Fixed costs and Part 36 offers…the saga continues!

DJ Besford’s judgment, handed down recently, in the case of Whalley v Advantage Insurance (2017) concluded that late acceptance of a Part 36 offer will not guarantee the Claimant automatic entitlement to costs on the indemnity basis for the period of delay.

This supersedes his previous ruling, which has been the subject of numerous conflicting authorities, in the case of Sutherland v Khan, wherein he ordered that a Claimant was entitled to fixed costs up to the date of expiry of the Part 36 offer and costs on the indemnity basis, thereafter, up to the date of acceptance. He concluded that this decision was incorrect and can no longer be relied upon. In Sutherland, DJ Besford had taken the Broadhurst principle, that a Part 36 offer trumps fixed costs on a case that proceeded to trial, a step further by allowing indemnity costs for cases that didn’t proceed to trial but where a Part 36 offer was made and accepted out of time.

It appears, for now, that unless there are conduct issues or, as per CPR 45.29J the Court considers there are “exceptional circumstances” making it appropriate to depart from the fixed costs, Claimants, that do not proceed to trial, will be stuck with fixed costs regardless of whether or not they have made a Part 36 offer. An “exceptional circumstance” is likely to be determined by the timing between when a part 36 offer is made, the delay in accepting the offer and, more importantly, the proximity of trial.

Until this point is dealt with by a higher court or the rules committee, it is likely to arise again. Perhaps some guidance may be obtained from the Court of appeal, later this year, when the case of Lowin v W Portsmouth (2016) EWHC 2301 (QB) is to be heard. On appeal, the High Court held that the Broadhurst principles should be applied. The receiving party was, therefore, not subject to the cap of £1,500.00, as per CPR 47.15 (5), for the costs of provisional assessment due to recovering more than their Part 36 offer. Hopefully the Court of appeal will determine when the Broadhurst principles are to be applied and shine a light on what exactly the Rule committee’s intentions are in relation to the conflicts between the rules.

Indeed, an obvious way to avoid the all the confusion would be to run with what Jackson LJ suggested, in his recent report, and apply a simple percentage uplift to fixed costs in cases where a good Part 36 offer has been made.