England and Wales High Court (Queen's Bench Division) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION

		The Royal Courts of Justice Strand London WC2A 2LL
		20 June 2016

1. MRS JUSTICE ELISBAETH LAING: This appeal raises a relatively narrow point about the construction of the Civil Procedure Rules ("the CPR"). It is an appeal from an order of Costs Master Whelan ("the Master") dated 8 December 2015. He decided that the costs allowed to the appellant on provision assessment pursuant to rule 47.15(5) should be capped. The issue raised by the appeal is the relationship of that rule with rule 36.17(4).
2. We take the background from the helpful skeleton argument that has been provided to us by Mr Taussig who represented the appellant. We are grateful to him for his helpful skeleton argument and oral submissions, and also to Mr Carpenter who represented the respondent for his helpful skeleton argument and oral submissions.

Background

3. The underlying claim is a claim for damages arising from the death of the appellant's mother ("the deceased") as the result of malignant mesothelioma. The deceased contracted mesothelioma by washing her son's clothes. Those clothes had been contaminated with asbestos fibres and dust in the course of her son's employment with the respondent.
4. On 20 October 2014, the claim was settled for £70,200 when the appellant accepted a pre-issue offer made pursuant to Part 36 of the CPR ("the Part 36"). On 3 March 2015, the appellant made a further Part 36 offer for £32,000 in respect of the costs of the claim. On 16 March 2015, District Judge Cohen ordered the respondent to pay the appellant's costs to be decided at a provisional assessment if not agreed.
5. On 1 April 2015, the appellant filed a notice of commencement of assessment of a bill of costs. The total amount of the bill was £55,086.52. On 8 February 2016, the Master provisionally assessed the appellant's costs. Insofar as it is material, the order that he made provided:

"It is ordered by consent that -

(1) the claimant's costs are payable by the defendant are provisionally assessed in the sum of £32,255.35. It is further ordered that -

(2) pursuant to the provisions of CPR 36.17(4) -

(i) the defendant do pay the claimant's interest on the sum of

£32,255.35 at a rate of 10 per cent per annum from 24 March 2015;

(ii) the defendant shall pay the claimant's costs of the assessment to be summarily assessed on an indemnity basis if not agreed;

(iii) the defendant shall pay interest on the costs payable to the claimant at a rate of 10 per cent."

6. Mr Carpenter tells us that by consent (so this did not appear in the order), it had agreed that the appellant should receive interest on the cost in the sum of £3,225.54.
7. The assessment gave the appellant a better result than the terms of her Part 36 offer in relation to costs. The appellant's statement of costs dated 6 August 2015 in respect of the detailed assessment proceedings was in the sum of £6,091.20. On 17 February 2016 the Master made a costs order in respect of the provisional assessment. He decided that the appellant's costs should be capped pursuant to rule 47.15(5). His order read as follows:

"It is ordered that -

(1) The claimant's costs of the detailed assessment payable by the defendant are assessed on an indemnity basis pursuant to paragraphs 2(i) and (ii) of the order dated 8 February 2016 and ordered in the sum of

£2,805.

(2) This sum shall be paid within [sic] by the defendant to the claimant within 14 days of the date of this order."

8. The Master's reasons for his decision were:

"Assessment of the claimant's costs of the assessment can properly be undertaken pursuant to CPR 36.17(4)(c)/(c) but this does not, in my judgment, dislodge the effect of CPR 47.15(5) which has the effect of trapping the 'maximum amount the court would award' to the receiving party to £1,500 plus VAT plus court fees which in the case was £1,005."

9. The appellant applied to the Master for permission to appeal the decision to cap the appellant's costs in the provisional assessment pursuant to rule 47.15(5). The Master refused that application. His reasons were:

"Please see reasons attached to the original order. The decision in Broadhurst v Tan [2016] EWCA Civ 94 has, in my view, no application as there is a conceptual difference between 'fixed costs' and, as here, assessed costs subject to the cap in CPR 47.15(5)."

10. On 8 March 2016 the appellant filed an appellant's notice appealing the decision of the Master and the appellant was in due course given leave to appeal.
11. The grounds of appeal were as follows:

"1. The Master erred in law and in principle when he summarily assessed the claimant's costs on an indemnity basis but capped the summarily assessed costs in the sum of £2,805 … on the grounds that CPR Part 36.17(4) does not dislodge the effect of CPR Part 47.15(5).

2. Further, the Master erred in law and in principle in applying no application to the decision in Broadhurst v Tan and in deciding that there is no conceptual difference between fixed costs and assessed costs subject to the cap in CPR Part 47.15(5).

3. It is the claimant's case that CPR Part 36.17(4)(b)/(c) does dislodge the effect of CPR Part 47.15(5) and that full not capped/fixed indemnity costs are recoverable and therefore this appeal should be allowed."

12. Rule 36.17 "costs consequences following judgment" is relevant. It provides as follows, so far as is material:

"(1) Subject to rule 36.2 this rule applies where, upon judgment being entered … [the] judgment against the defendant is at least as advantageous to the claimant as the proposals contained in a claimant's Part 36 offer …

(4) Subject to paragraph (7) where paragraph (1)(b) applies, the court will, unless it considers it unjust to do so, order that the claimant is entitled to -

(a) interest on the whole or part of any sum of money (excluding interest) awarded at a rate not exceeding 10 per cent above base rate for some or all of the period starting with the date on which the relevant period expired;

(b) costs (including any recoverable pre-action costs) on the indemnity basis from the date on which the relevant period expired;

(c) interest on those costs at a rate not exceeding 10 per cent above base rate; and

(d) … an additional amount which shall not exceed £75,000 …"

13. There is what appears to be a not very significant issue about which version of Part 36 applied. The parties agree that the Master applied the current version when, because of the date of the Part 36 offer, a previous version applied. The parties also agree that the terms of the two sets of provisions for present purposes are not materially different so we have referred to the current version.
14. Rule 36.14A (now re-enacted as rule 36.2(1)) insofar as is relevant provides:

"(1) where a claim no longer continues under the RTA or EL/PL protocol pursuant to rule 45.29A(1), rule 36.17 applies with the following modifications …"

15. Rule 44.4(1) provides:

"The court will have regard to all the circumstances in deciding whether costs were -

(a) it is assessing costs on the standard basis -

(i) proportionately and reasonably incurred, or

(ii) proportionate and reasonable in amount, or

(b) if it is assessing costs on the indemnity basis -

(i) unreasonably incurred, or

(ii) unreasonable in amount."

16. Rule 47.15(5) provides:

"In proceedings which do not go beyond provisional assessment, the maximum amount the court will award to any party as costs of the assessment (other than the costs of drafting the bill of costs) is £1,500 together with any VAT thereon and any court fees paid by that party."

17. Rule 47.20 provides:

"… (4) the provisions of Part 36 apply to the costs of detailed assessment proceedings with the following modifications …"

18. Four modifications are then set out which are not relevant for the purposes of this appeal.
19. We need to refer to the decision of the Court of Appeal in Broadhurst which was mentioned in the Master's reasons. In that case, the Court of Appeal considered the effect of rule 36.1(4) in its pre-6 April 2015 form on the fixed-costs regime which is set out in Part 45. In Broadhurst the Court of Appeal held that, in low value fixed-cost personal injury claims which would normally be governed by section IIIA of Part 5, costs should be assessed on the indemnity basis pursuant to rule 36.14 where a claimant has made a Part 36 offer and then obtained a judgment which was more advantageous than the offer:

"7. Rule 45.29B provides that if, in a section IIIA claim started under the RTA Protocol, the Claim Notification Form is submitted on or after 31 July 2013, "the only costs allowed are—(a) the fixed costs in rule 45.29C; (b) disbursements in accordance with rule 45.29I". Rule 45.29C provides that the amount of fixed costs for cases in the RTA Protocol is set out in Table 6.

8. The 2013 Amendment Rules also introduced changes to Part 36 to take account of section IIIA. A new rule 36.10A legislated for the treatment of costs in section IIIA where a defendant's Part 36 offer was accepted by the claimant. The effect of this provision was that the claimant would receive the fixed costs provided for by section IIIA. This disapplied the usual rule, contained in the pre-existing rule 36.10, that where a Part 36 offer is accepted, the claimant is entitled to costs assessed on the standard basis to the point of acceptance.

9. A new rule 36.14A was also introduced to prescribe the costs consequences following judgment in section IIIA cases. While it modified some aspects of rule 36.14 (which set out the cost consequences following judgment) in fixed costs cases, it left rule 36.14(3) unmodified. Rule 36.14 provided, so far as material:

'36.14 – Costs consequences following judgment

(1) Subject to rule 36.14A, this rule applies where upon judgment being entered

…

(b) judgment against the defendant is at least as advantageous to the claimant as the proposals contained in a claimant's part 36 offer.

…

(3) Subject to paragraph (6), where rule 36.14(1)(b) applies, the court will, unless it considers it unjust to do so, order that the claimant is entitled to –

(a) interest on the whole or part of any sum of money (excluding interest) awarded at a rate not exceeding 10% above base rate for some or all of the period starting with the date on which the relevant period expired;

(b) costs on the indemnity basis from the date on which the relevant period expired;

(c) interest on those costs at a rate not exceeding 10% above base rate and

(d) an additional amount, which shall not exceed £75,000, calculated by applying the prescribed percentage set out below…'

10. Rule 36.14A provided, so far as material:

'36.13.39 cm4A – Costs consequences following judgment where Section IIIA of Part 45 applies

(1) Where a claim no longer continues under the RTA or EL/PL Protocol pursuant to rule 45.29A(1), rule 36.14 applies with the following modifications.

(2) Subject to paragraphs (3), (3A) and (3B) where an order for costs is made pursuant to rule 36.14(2)-

(a) the claimant will be entitled to the fixed costs in Table 6B, 6C or 6D in section IIIA of Part 45 for the stage applicable at the date on which the relevant period expired; and

(b) the claimant will be liable for the defendant's costs from the date on which the relevant period expired to the date of the judgment.

(3) Subject to paragraphs (3A) and (3B) where the claimant fails to obtain a judgment more advantageous than the defendant's Protocol offer -

(a) the claimant will be entitled to the applicable Stage 1 and Stage 2 fixed costs in Table 6 or Table 6A in Section III of Part 45; and

(b) the claimant will be liable for the defendant's costs from the date on which the Protocol offer is deemed to be made to the date of judgment; and

…

(6) Fixed costs shall be calculated by reference to the amount which is awarded.

(7) Where the court makes an order for costs in favour of the defendant

–

(a) the court will have regard to; and

(b) the amount of costs ordered shall not exceed,

the fixed costs in Table 6B, 6C or 6D in Section IIIA of Part 45 applicable at the date of judgment, less the fixed costs to which the claimant is entitled under paragraph (2) or (3).

(8) The parties are entitled to disbursements allowed in accordance with rule 45.29I incurred in any period for which costs are payable to them.'"

20. In the course of the judgment given by the Master of the Rolls in Broadhurst, the Master of the Rolls in paragraph 30 distinguished between fixed costs and assessed costs. He said that the two were conceptually different. He went on to say:

"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. This conceptual difference was accepted in Solomon at para 19."

21. The reference to Solomon is to an earlier decision of the Court of Appeal in Solomon v Cromwell Group Plc [2011] EWCA Civ 1584. The nature of fixed costs was explained by Simon J (as he then was) in Nizami v Butt [2006] EWHC 159 (QB); [2006] 1 WLR 3307.
22. The reasons for the Court of Appeal's decision in Broadhurst are contained in paragraphs 23 to 27 of the judgment of the Court of Appeal:

"23. If rule 45.29B stood alone, then subject to various rules in Part 45 which are immaterial, the only costs allowable in a section IIIA case to a claimant who was awarded costs following judgment in his favour would be "(a) the fixed costs in rule 45.29C and (b) disbursements in accordance with rule 45.29I". But rule 45.29B does not stand alone. The need to take account of Part 36 offers in section IIIA cases was recognised by the draftsman of the rules. Indeed, rule 36.14A is headed "costs consequences following judgment where section IIIA of Part 45 applies". Rule 45.29F (8) provides that, where a Part 36 offer is accepted in a section IIIA case, "rule 36.10A will apply instead of this rule". And rule 45.29F(9) provides that, where in such a case upon judgment being entered the claimant fails to obtain a judgment more advantageous than the claimant's Part 36 offer, "rule 36.14A will apply instead of this rule". Rule 45.29F does not, however, make provision as to what should happen where the claimant makes a successful Part 36 offer.

24. Mr Laughland submits that, since rule 45.29F makes no such provision, the basic or general rule in rule 45.29B that the only costs allowable are fixed costs and disbursements carries the day. But that is to ignore rule 36.14A which is headed "Costs consequences following judgment where section IIIA of Part 45 applies". Rule 36.14A(1) provides that in a section IIIA case "rule 36.14 applies with the following modifications". As we have seen, rule 36.14(3) provides that, where a claimant makes a successful Part 36 offer, the court will, unless it considers it unjust to do so, order that the claimant is entitled to four enhanced benefits including "(b) his costs on the indemnity basis from the date on which the relevant period expired".

25. The effect of rules 36.14 and 36.14A when read together is that, where a claimant makes a successful Part 36 offer, he is entitled to costs assessed on the indemnity basis. Thus, rule 36.14 is modified only to the extent stated by 36.14A. Since rule 36.14(3) has not been modified by rule 36.14A, it continues to have full force and effect. The tension between rule 45.29B and rule 36.14A must, therefore, be resolved in favour of rule 36.14A. I reach this conclusion as a straightforward matter of interpretation and without recourse to the canon of construction that, where there is a conflict between a specific provision and a general provision, the former takes precedence. As we have seen, there is disagreement as to which is the relevant general provision in the present context. Mr Williams submits that it is rule 36.14; and Mr Laughland submits that it is rule 45.29B. I do not find it necessary to resolve this difference.

26. Rule 36.14A(8) provides further support for my conclusion. This provision states that in a section IIIA case the parties (i.e. claimant as well as defendant) are entitled to disbursements allowed in accordance with rule 45.29I in any period for which costs are payable to them. This reflects rule 45.29B(b). If, as Mr Laughland contends, rule 45.29B prevailed over rule 36.14A in any event, this provision would have been unnecessary. It is significant that rule 36.14A does not contain a provision which reflects rule 45.29B(a) and 45.29C. In my view, the fact that rule 36.14A contains provision for payment of disbursements in accordance with rule 45.29B(b), but not for payment of fixed costs in accordance with rule 45.29B(a) confirms that the interpretation that I have adopted above is correct.

27. I find yet further support for the conclusion that I have reached in the wider contextual points made by Mr Williams to which I have referred at para 13 above which it is unnecessary to repeat."

23. The issue on the appeal can be shortly stated. It is whether, if a costs assessment proceeds no further than a provisional assessment, a claimant who has made a successful Part 36 offer is limited to the costs provided for in rule 47.15.5 or whether the provisions of Part 36 entitle the claimant in this case (or the appellant), to costs assessed on an indemnity basis.
24. As the matter of a construction of the express provisions of the rule, the answer seems to us to be relatively clear. The intention of the draftsman of Part 37 appears to be to import the provisions of Part 36 into Part 47 with four express modifications which are not relevant on the facts of this case. The issue is whether, if the assessment does not go beyond a provisional assessment, a party who can invoke the provisions of Part 36 in his or her favour, is nonetheless restricted to the amount of costs capped by rule 47.15(5).
25. Mr Taussig for the appellant submits that the Master erred in not applying the principles which were elucidated by the Court of Appeal in the Broadhurst decision. We accept that Broadhurst was concerned with different provisions of the CPR and we also accept, although the precise role that this argument played in the Court of Appeal's reasons is not clear, that one of the points that was argued in the Broadhurst case was that the construction of the two rules which had been considered in that case all turned on conflict between fixed costs and assessed costs.
26. We do not consider that we are much helped by whether or not costs subject to a cap are fixed costs or assessed costs, although it is our clear view that costs which are subject to a cap are not fixed costs. It is clear from paragraph 30 of the decision of the Court of Appeal in Broadhurst and from the more detailed reasoning in Nizami that, where there is a fixed-costs regime, a party gets the amount fixed irrespective of the costs actually incurred, so that if the party has incurred more costs than the fixed costs then they only get the fixed costs, but conversely, if they had not incurred any costs at all or had incurred costs which are lower than the fixed costs, they still get the fixed costs.
27. In brief, where costs are assessed, the receiving party gets the costs that he or she has actually incurred, subject to the detailed principles which apply to such an assessment and subject to whether the costs are assessed on the indemnity basis or the standard basis.
28. It seems to us that where a cap applies, the costs are assessed but the receiving party does not in fact get costs assessed on the indemnity basis. What the receiving party gets is costs assessed on an indemnity basis, subject to a cap.
29. There was some discussion in argument before us about the principle of construction which is expressed in Latin as generalia specialibus non derogant. We do not consider that that principle is particularly helpful in this case, nor do we consider that we are assisted by the reasoning of the Court of Appeal in the Solomon case in deciding, if we had to decide, which of the two provisions of the CPR that we are considering is the general and which is the specific provision. We are not assisted by the reasoning in Solomon because it applied to a version of the rules which has since in a material respect been amended. The amended version is the version that was considered by the Court of Appeal in Broadhurst. The reason that the Court of Appeal in Broadhurst did not need to decide which provision is the general one and which provision is the specific one, was precisely because the draftsman in Part 36.14A(1) had made specific provision for the relationship between Part 45 and Part 36.
30. We do consider, however, that the general scheme of the reasoning in Broadhurst does assist us because we consider that, as in Broadhurst, the draftsman of Part 47 has made specific provision for the relationship between Part 47 and Part 36. That is the provision made in rule 47.20(4). In other words, the draftsman has considered how Part 36 should apply to the procedural provisions which are contained in Part 47. The provision which he has made is that the provisions of Part 36 apply to the costs of the detailed assessment with the four irrelevant modifications which are set out in sub-rule (4) of rule 47.20.
31. It seems to us that there is a conflict in a sense between Part 47.15(5) and Part 36. This conflict arises not because Part 47.15(5) provides for fixed costs, because it does not provide for fixed costs. Rule 47.15(5) does potentially derogate from the entitlement to have costs assessed on an indemnity basis which is conferred by Part 36. For it to derogate in fact, the draftsman would, it seems to us, have had to have provided specifically in rule 47.20 that the provisions of Part 36 would apply to the costs of the detailed assessment with modifications that included 47.15(5).
32. It seems to us that, because he has not so provided, it must follow that the provisions of Part 36 apply to this case and that they are not displaced by a provision of rule 47.15(5). To that extent it seems to us that the scheme of the reasoning in Broadhurst helps us to reach a conclusion on the correct relationship between Part 36 and Part 47 on the facts of this case.
33. Both sides in their arguments urged on us the undesirable policy consequences of accepting the other side's argument. It seems to us that there is one potentially undesirable consequence from our conclusion. That is that it may reduce incentives for people to keep the costs of a provisional assessment as low as possible. On the other hand, it seems to us that, one consequence of our conclusion is that it increases the incentives on parties to accept sensible Part 36 costs offers because, if they do not, then there is the potential for them to incur further costs if that rejection is proved wrong by a detailed assessment.
34. For those reasons, it seems to us that the appellant's argument on the construction of these two provisions is correct. We therefore allow the appeal.