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

Comments

Sue Nash   25/09/2017 at 20:56

It appears that RNB is set for a HC appeal - watch this space! Meanwhile, RIP Solicitors Journal which - sadly - has just ceased publication after 180 years

News Flash   28/09/2017 at 12:18

Another pointless case, why resist a payment on account when your paying the opponents costs in the end anyway? these types of disputes should be a thing of the past!

MB   05/10/2017 at 13:18

Why has the focus returned to the SCCO "going completely digital". Was the electronic bill not extended to all Courts!

Dragon   12/10/2017 at 13:40

Well said Jim. Too often we see clinical negligence claims settle for say £2k only to be followed by a bill for say £50k. Thankfully there are some excellent costs lawyers out there who battle those costs down, but the situation remains outrageous.

Simon Mccarthy   13/10/2017 at 13:56

Dragon - your comment overlooks the fact that it is almost invariably your clients - the Defendants - who cause those scandalous costs by intransigently, and inexplicably, refusing to come to the negotiating table until too late, when the costs have already been racked up; it is their failure to take a realistic view to claims at the outset which necessitates the costs. This faux horror is therefore hard to stomach, especially when one considers the equivalent costs being incurred by government bodies (funded by us tax payers of course) often to the tune of 4-5 times the sums you mention, and the many Defendant costs draftsmen shelling peas for their piece of the pie. Sadly, it is the same old story of 'pay peanuts get monkeys' and, unless and until government wake up and start paying competent people to deal with claims pragmatically, the UK public purse will continue to haemorrhage billions of pounds that we can ill afford. Still, as long as it keeps Defendant costs draftsmen/lawyers in business?....

Northern Costs Monkey   13/10/2017 at 14:31

Just shows how ridiculous the whole budgeting process is. The reason firms generally don’t make applications to revise their budgets is because the bar set for varying them is absurdly high. No one even knows what a “significant development” is. A load of nonsense in my opinion. The situation we have now is that firms just don’t bother revising the budgets because in all likelihood it won’t be accepted. Meaning firms can be stuck with an “approved” budget that is a couple of years out of date, was drafted before the directions were even agreed, and is no longer fit for purpose. What should happen is that budgets should be drafted after the first CMC, and there should be a rule put in place that parties are able to freely revise a previously agreed or approved budget every six months, regardless of significant developments, with the updated budget to be considered at a costs management conference listed for a later date. That after all was the whole point of budgeting, was it not? Pragmatic costs management?

Simon   16/10/2017 at 16:47

I find this whole issue completely unnecessarily. Independent Midwives had commercial insurance suitable for their needs, however to try and save money they chose to try and become self-funding and cancelled their insurance without fully understanding the risks and exposures. I cannot see why it is in the public interest to bring a JR (and why the costs should be capped) when commercial solutions were available, however the issue is that as a group they didn't want to pay the costs of commercial insurance.

Dragon 2   18/10/2017 at 08:07

Great points Simon. Fully agree. Courts are fully aware of how these matters are conducted by those representing defendant. Surely though the money for damages and costs comes out of the medical suppliers' insurers' account, not tax pot nor nursing fund. Maybe that's why there is such a drive to extend the fixed costs regime to clin neg claims. Just a thought......

Mel B   19/10/2017 at 12:05

'Like' Simon McCarthy's comment

Cath Hart   21/10/2017 at 09:32

In reply to Simon's comment (which I thought at first meant this situation could be resolved) my understanding is that professional indemnity insurance for independent midwives has been withdrawn, but even if available the premium would be in the region of 20-30k annually (reference https://www.aims.org.uk/Submissions/nmc.htm) so I would disagree that it was cancelled to "save money" - these premiums exceed many of the midwives salaries so it was simply unworkable without government assistance. When professional indemnity insurance became mandatory under the EU directive in 2014 the independent midwives did appeal to the government for funding but this was rejected due to the low number of women involved so was not thought to represent value for money for the taxpayer. (reference: https://www.gov.uk/government/news/independent-midwives-insurance-options-outlined).

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