Gurion Taussig is successful in High Court Appeal on Part 36 costs case

Gurion Taussig successfully appealed a decision of Master Whalan in respect of the costs of a detailed assessment that concluded at provisional assessment stage. The issue at stake was whether CPR 36.17(4) could dislodge the cap set out in 47.15(5).

Rule 47.15(5) states that the court will not award any party costs of more than £1,500 plus VAT plus court fees if the matter concludes at provisional assessment. In Lowin, the Appellant had made a Part 36 offer in respect of her costs of the action, which she bettered (by £255) on provisional assessment. The Master agreed that her costs should be assessed on the indemnity basis pursuant to 36.17(4) as one of the costs consequences of achieving a result as advantageous as the proposals contained in her Part 36 offer. However, he stated that the cap in 47.15(5) remained intact. In particular, he drew a distinction between the instant case and the decision in Broadhurst v Tan [2016] EWCA Civ 94 – in which the Court of Appeal held that Part 36 could dislodge the fixed cost provisions contained in Section IIIA of Part 45, in respect of low-value road traffic accidents.

On appeal, the Appellant continued to argue that Broadhurst did apply to the instant case. In the same way that in Broadhurst, Rule 36.14(A) had incorporated Rule 36.14 without modification into Section IIIA of Part 45, so, it was submitted, Rule 47.20(4) incorporated Rule 36.17 without substantive modification into Part 47. In Broadhurst, the Court of Appeal held that, as a matter of construction, Rule 36.14 therefore continued to have ‘full force and effect’. The Appellant argued that the same principle applied in respect of Part 47.

The Court agreed with the Appellant’s submissions. Mrs Justice Laing held that there was indeed a conflict between Rule 36.17 and 47.15(5), because the latter derogated from the entitlement to costs on the indemnity basis conferred by Part 36. In resolving the conflict, the scheme of reasoning contained in Broadhurst provided the answer. If the draftsman of the Rules Committee had wished Part 36 to be modified so that the cap would remain then that would have been stated. The Court further stated that the dislodging of the cap would incentivize parties to accept reasonable costs offers because if they did not, they would be at risk of adverse cost orders pursuant to Part 36.

The Appeal was granted and the matter remitted to Master Whalan to re-assess the Appellant’s costs of the detailed assessment on an indemnity basis, without those costs being capped by Rule 47.15(5).

The decision represents an important extension of the Broadhurst principle, and one that potentially affects all cases that proceed to provisional assessment of costs in Part 47 proceedings. Parties should indeed be incentivized to make reasonable cost offers, but equally they must be aware that a failure to accept a reasonable Part 36 offer is likely to have cost consequences if the offeror achieves a better result on provisional assessment.

Gurion acted for Boyes Turner (instructed by Rob Franks, Costs Manager).

Click here to read the Case Report, available on Lawtel © Thomson Reuters.