Costs News

09 February 2017
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Indemnity costs award in fixed-fee RTA case

A district judge has awarded costs on the indemnity basis following the late acceptance of a part 36 offer in a road traffic accident where fixed costs would have ordinarily been payable.

In Car Craft Test Centre & John Martin v Kirsty Trotman & Advantage Insurance Company, the defendant accepted the claimant’s part 36 offer some 10 months out of time, but before trial. The claimant had made his offer following disclosure of medical evidence, prior to proceedings being commenced.

According to a report of the case by the Costs Lawyer who ran it – Joe Rose, London office manager of PIC (instructed by ALPS Legal) – the defendant’s primary submission was that Excelsior Industrial and Commercial Holdings v Salisbury Hammer Aspden and Johnson [2002] EWCA Civ 879 and surrounding case law meant the judge could only award indemnity costs following a late acceptance where there has been severe misconduct on the part of the offeree.

Mr Rose argued that the considerations in this case were different, because an order for standard basis costs would bring about a different outcome (owing to CPR 45.29B a standard basis costs order is tantamount to an award of fixed costs) and as such could be distinguished. Further, if the defendant’s submissions were to be accepted and indemnity costs would not be awarded save for only the most exceptional cases, this would effectively render CPR 36.13(5)(b) entirely redundant and cause a sharp increase in the number of issued cases and potentially missed trial dates.

The facts of the case were then applied to the factors listed under CPR 36.17(5), which, in the claimant’s submission, meant that a failure to make an order for costs on the indemnity basis would make no difference to the defendant.

It was also submitted that the landscape was entirely different now compared with when cases such as Excelsior were decided, given the addition to the overriding objective that cases should be dealt with at proportionate cost.

District Judge Etherington in Stoke agreed with the claimant’s submissions, confirming that CPR 36.13(5) should be the starting point, namely whether it would be unjust to make such an award. He further found that CPR 36.13(6) directly assisted the court in referring it to the factors listed under CPR 36.17(5). Considering these factors, he concluded that none of the facts indicated that it would have been unjust to make the order requested by the claimant.

Mr Rose said: “This is an extremely important case in light of the potential extension of fixed costs as it is further confirmation, following Sutherland v Khan, that part 36 has sufficient bite to encourage parties to settle early and to avoid wasting valuable court resources. It is also an important evolution in the interpretation of part 36 and the making of indemnity costs awards, with the judgment being extremely detailed and mindful of all of the conflicting parts of the CPR as well as previous case law.

“However, offerors should be mindful that this does not give an automatic entitlement for offerors to seek indemnity costs in all cases and they will have to consider the facts of the individual case carefully, applying CPR 36.17(5), before considering making such an application.”

Usha Nayee, senior solicitor at ALPS Legal, decided to proceed with this case despite the relatively low amount of costs at stake due to its potential significance. “This was a common sense decision. If this case was decided against the offeror, then that would have effectively meant that part 36 means very little and there is no incentive for parties to settle cases swiftly. An offeree could have effectively accepted an offer just one day before a trial without any costs consequences.”

The defendant had warned that the decision result in the courts being flooded with applications for indemnity costs, but DJ Etherington rejected this, saying that any unmeritorious applications for indemnity costs would result in adverse costs orders against the offeror.

This post was posted in ACL e-Bulletin


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