Part 36 Cots Consequences Trump Fixed Costs

Where a claimant in an ex-portal case beats her own Part 36 offer, she is entitled to her costs assessed on the indemnity basis. She is not limited to receiving her fixed costs. Further, indemnity costs are not the same as fixed costs. The Court of Appeal so held in a judgment handed down today, available on Bailii.

The Claimants in these two appeals had started low-value RTA claims in the portal. They each made a Part 36 offer which the Defendant rejected. Each obtained judgment more advantageous than the offer she had made.

Both judges held that r.36.14(3) applied (costs consequences when claimant beats her own offer). The Defendants argued that r.36.14(3) gives the claimant no advantage where costs are fixed by Part 45, since the more specific provisions in Part 45 prevail. The only judgment was delivered by Lord Dyson MR with whom McCombe and Richards LLJ agreed. The Master of the Rolls found this to be a straightforward matter of interpretation of rules 36.14 and 36.14A. The latter modifies the former where fixed costs apply, but says nothing about a claimant beating her own offer. The rule that claimants are entitled to an indemnity basis assessment of their costs where they have made a successful Part 36 offer is thereby preserved.

One of the two first instance judges held that there is no difference between profit costs assessed on the indemnity basis, and fixed costs. On appeal the Defendants sought to support this conclusion. The Court of Appeal overturned it. The starting point is that fixed costs and indemnity costs are conceptually different. From now on, where a claimant beats her own offer in a fixed costs case, she will be awarded fixed costs to the last staging point provided by the relevant table. Then she will be awarded costs on the indemnity basis, in addition, from the date the offer became effective. This will not require apportionment. It will lead to a generous outcome for the claimant, but this is consistent with the policy of Part 36.

Legal representatives in these cases will wish to continue to charge on a conventional hourly basis, if need be capping their right to enforce payment with reference to the amount recovered. Then if the claimant beats her offer she will be entitled to ask for an order for costs on the hourly rate basis. There may now be some pressure on defendants to place more generous valuations on low-value cases.