Exceptional Circumstances in Fixed Recoverable Costs Cases

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Posted on: November 11th, 2021 by Brett Anderson

Brett Anderson looks at the recently published case of William Lloyd And 2 Sisters Poultry Limited in which the court considered a claim for additional costs in a Fixed Recoverable Costs (“FRC”) case under “exceptional circumstances” provision, CPR 45.29J. This is a rule that, in exceptional circumstances, permits the courts to depart from the costs usually awarded under the FRC regime and grant more profit costs to a Claimant.

The background to this case saw the claim submitted via the portal and conducted under the Pre-Action Protocol for Low Value Personal Injury (Employers’ Liability and Public Liability) Claims. Following the initial orthopaedic evidence, the case appeared a run-of-the-mill fast-track injury claim. Matters changed on receipt of a second report where a finding of a permanent disability and disadvantage on the labour market formed part of the diagnosis.

In view of the significant implications of the injury, the claim required substantial additional work to present. This include a detailed 27 page Schedule of Loss claiming £71,500, including Ogden calculations and Billet considerations. This was supported with a more extensive witness statement of 16 pages.

The case settled prior to allocation. It was accepted by the Deputy District Judge (“DDJ”) that the MT was the inevitable destination of the claim had the matter come to be allocated to track. This was repeated on numerous occasions throughout the first instance judgment and not contested on appeal.

The Claimant served a Bill of Costs of around £45,000 citing exceptional circumstances existed to justify an award of further costs beyond those available within the FRC regime pursuant to CPR 45.29J.

The case was considered within the forum of Provisional Assessment and at the oral review hearing, the DDJ held in his extempore judgment that there were exceptional circumstances, made an assessment on a “traditional basis” and awarded costs accordingly, those costs being 60% more than would have been permitted under the FRC regime. 

On appeal HHJ Howells was asked to consider if the DDJ had made an error in law or had exceeded the broad ambit of his discretion in finding there were exceptional circumstances. It was more specifically submitted by the appellant that the test applied wasn’t properly made out in the DDJ’s judgment and the DDJ seems to have relied too heavily on the expectation of the matter being a MT case in finding that there were exceptional circumstances, something of no relevance to the applicable test in Costin v Merron [2013] 3 Costs LR 391. Accordingly, it was argued that the decision was wrong.

Firstly, HHJ Howells reviewed the test in Costlin and particularly the applicable test which he repeated verbatim in his judgment:

I for my part have no difficulty in concluding that the exceptional circumstances to which 45.12 refer must be exceptional in the sense that the case is taken out of the general run of this type of case by reason of some circumstances which means that greater costs are in fact incurred that would reasonably be expected to be incurred’, and he went on to say this, ‘In my judgment the phrase “exceptional circumstances” in the context of 45.12 speaks for itself. It cannot possibly mean anything other than that for reasons which make it case to fall outside the fixed costs regime appropriate to order the exceptionally more money is had to be expended on the case by way of costs than would otherwise had been the case’.

It should be noted that this test was applied in Costin to a claim for exceptional circumstances under CPR 45.12, so a potential distinction from this case considering this appeal was a finding under CPR 45.29J. HHJ Howells found no such distinction and applied the test. Therefore, Costin is good law and the applicable test in cases where additional costs are sought under CPR 45.29J.

Secondly, HHJ Howells reviewed the judgment of the DDJ, excusing some of it for being an extempore Judgment and thus without the opportunity to be refined in a way a reserved judgment would be, and concluded that the test had been properly applied. He specifically found that the reason for finding the case exceptional was a result of the considerable addition work and costs incurred and not the potential future allocation to the MT.

It seems therefore that a 60% increase in costs beyond FRC is considered “exceptionally more money” and thus should be appropriate to order the “case to fall outside the fixed costs regime”. The DDJ, in considering all the circumstances, found that the case required extensive witness evidence and Schedule of Loss which justified an additional 60% in costs. This finding formed a reasonable basis for the DDJ concluding that there were exceptional circumstances as it was both in accordance with the test in Costing and within the broad ambit of discretion the he had. The appeal was dismissed.

Comment

This will be a decision clearly welcomed by Claimant Solicitors. Whilst the case does not create a defined threshold as to what is “exceptionally more money “, it is now almost inarguable that 60% additional profit costs compared to FRC, would be considered as exceptional. It seems to me that the courts will now struggle not to find a claim for 60% more reasonably incurred costs as being exceptional. Will this open the door to Claimants trying to stretch their work and profit costs to try and demonstrate a 60% increase in costs beyond FRC? I guess that remains to be seen.

Certainly, in this case, there was a clear expectation that the case would fall into the MT were it to have been allocated. Further, it was held that there were considerable complications and complexities that would not normally form part of run-of-the-mill fast-track matters. Whilst the court did not make a finding that the additional costs needed to be caused as a result of the cited complexities, it seems that this was the case and that has probably influenced the DDJ in his decision.

Whilst the Costin test is primarily an economic one, it seems to me that, absent a specific feature of the case that could be pointed to to justify the 60%+ increase in reasonably incurred profit costs, the application is likely to fail. Having said that, given the ‘skinny’ nature of FRC and the recently updated SCCO guideline hourly rates, the ability to show a 60% advancement on FRC doesn’t seem a particularly high threshold to me and, thus, I suspect more applications under this provision may follow. If that does transpire, I fully expect that the next appeal will lead to a toughening up of this test.

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