every case.
23. In my judgment this was not a run-of-the-mill case. This was a case where the defendant was giving the claimant the run-around. That may be normal practice certain cases, but the purpose of the fixed costs regime, when complimented by the protocols, is to bring matters to a conclusion as soon as possible if liability is not disputed on the other hand its liability remains in dispute, to set out the reasons why and move rapidly within the predicted costs regime to the issue of proceedings where, as the defendant's counsel rightly said at the end of her submissions, the court would have to decide the outcome. It seems to me that this was always a case which, at the end of the day, with the parties so polarised, a court would have had to decide had the Part 36 offer not been accepted.
24. I have looked at all the work that has been occasioned in this case, and taken into account all the correspondence from the defendant's insurers and the defendant's solicitors. The insurers and the defendants solicitors scatter their shot somewhat widely as to breach of duty. Causation and liability is disputed on one of two grounds to start off with -- either there was no impact or there was a low velocity impact. Having looked at the extensive requests for further information which, I accept on the claimant's argument, seems to infer almost (but not quite) that this claim is not a proper claim, it seems to me that the claimant's side was put to considerably more work than would otherwise be the case in this type of claim. In my experience this is not a typical case; it is unusual in the way in which it has been handled both with regard to the claimant and as to the defendant. That being so, it seems to me that it comes within the exceptional circumstances provided for in 45.12. The claimant has to make a choice. Either he accepts the predictable costs or he pushes forward in the knowledge that 45.13 may be applied if the matter goes to a detailed assessment. Whilst he may win the battle, he may not win the war if he does not achieve a significantly greater figure than he would otherwise do in relation to predictable costs.
25. That being the case, therefore, I consider that there are exceptional circumstances and I propose to make an order that the costs be assessed.
(There followed a discussion relating to the order) --------------------------