Source: https://www.johnmhayes.co.uk/blog/calculating-fixed-costs-do-sums-paid-prior-to-issue-count/
Timestamp: 2020-07-14 22:02:02
Document Index: 784834739

Matched Legal Cases: ['art 7', 'art 36', 'art 36', 'art 36', 'art 36', 'art 36', 'art 36', 'art 45']

Calculating Fixed Costs: do sums paid prior to issue count?
Home>Blog>Calculating Fixed Costs: do sums paid prior to issue count?>
Fixed costs are supposed to make the assessment of costs a simple and straightforward exercise leaving little room for disagreement between the parties. Practice doesn’t always match theory though, and a matter from the North Shields County Court from 10 November 2016 is illustrative of that fact.
Jones v Jones related to an RTA. Liability for the accident was admitted by the Defendant. The Claimant submitted a CNF which referred to personal injuries and a claim for vehicle damage. The vehicle was written off. The claim for vehicle damage was put at £1,800 on the basis of a pre-accident value of £2,000, net of salvage of £200.
The Claimant sought an interim payment in the sum of £1,800 in respect of the vehicle damage. This was paid whilst the matter remained on the portal.
The matter subsequently left the portal and the parties were unable to reach an agreement. Proceedings were issued under Part 7. The vehicle damage was not included in the proceedings, as it had already been paid. Before the matter was allocated, the Defendant made a Part 36 offer in the sum of £5,850 in respect of ‘the whole claim’. The Claimant accepted the offer.
CPR 45 provided, at Table 6B that the fixed costs were £1,160 plus 20% of the damages. The Claimant believed that 20% of the damages included the £1,800 for vehicle damage, and so sought £1,160 + 20% of £7,650 = £2,690, plus VAT and disbursements which had been agreed. The Defendant believed that the 20% of damages related to the amount stated on the face of the Part 36 offer only, and sought to pay £1,160 + 20% of £5,850 = £2,330 plus VAT and disbursements. The dispute was therefore over the princely sum of £360 plus VAT.
The Claimant relied on CPR 45.29C (4) (b), which says that “Unless stated otherwise, a reference to damages means agreed damages.” The reference to agreed damages had to relate to all of the damages agreed between the parties in respect of the dispute. If it did not, it would lead to the absurd result that a solicitor would not be paid in respect of work done on heads of damages which settled pre-proceedings. That would be a deterrent to early settlement of issues between the parties, as Claimants would have to hold out for global offers in order to maximise their entitlement to costs.
The Defendant relied on CPR 36.20, which states that:
The Defendant submitted that CPR 36.20 (10) clearly and unambiguously required the fixed costs to be calculated by reference to the sum stated in the offer, no more and no less, and to the extent that this appeared to conflict with CPR 45.29C (4) (b) then this was resolved in the Defendant’s favour by the appearance of the words ‘unless otherwise stated’ in the latter provision.
The court found in favour of the Claimant. The argument that it would be absurd to exclude damages agreed outwith the scope of the final Part 36 offer from the scope of costs was accepted, especially as it was obvious that if the vehicle damages had not been agreed pre-action and had been included in the proceedings then the fixed costs would have been on the whole sum.
The court recognised the problem with the wording of CPR 36.20, and dealt with this by reading the words ‘by reference to’ as meaning ‘having a bearing on’, such that the amount of the Part 36 offer had to be taken into account when determining the fixed costs but was not the only relevant sum.
There was also criticism of the drafting of the rules, as CPR 36.20 assumes that there will only ever be one Part 36 offer disposing of the entirety of the claim, but this is clearly not the case.
The decision reached is surely correct. Whilst the Defendant’s reasoning is superficially attractive based on a formal reading of the wording of CPR 36.20, the result is so patently absurd that it is no surprise that the court interpreted the provision so as to avoid that consequence.
Of course, as was recognised by the judge, the problem is caused by shoddy drafting and a failure to ensure that Part 36 tallies with the provisions of Part 45. This is certainly not the first time that such problems have been caused by a failure of the rules to account of the practical realities of running cases. It can only be hoped that any extension of fixed costs is accompanied by a well drafted and fully integrated set of procedural rules. Furthermore, the rules themselves, rather than just the general principle of any extension, should be subject to a reasonable period of consultation. Sadly, past evidence suggests that this hope is likely to prove forlorn.
The Claimant was awarded their costs of the application which were summarily assessed. The precise figures are not available, but Counsel’s fee was reduced to £5000, and the solicitor’s fee was reduced to 12 hours of time. With the court fee, the costs were allowed in excess of £7,000. Given the Defendant’s own costs are likely to have been in the same ball park figure, it seems that the Defendant has expended close to £15,000 over a dispute worth £360 plus VAT.
Who says that fixed costs keep the costs of litigation proportionate?