10 July 2022

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Court of Appeal holds that agreement to costs being subject to detailed assessment meant fixed-costs regime did not apply

A consent order that the costs of an ex-portal claim be subject to detailed assessment if not agreed amounted to the parties contracting out of fixed costs, the Court of Appeal has ruled.

Lord Justice Phillips distinguished this case from Adelekun v Ho, which ended up in the Supreme Court and concerned the same wording, because Doyle v M&D Foundations & Building Services Ltd [2022] EWCA Civ 927 did not involve the case settling via a part 36 offer.

The employers’ liability claim for an injury on a construction site settled for £5,000 outside the portal three days before trial. The defendant made a part 36 offer for £5,000; while the claimant agreed to settle for that sum, it was on the basis that the claimant was not accepting the offer.

This was because it was made “at a very late stage and well within the 21-day period referred to in part 36.13(4)”. The claimant said a consent order was required instead. This was done and provided that the defendant would pay the claimant’s costs, "such costs to be the subject of detailed assessment if not agreed".

As a result, the claimant lodged a bill of costs for detailed assessment on the standard basis. The defendant argued that, as an ex-protocol claim, fixed costs should apply and the reference to detailed assessment in that context was to the process of determining the amount of such fixed costs and disbursements, to the extent there was any disagreement.

District Judge Rogers in Doncaster rejected the defendant’s contention and assessed the bill of costs at £14,467 plus interest. Her Honour Judge Ingram in Sheffield upheld this.

Giving the unanimous ruling of the Court of Appeal, Phillips LJ said: “In my judgment, and contrary to the appellant's contention, there is no ambiguity whatsoever as to the natural and ordinary meaning of ‘subject to detailed assessment’ in an agreement or order as to costs.

“The phrase is a technical term, the meaning and effect of which is expressly and extensively set out in the rules. It plainly denotes that the costs are to be assessed by the procedure in part 47 on the standard basis (unless the agreement or order goes on to provide for the assessment to be on the indemnity basis).

“The phrase cannot be read as providing for an ‘assessment’ of fixed costs pursuant to the provisions of part 45 unless the context leads to the conclusion that the wrong terminology has been used (by the parties or by the court) so that the phrase should be interpreted otherwise than according to its ordinary meaning.”

This was “abundantly clear” from consideration of the rules themselves, the judge went on.

Phillips LJ noted how, in the Court of Appeal ruling in Adelekun, Newey LJ said part 45 did not itself explain how the amount recoverable in respect of disbursements under rule 45.29I was to be determined (the assumption being that no determination at all is necessary in relation to fixed costs other than disbursements).

Newey LJ recorded that it was common ground between counsel that the provisions in part 47 relating to detailed assessment would apply. Citing several reasons, Phillips LJ said: “In my judgment the position agreed by counsel in that case was not correct.”

However, the court still needed to consider the context to determine whether, judged objectively, that meaning was truly intended by the parties.

“In this case the terms of the order were agreed by firms of solicitors acting for the parties, both specialists in this type of litigation. They reached agreement in the course of inter-solicitor correspondence in which a part 36 offer by the appellant was expressly rejected by the respondent, but a counter-offer (not pursuant to part 36) in the form of a draft of the order was accepted by the appellant (being returned with minor amendments which were in turn accepted by the respondent).

“In so doing, the solicitors must, applying an objective test, be taken to have been aware of the relevant rules and principles, in particular, (i) that the fixed-costs regime can be disapplied by agreement and (ii) that an order providing for detailed assessment (without more) entails an assessment on the standard basis (rule 44.3(4)(a)).

“In those circumstances it is difficult to see any basis on which the use of the term ‘detailed assessment’ could bear anything other than its natural and ordinary meaning.”

It did not matter, Phillips LJ continued, how strictly enforced the fixed-costs regime may be or how unlikely it was that the claimant would have been able to escape it had the matter proceeded.

“There is no objective reason to believe that the solicitors did not intend the term to bear its natural, ordinary (and in my judgment, obvious) meaning, not least because it would be impermissible (and to no avail) to speculate as to the parties' respective legal or commercial motivations for reaching a settlement on the terms they did.

“Indeed, the appellant has not suggested that the use of the term ‘detailed assessment’ was a mistake or otherwise did not reflect the parties' agreement.”

Kevin Latham, costs counsel at Kings Chambers who acted for the claimant at each stage, said: “This is an important decision which underlines the importance of parties taking considerable care when reaching agreement as to costs in cases to which the fixed-costs regime applies, and which may have application in a significant number of claims, both those already settled and those yet to reach a conclusion.

“Care will need to be taken in each case where a similar costs order is agreed, to consider the context in which the agreement was made, but in the majority of cases, it now appears that an order which provides for costs to be ‘subject to detailed assessment’ – even without reference to that assessment being conducted on the standard basis – will result in the claimant ‘escaping’ the fixed-costs regime.”

He was instructed by Atherton Godfrey. Roger Mallalieu QC, instructed by DWF Law, acted for the defendant/appellant.