The Court of Appeal has recently considered the issue as to whether it is possible to contract out of fixed costs and, whether the terms “standard basis” and “to be subject to Detailed Assessment” are compatible terms in agreeing costs on a fixed recoverable basis in the case of Ho v Adelekun  EWCA Civ 1988.
- Be careful not to use terms such as “detailed assessment” or “standard basis” in seeking to agree costs on a Fixed Costs basis.
- Do not specifically offer Fixed Costs in an offer you wish to be pursuant to Part 36, merely refer to the consequences of Part 36.13.
Summary of the Case
The case was commenced in the Pre-Action Protocol for Low Value Personal Injury (Employers’ Liability and Public Liability) Claims but was withdrawn due to value. The case was issued but had yet to be allocated. The Parties had agreed the case was suitable for allocation to the Multi-track just prior to agreeing the settlement of the claim for £30,000. The Claim was settled by the Claimant accepting the Defendant’s Part 36 offer which stated
If the offer is accepted within 21 days, our client will pay your client’s legal costs in accordance with Part 36 Rule 13 of the Civil Procedure Rules such costs to be subject to detailed assessment if not agreed.
However, the court wishing to vacate the upcoming hearing requested the terms be laid out in a Tomlin order which stated inter alia:
”the reasonable costs of the [respondent] on the standard basis to be the subject of detailed assessment if not agreed.”
The Court was invited to resolve the two questions:
- Did the acceptance of the Part 36 offer provide for the provision of costs on an retainer costs or by reference to the Fixed Costs Regime.
- Was the court permitted to “backdate” the allocation to the multi-track pursuant to CPR 46.13
The Court readily dismissed the request to treat the claim as being already allocated as it was outside its discretion to do so given the case was stayed, both by acceptance of the Part 36 offer and of the terms of the Tomlin order.
Turning to the terms of acceptance, it should firstly be noted there were no submissions as to the contract which, given the differing terms of the Tomlin order and the provisions under Part 36 is somewhat a surprising. Further, the Court was absent any evidence regarding the intention of the parties when making and accepting the offer(s) and thus a Joyce v Bateman approach was negated. Instead, the Court was required to consider the offer objectively and determine what the intentions would be. As a result the Court was invited to consider the terms of Part 36 offer and the Tomlin order and interpret the same to determine the basis of costs agreed. Specifically, the central battleground was whether the offer “to be subject to detailed assessment if not agreed” was an offer to pay costs on a retainer hourly rate basis rather than fixed costs.
The Court considered firstly whether the absence of a specific offer of costs on a fixed recoverable costs within the Part 36 offer should lead to a conclusion that retainer hourly rate based costs were offered in default. In exploring the wording of CPR 36.13 which expressly provided that CPR 36.20 (fixed Costs provisions within Part 36) is to be considered, the Court very quickly found that it was not necessary to specify that fixed costs were being offered. Indeed, they stated that to do so could take the offer outside Part 36 if fixed costs weren’t applicable as it would conflict with the provisions within Part 36 itself.
The Court went on to consider the specific wording of the offer and held that there was insufficient within the offer letter and the context in which it was made to persuade the Court that retainer hourly rate basis costs was being offered. In seeking to agree costs subject to “detailed assessed if not agreed”, did not indicated an intention to agree costs in accordance with the retainer hourly rate in itself. The Court held that even fixed costs were subject to some sort of assessment, particularly in relation to disbursements and, whilst such assessment may not necessarily be held to be a detailed assessment, the terminology was sufficiently proximate to persuade the Court that it was not intended to indicate a different basis upon which costs are to be paid.
Accordingly, despite the offer being made subject to “detailed assessment if not agreed” and the Tomlin Order providing for costs “on a standard basis”, the Court held that costs should be assessed pursuant to the Fixed Costs Regime.
This is not a surprising outcome in the context of the how the case was presented to the Court and the specific wording of both the offer letter and the resultant Tomlin order. It is surprising that the terms of settlement and how they were was transcribed into the Tomlin Order was an issue in the case. This looked a classic Joyce v Bateman style argument in the waiting but just never happened which, in allowing a purified look at a the interpretation of the disputed terms was actually very helpful.
I do wonder why the term “standard basis” has come to mean hourly rate costs. ‘Standard Basis’ has always enjoyed a definition in the CPR which was a reference to the exercise of the benefit of doubt and the application of proportionality. Why is it now that we have a Court of Appeal Judge warning not to use this term when also prescribing it a wholly different meaning? I guess it could be more readily misinterpreted now that the Court has given even more credence to the misinterpretation and hence, it is even more prudent to be explicit in your terminology.
It is also clear that the express provision of an offer of fixed costs could undermine the offer in terms of being compliant with Part 36. The indication is that merely referencing costs pursuant to CPR Part 36 is sufficient to trigger to cost effects of 36.13 which, in turn, directs the costs offer to CPR 36.20 and fixed costs where applicable.
One thing the case highlights is that where you are settling a case on the cusp of allocation to the Multi-track in a case previously in the Fixed Costs Regime, there is extra need for care. In the case of Claimants, they need to be explicit that the costs are on an hourly rate/time basis or, as was the case here, the costs could be assessed by way of Fixed Costs anyway. Another method maybe to agree by consent that there be allocation to the Multi-track and thus, by virtue of Qader v Esure  EWCA civ 1109, the Claimant will recover their costs outside of Fixed Costs. This obviously runs the risk of the Court not approving such a Consent Order; a risk which must be quite high.
For Defendants, particularly where there is a high value claim exiting the portal, other than considering the merits of putting the case in the portal in the first instance, the Defendant need to consider the likely amount of fixed costs as opposed to the likely costs on the hour rate/time basis. It maybe, where the claim is relatively shortly-lived and the value has become significantly above the £25K threshold, that it would be more economic to conclude after the CMC or on an retainer hourly rate basis agreed for the assessment of the costs. Cetainly, this may well be worth some detailed consideration by a costs specialist at this stage.
This case again shines a light on the language of costs and the importance to use the appropriate wording when making offers, specifically in this case, around the time of a CMC.Tags: Adelekun, Detailed Assessment, Ho, interpretation, offer to settle, Part 36, standard basis