The quantum foam

Part 45 CPR is an interesting section of the rules, which could be viewed as a kind of parallel universe to the one most lawyers inhabit: analogous to the quantum realm, where universal constants simply do not apply.

In particular the scale of costs prescribed to apply to, for example road traffic accident claims does not depend on the time spent by a solicitor on a case but rather is fixed by reference to other criteria. This can have surprising consequences when considering what costs orders may be open to a judge dealing with a claim governed by fixed costs.

An area of practice which has a particularly high volume of litigation is that of road traffic accident claims involving a claim for credit hire. Many credit hire claims start off under the Portal as part of a larger claim frequently including claims for damages for personal injuries, vehicle repairs or value, loss of earnings and other heads of claim. When a case falls out of the Portal and assuming it is allocated to the Fast Track, it will be subject to the fixed costs provisions of part 45 CPR.

Not infrequently a case will proceed to trial and although the claimant will recover some damages, a credit hire claim can fail in its entirety: perhaps on the issue of need for a replacement vehicle, problems with the enforceability of a credit hire agreement or some other reason.

Often the credit hire claim will be the single largest head of claim, and have identifiable items of costs related to it: disclosure of bank statements and other financial documentation, rates evidence, part 18 requests and reply and so on.

Even if the claimant is successful overall, the defendant may argue that either the costs of the claimant should be reduced, due to the failure of the credit hire element of the claim, or even to recover its own costs of the issue of credit hire. To what extent is this possible, if the case is a Fast Track case and fixed costs are prescribed by part 45 CPR? The answer may be: it isn’t.

Part 45 CPR contains no support for the notion that the court has a general power to make an issue based costs Order by reference to particular heads of loss: in fact it tightly prescribes the costs that can be awarded to either party, limiting a defendant’s potential to recover costs to the circumstances where the defendant has made a part 36 offer or pursued a counterclaim.

This is not to say that success or failure by the claimant on particular issues is not taken account of by the rules: it plainly is, but not in the context of making an order, but rather by the quantification of the costs recoverable by the claimant.

This is a logical approach, given the very modest sums recoverable, the context of QUOCS and the essentially arbitrary nature of the “bright lines” drawn in table 6B on the phases of the claim.

Pursuant to rule 45.29B when a costs order is made in the claimant’s favour, the costs are calculated as being the fixed costs recoverable under rule 45.29C and the reasonable disbursements permitted under rule 45.29I.

Table 6B indicates that where the claim is disposed of at trial, the relevant fixed costs are £2655 plus 20% of the damages awarded plus the trial advocacy fee with the addition of VAT on these amounts.

Rule 45.29I provides a further list of the categories of reasonable disbursements which will be recoverable, with VAT if appropriate.

It will be noted that because the claimant’s costs are calculated by reference to the judgment sum awarded, because the claimant will have been awarded no sums in respect of damages for credit hire, the claimant’s costs have already notionally been reduced by 20% of the damages that might have been awarded: in effect, the claimant has been deprived by the rules, of the costs of that issue.

For the defendant to be awarded a further sum of costs in respect of that issue, would accordingly constitute “double recovery”. Moreover the rules are prescriptive of the amount of costs that a defendant can be awarded: see in particular rule 45.29F.

The limitations are particularly striking: see 45.29F(2) any award of the defendant’s costs cannot exceed the amount that would have been awarded to the claimant at the same stage of the proceedings. The court’s jurisdiction to award any costs to the defendant at all, is prescribed, and predicated upon the notion that the defendant is successful at an identifiable stage of the proceedings.

Thus there is no scope for the defendant to be awarded “assessed costs” of a particular issue as the claimant will have succeeded at each stage of the proceedings, pre-issue, pre-trial and at trial.

In a scenario where there are substantial awards of damages for the claimant for eg: personal injuries and no effective part 36 offer by the defendant, there can be no doubt that the claimant was the winner at each stage of the proceedings.  The claimant will have had to go to trial to recover those damages and incurred the advocacy fee to do so.

See also 45.29G: even had the defendant brought a counterclaim, which succeeded, that would not have disentitled the claimant to his costs of the claim calculated in accordance with rules 45.29C and 45.29I and only nominal costs would have been attributed to the costs of the counterclaim, reflective of the Medway Oil principle.

In summary, as part of the “swings and roundabouts” of part 45 CPR, it can be argued that the court has no power to order the claimant to pay the costs of a failed claim for credit hire itself part of a larger claim: the rules in 45 CPR do not provide for it and the circumstances where the defendant might recover costs (success at an identifiable stage, a part 36 offer, or a counterclaim) do not arise in this case.

The above analysis is underpinned by the general principles which apply to awards of costs in personal injury actions, where a claimant’s claim is reduced at trial, or he fails on certain allegations, or certain heads of claim. Even if the court took the view that it had a wider discretion than is submitted to be the case, it would, not aid the defendant as binding authority indicates that the discretion should not in this context, be exercised in favour of the defendant.

In the case of Fox.v Foundation Piling [2011] EWCA Civ 790 Jackson LJ summarised the position as follows:

From this review of authority I draw the following conclusions. First, where one party makes a Part 36 offer and then achieves a more advantageous result than that proposed in his offer, the provisions of rule 36.14 modify the court’s general discretion in respect of costs. This is important because parties who choose to use the Part 36 mechanism in their settlement negotiations need to have a clear understanding of the legal effects of making, accepting and rejecting offers under Part 36.

Secondly, parties are quite entitled to make Calderbank offers outside the framework of Part 36. Where a party makes such an offer and then achieves a more advantageous result, the court’s discretion is wider. Nevertheless it may well be appropriate to order the party which has optimistically rejected the Calderbank offer to pay all costs since the date when that offer expired. This was what the court ordered in Stokes.

A not uncommon scenario is that both parties turn out to have been over-optimistic in their Part 36 offers. The claimant recovers more than the defendant has previously offered to pay, but less than the claimant has previously offered to accept. In such a case the claimant should normally be regarded as “the successful party” within rule 44.3 (2). The claimant has been forced to bring proceedings in order to recover the sum awarded. He has done so and his claim has been vindicated to that extent.

In that situation the starting point is that the successful party should recover its costs from the other side: see rule 44.3 (2) (a). The next stage is to consider whether any adjustment should be made to reflect issues on which the successful party has lost or other circumstances. An adjustment may be required to reflect the costs referable to a discrete issue which the successful party has lost. An adjustment may also be required to compensate the unsuccessful party for costs which it was caused to incur by reason of unreasonable conduct on the part of the successful party.

In a personal injury action the fact that the claimant has won on some issues and lost on other issues along the way is not normally a reason for depriving the claimant of part of his costs: see Goodwin v Bennett UK Limited [2008] EWCA Civ 1658. For example, the claimant may succeed on some of the pleaded particulars of negligence, but not on others. Indeed the fact that the claimant has deliberately exaggerated his claim may in certain instances not be a good reason for depriving him of part of his costs: see Morgan v UPS. A defendant who has obtained video surveillance evidence is perfectly well able to protect his position on costs by making a modest offer under Part 36.

Nevertheless in other cases (as stated above) the fact that the successful party has failed on certain issues may constitute a good reason for modifying the costs order in his favour. This is commonly achieved by awarding the successful party a specified proportion of its costs. In Widlake the facts were so extreme that the successful party was ordered to bear all of its own costs.(emphasis added)

There are of course, excellent arguments which could be mounted for a defendant but given the length of this post, I shall have to save those for another day.


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