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

IN THE SENIOR COURTS COSTS OFFICE
FROM ST ALBANS COUNTY COURT

		Clifford's Inn, Fetter Lane London, EC4A 1DQ
		1st April 2011

Master Gordon-Saker :

1. On 28^th August 2008 the Claimant, Mr Stuart Lisbie, had the misfortune to be injured in a road accident. He instructed McKeowns, a firm of solicitors in St Albans, to act on his behalf in relation to his claim for damages against the Defendant.
2. On 24^th November 2008 Wonway UK Limited, a claims management company, wrote to the Defendant's insurers:

We are instructed to act on behalf of Lewis Day Transport Plc, and for their driver [Mr Lisbie], in relation to their claims for losses suffered as a result of the above accident.

…

We confirm provided there is no dispute on quantum and that we receive payment within the next 14 days, our client is prepared to accept your offer of 50:50.

3. Apparently unaware of that letter McKeowns wrote to the Defendant's insurers the following day:

We are instructed to put forward an offer of £1,650 in full and final settlement of our client's claim.

…

The above is without prejudice to any claim our client's insurers or employers might have.

4. On 2^nd December 2008 Accident Hotline Limited, claims handling agents for the Defendant's insurers, replied to McKeowns:

We reject your offer of £1650, we would value your clients general damages at £1450. We are also prepared to make an offer of £25 in respect of undocumented special damages for your client.

As per the attached letter from your clients hire/repair company [Wonway] your client has agreed to settle this matter on a 50.50 basis.

We assume that you will also be in agreement to dealing on a 50.50 basis and we will raise the relevant cheques on acceptance of our offer.

5. McKeowns wrote to the Defendant's insurers on 16^th February 2009:

We … would confirm our client's acceptance of your offer in the sum of £1,475.00 of which our client will receive £737.50 after deduction of 50%, provided, of course, that our costs and disbursements are met in addition, such costs to be assessed in default of agreement between us.

6. There then followed a calculation of the costs claimed in accordance with Section II of Part 45 of the Civil Procedure Rules 1998. The sum claimed for costs was £2,015.58.
7. Accident Hotline Limited replied by letter dated 19^th February 2009:

We have noted that the valuation of £1475 has been agreed. As such we have raised a payment of £737.50 in settlement of your clients claim.

Given that your clients damages after contributory negligence fall below £1000, we will not be in a position to consider your costs.

8. On 19^th March 2009 the Claimant commenced costs-only proceedings pursuant to CPR 44.12A in St Albans County Court. By an order dated 3^rd March 2010 (but varied by an order made on 7^th June 2010) the Claimant was awarded his costs "to be subject to detailed assessment if not agreed" and by an order dated 31^st August 2010 the case was transferred to the Senior Courts Costs Office.
9. There is but one issue on the detailed assessment: whether the Claimant is entitled to fixed recoverable costs calculated under Section II of CPR Part 45 or whether he is only entitled to the fixed costs recoverable in small claims track cases. The amount of the latter has been agreed at £280.
10. As this case has not been transferred to the High Court I am hearing it as a Deputy District Judge of the St Albans County Court and any appeal from me would be to a Circuit Judge of that court. Although I am told that a large number of cases may be affected by this decision, it seems to me that fixed recoverable costs under Section II of CPR Part 45 fall entirely within the province of the County Courts and that it would not be appropriate to transfer this case to the High Court.
11. Section II of CPR Part 45 provides a regime for the calculation of costs in low value personal injury claims arising out of road accidents where everything other than the amount of costs has been agreed.
12. CPR 45.7 provides:

(1) This Section sets out the costs which are to be allowed in –

(a) costs-only proceedings under the procedure set out in rule 44.12A; or

(b) proceedings for approval of a settlement or compromise under rule 21.10(2),

in cases to which this Section applies.

(2) This Section applies where –

(a) the dispute arises from a road traffic accident;

(b) the agreed damages include damages in respect of personal injury, damage to property, or both;

(c) the total value of the agreed damages does not exceed £10,000; and

(d) if a claim had been issued for the amount of the agreed damages, the small claims track would not have been the normal track for that claim.

…..

(Rule 26.6 provides for when the small claims track is the normal track.)

13. The Defendant contends that, for the purposes of CPR 45.7(2)(d), had a claim been issued for the amount of the agreed damages the small claims track would have been the normal track for the claim.
14. CPR 26.6(1) provides:

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

(a) any claim for personal injuries where –

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

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

15. CPR 26.7(1) provides:

(1) In considering whether to allocate a claim to the normal track for that claim under rule 26.6, the court will have regard to the matters mentioned in rule 26.8(1).

16. CPR 26.8 provides (insofar as material):

(1) When deciding the track for a claim, the matters to which the court shall have regard include –

(a) the financial value, if any, of the claim;

…..

(2) It is for the court to assess the financial value of a claim and in doing so it will disregard –

…..

(d) any contributory negligence.

17. Section 25A of the Costs Practice Direction provides:

25A.1

Section II of Part 45 ('the Section') provides for certain fixed costs to be recoverable between parties in respect of costs incurred in disputes which are settled prior to proceedings being issued. The Section applies to road traffic accident disputes as defined in rule 45.7(4)(a), where the accident which gave rise to the dispute occurred on or after 6th October 2003.

25A.2

The Section does not apply to disputes where the total agreed value of the damages is within the small claims limit or exceeds £10,000. Rule 26.8(2) sets out how the financial value of a claim is assessed for the purposes of allocation to track.

25A.3

Fixed recoverable costs are to be calculated by reference to the amount of agreed damages which are payable to the receiving party. In calculating the amount of these damages –

(a) account must be taken of both general and special damages and interest;

(b) any interim payments made must be included;

(c) where the parties have agreed an element of contributory negligence, the amount of damages attributed to that negligence must be deducted;

(d) any amount required by statute to be paid by the compensating party directly to a third party (such as sums paid by way of compensation recovery payments and National Health Service expenses) must not be included.

18. On behalf of the Claimant, Mr Browne submitted that for the purposes of CPR 45.7(2)(d) "if a claim had been issued for the amount of the agreed damages, the small claims track would not have been the normal track for that claim" because the value of the Claimant's damages was £1,450, the figure agreed by McKeowns and Accident Hotline Limited in the correspondence to which I have referred. No deduction should be made from that figure for contributory negligence by virtue of CPR 26.8(2)(d).
19. He submitted that had proceedings been issued the Defendant could have no objection to the claim being allocated to the fast track because its own valuation of the damages was a sum in excess of £1,000 (CPR 26.6(1)) and any deduction for contributory negligence for which it contended should be disregarded (CPR 26.8(2)(d)). That submission must be correct.
20. Mr Browne pointed to the inconsistency that the claim, if issued, would be allocated to the fast track but if no claim were issued the costs would not be calculated by the system designed for cases which, if issued, would be allocated to the fast track.
21. He drew the distinction between the rules governing the application of the regime under Section II, which provide that deduction for contributory negligence should not be taken into account, and the rules governing the calculation of the costs under the Section (CPR 45.9 and paragraph 25A.3(c) of the Costs Practice Direction) which provide that deduction for contributory negligence should be taken into account.
22. He sought to distinguish the decision of HH Judge Stewart QC in Parveen v Farooq (30^th June 2009, Liverpool Crown Court; unrep.).
23. Factually, that was apparently a similar case to the present. The value of the claim was agreed between the parties at £1,750 but, on the basis that the claimant was 50 per cent to blame, damages of only £875 were paid. The only issue, as here, was whether the case fell within Section II of Part 45 or whether only the fixed costs payable by reference to the small claims track were recoverable. Deputy District Judge Smith held that the case fell outside Section II and that decision was upheld on appeal.
24. The ratio of Judge Stewart's decision is at paragraph 9 of his judgment:

(1) It is of paramount importance to focus on the rule which governs whether this case is within or without the fixed recoverable costs regime. The critical words of the rule are in 45.7(1)(d), namely:

"If a claim had been issued for the amount of the agreed damages, the small claims track would not have been the normal track for that claim."

The plain and obvious interpretation of that rule is to ask, (1) what were the 'agreed damages?' The answer is £875. (2) If a claim had been issued for £875 would the small claims track have been the normal track for that claim? The answer is 'Yes', see rule 26.6(1)(a)(ii).

It is noteworthy that the only signpost in rule 45.7 is in subparagraph (3), where it says, '… (Rule 26.6 provides for when the small claims track is the normal track)'. It does not signpost to rule 26.7 or rule 26.8, which deal with whether or not to allocate to the 'normal track'.

(2) It is to be realised that this is in effect the beginning and the end of the matter. There is nothing requiring the court to consider the impact of contributory negligence. At the costs only stage the court knows what the agreed damages are, it does not have to make any assessment of the financial value of the claim, as it does when considering whether to allocate to the small claims track [cf rule 26.8(2)(d)].

(3) The costs practice direction at Section 25A cannot change the clear meaning of the rule but in my judgment it is consistent with it since:

(a) 25A.2 states in terms that Section II to Part 45 does not apply to disputes where the total agreed value of the damages is within the small claims limit (the signpost to rule 26.8(2) does not affect the meaning of those words).

(b) 25A.3 requires that to calculate the amount of agreed damages (albeit in this paragraph for the purposes of calculating the fixed recoverable costs) the court must deduct any damages attributed to contributory negligence.

25. The learned judge then went on to consider the practical problems that would flow were the claimant's argument correct, by reference to examples which I need not repeat.
26. I cannot accept Mr Browne's submission that the present case is readily distinguishable from Parveen and I have no hesitation in following it (despite the assurances of both counsel that I am not bound by it even when sitting as a Deputy District Judge of the County Court) and I respectfully adopt Judge Stewart's reasoning.
27. The term "agreed damages", used in CPR 45.7(2)(d), is not defined in the rules. In the absence of particular definition, words should be given their usual meanings. It seems to me that the usual meaning of "agreed damages" is the amount of compensation which the parties have agreed should be paid. It is not the value of the claim before any deduction for contributory negligence. That would be an artificial meaning.
28. CPR 45.9, which provides the formula for the calculation of the costs under Section II, uses the term "damages agreed". I can see no reason why "damages agreed" and "agreed damages" do not mean the same thing, namely the amount of compensation which the parties have agreed should be paid. In relation to CPR 45.9, section 25A.3 of the Practice Direction makes it plain that any damages deducted on account of contributory negligence are to be disregarded. The result is the "damages agreed".
29. It seems to me that had the Civil Procedure Rules Committee intended that deduction for contributory negligence should be disregarded for the purposes of CPR 45.7(2)(d) that could easily have been provided. For example:

(d) if a claim had been issued, having regard to its value it would not have been allocated to the small claims track.

30. But the value of the claim, the first hurdle on allocation, is historical by the time that costs fall to be assessed, because by that stage "the [actual] amount of the agreed damages" is known.
31. That this interpretation may lead to the inconsistency identified by Mr Browne – that the claim would have been allocated to the fast track, if issued, but only small claims track costs are recoverable – is unfortunate. It would be deeply unfortunate if solicitors were driven to issue claims, which need not be issued, simply to make them cost-bearing claims.
32. But I have to interpret the words of the rule as they are written and I cannot understand "the amount of the agreed damages" to mean "the value of the claim before deduction for contributory negligence" whether that value has been agreed (as in the present case) or not.
33. I cannot ignore the pointer to CPR 26.8(2) in paragraph 25A.2 of the Costs Practice Direction, which I accept deals with the application of Section II rather than the calculation of the costs. However the Costs Practice Direction is designed as guidance and a pointer to CPR 26.8(2) cannot, to my mind, alter the usual meanings of the words used in the rule. Had it been intended that "the amount of the agreed damages" means "the value of the claim before deduction for contributory negligence" that could easily have been stated expressly in the Practice Direction.
34. That inconsistency may be the result is not a reason that justifies replacement of the words of the rule or a rewriting of the rule. As Simons J said in Butt v Nizami [2006] EWHC 159 (QB) (cited with approval by Dyson LJ, as he then was, in Lamont v Burton [2007] EWCA Civ 429):

22 … the provisions of sections II to V of CPR 45, were introduced following 'industry wide' discussions under the aegis of the Civil Justice Council. Agreement was reached on the recoverable costs in the different situations covered by the various sections.

23. It seems to me clear that the intention underlying CPR 45.7-14 was to provide an agreed scheme of recovery which was 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 were regarded as fair when taken as a whole.

35. Any formulaic scheme, applied mechanistically, will produce inconsistencies and odd results. Introducing uncertainty (the value of the claim before deduction for contributory negligence) when certainty (the amount of damages actually payable) is available would seem undesirable.
36. In the present case it seems to me that if a claim had been issued for the amount of the agreed damages (£737.50) the small claims track would have been the normal track for that claim (by reference to CPR 26.6(1)). Had a claim been issued for the value of the claim before deduction for contributory negligence the claim would have been allocated to the fast track. But whether the case falls within Section II depends on the first proposition not the second.
37. Accordingly, in my judgment this claims falls outside Section II of Part 45 and the Claimant is entitled only to the fixed costs referable to the small claims track which have been agreed in the amount of £280.