FIXED COSTS, CASES OVER £25,000, EXCEPTIONAL CIRCUMSTANCES AND THE BASKET OF CASES

April 18, 2019 · by · in Appeals, Civil Procedure, Costs, Fixed Costs

In Ferri v Gill [2019] EWHC 952 (QB)Mr Justice Stewart considered the relevant criteria to be applied when a claimant argued that fixed costs should not be applied to a case that had started in the portal but was settled for more than £25,000.  How should the court consider “exceptional circumstances” in these circumstances?

 

“It goes without saying that a test requiring “exceptional circumstances” is already a high one”.

THE CASE

The claimant was injured riding his cycle.  A GP report was obtained which anticipated a full recovery.  A CNF was prepared under the pre-action protocol for low value personal injury claim. New solicitors were then instructed by the claimant. They obtained report from an orthopaedic surgeon who diagnosed a more serious injury. The new solicitors stated that the claim was not suitable for the protocol, there was a claim for loss of earnings and treatment.

The claim settled for £42,000 without the issue of proceedings,

THE ISSUE

The issue was whether the fixed costs regime after a claim left the protocol should be applied, CPR 45.29J allows the court to award non-fixed costs “If it considers that there are exceptional circumstances making appropriate to do so…”

THE DECISION OF THE MASTER

Master McCloud  found that these were exceptional circumstances.

THE DECISION ON APPEAL: THE MEANING OF “EXCEPTIONAL”

    1. The two central questions are (i) was the Master was right in her test of “exceptional”; (ii) was she right in deciding against what ‘basket’ of cases a case needs to be exceptional.
    2. As regards the first question, it might be thought that “exceptional” is an ordinary English word which would not benefit from Judicial interpretation. Indeed this is what Lord Bingham said in R v Kelly. Statements which define it as “out of the general run”[31] add little, if anything. Had the Master said no more, then this part of the challenge would have failed.
    3. However, there is no getting away from the fact that the Master herself said she was applying a ‘low bar’ to exceptionality and that she construed her test of “outside the general run of these cases” through that prism. There is a further indication of this from her application of the test to the circumstances in her judgment at [10][32]. Indeed it might be inferred that she gave permission to appeal on the basis that she was not adopting a high threshold since (a) “outside the general run” says nothing more than exceptional, and (b) there is no suggestion in her judgment that she was aware of the “basket” point which arises from the wording of her judgment.
    4. As the House of Lords said in R v Soneji, an expression such as “exceptional circumstances” must take its colour from the setting in which it appears. The setting in which it appears informs the Court whether a strict approach to exceptional is or is not warranted. This is apparent from Soneji where the House did not accept the lower courts’ strict construction and did not itself “adopt a very strict approach” “bearing in mind the context”.
    5. Was the Master correct in using a “low bar” or not a “strict approach”, bearing in mind the context of Rule 45.29J. I do not believe she was. My reasons are as follows:

i) Unavailable to the Master, as it had not by then been decided, was the decision in Hislop and the obiter dictum of Coulson LJ that: “It goes without saying that a test requiring “exceptional circumstances” is already a high one”.

ii) The setting of the policy reasons reiterated in the Fixed Costs regimes cases cited earlier in this judgment, while allowing for “exceptional circumstances” to depart from that regime, require a more strict, not a “low bar”, approach.

    1. I turn now to the second question, namely was the Master right in defining the ‘basket’ of cases compared with which a case needs to have “exceptional circumstances”.
    2. The Master referred[33] to looking at the case “in the context of the sorts of cases that are in the Portal” and the correct test being whether there were circumstances “which take it out of the general run of the type of such a case”. Further that it is a low bar because “the Portal is intended to deal with…simple cases which would typically be fast track cases”.
    3. It is clear that the basket of cases against which a case must demonstrate “exceptional circumstances” is the type of cases that have exited the Portal and are subject to the Part IIIA regime. The costs in Table 6B for cases that have exited the Protocol are different from those in Table 6 for cases which have not. Also, it must be remembered that Table 6B costs provide for costs in cases where damages exceed £10000, by reference to a Fee of £1930 and 10% of damages over £10000.
    4. Mr Williams submitted in his skeleton argument, though he did not press it at the hearing, that the ‘basket’ point was not taken below. I do not accept that this is a new point. The point at issue below was the construction of Rule 45.29J. This is an argument on that construction, based on an alleged error by the Master. In any event it would be legitimate to allow the point to be taken, given the principles set out in Paragraph 52.17.3 of the 2019 White Book. Otherwise the Court would be giving a ruling on a pure matter of construction while consciously disregarding an argument which has force. Further, looking at the Defendant’s skeleton before the Master[34], the point was sufficiently raised.
    5. The initial question is whether the Master did use the wrong basket. Mr Williams submitted that it is not clear that she did. He says that she referred to the ‘Portal’ rather than the Protocol and that certain paragraphs of her judgment only make sense if she was using the correct basket. There is some difficulty in the terminology used in the Master’s judgment. However it seems to me that she was probably using the term ‘Portal’ in the sense of cases within the Protocol and those that had exited the Protocol and were subject to the Section IIIA regime. Then at [12] she says: “It is a low bar because the Portal is intended to deal with, in my judgment, simple cases which would typically be fast track cases and, for the factual circumstances that I have set out, it is on balance outside the general run of such cases.” It is correct that cases exit the Portal for a number of reasons, only one of which is that the value is said to be more than the Protocol upper limit; another is that the claimant gives notice to the defendant that the claim is unsuitable for the Protocol (for example, because there are complex issues of fact or law)[35]. Nevertheless, the basket must comprise only the cases covered by the Part IIIA Fixed Costs Regime. Therefore cases which have exited the Protocol under its paragraphs 4.43 and 7.76, (a) form part of the basket against which exceptionality must be construed and (b) do not qualify as engaging exceptionality merely because they are of that type.
    6. Mr Williams submitted that there is no qualitative difference between asking whether the case is out of the norm for, on the one hand, cases within the Protocol/cases in a basket which includes those within and those which have exited the Protocol, and, on the other hand, only cases which have exited the Protocol. The response to this is that I am here dealing with the issue of construction, not with the application of that construction to the facts. The Master used the wrong basket for comparison. “Exceptional circumstances” must be construed against the setting (i.e the basket) in which it appears. I have no evidence to support the argument that there is no qualitative difference between a basket comprising (1) cases which remain in the Protocol, or (2) cases which remain in the Protocol and which exit the Protocol or (3) cases which exit the Protocol. If anything, first impressions suggest the contrary to Mr Williams’ argument. One would expect that cases covered by Protocol paragraphs 4.3 and 7.76 will be a substantially higher proportion of the cases in basket (3) than those in basket (2), and even more so than those in basket (1).
    7. Finally, Mr Williams says that the defendant repeatedly refers to the ‘swings and roundabouts’ of fixed costs. But, he argues, this assumes two things, neither of which should be assumed.

“(a) The first is that any shortfall on costs resulting from fixed costs falls on solicitors who are serial users of the system. This assumption is not (remotely) safe. The shortfall in recovery fact falls on the parties who, in the case of claimants in personal injury proceedings, are very unlikely to be serial users of the system. Section IIIA of CPR 45 has no impact whatsoever on the costs which parties are liable to pay their own lawyers.

(b) The second is that, to the extent that shortfalls fall on solicitors, they will make it back over what the defendant calls their ‘macro’ experience of the protocol system. This might perhaps be a safe assumption for solicitors carrying out the bulk low-value work at which the protocol is in fact directed. It is not a safe assumption for solicitors like Fieldfisher, conducting higher value work for claimants who cases should never have been started under the protocol in the first place.”

    1. Nevertheless, how the regime may impact on a particular litigant or lawyer cannot inform the construction of exceptionality. The authorities already cited make clear the policy reasons behind this fixed costs regime in particular, and other similar fixed costs regimes. Exceptionality should not be a low bar and it must be measured against the types of cases that are covered by Section IIIA.
    2. For these reasons the Master erred in law on both the central questions raised in this appeal.
    3. I should add that I have seen a transcript of the judgment of HH Judge Tindal dated 8th September 2017 from the Birmingham County Court. One of the submissions before him was that the Claimant satisfied Rule 45.29J “exceptional circumstances” where a Defendant accepted a Claimant’s Part 36 offer out of time in a fast track case which had exited the Portal. The Judge decided[36] to follow the test in Costin at [11], namely whether “exceptionally more money has had to be expended on the case by way of costs than would otherwise have been the case”. He did not find exceptionality in that case. He was not referred to Qader or Sharp and his decision pre-dated Hislop.[37]

The matter was remitted for consideration by a different Master.

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