FIXED COSTS OUSTED BY AGREEMENT: INSURER HAS TO STAND BY THE DEAL IT STRUCK
I am grateful to barrister Andrew Roy for sending me a copy of the decision of District Judge Baldwin (sitting as a Regional Costs Judge) in Turner -v- Cole (16th December 2019). It is a case where the judge held that the fixed costs regime in personal injury cases were ousted by the terms of settlement. Turner Judgment
“I therefore have no hesitation in concluding… that the parties have, by concluded agreement, contracted out of the fixed costs regime by the effect of the correspondence between them”
The claimant brought an action for damages for personal injury. It was initially thought to be of low value and entered the Portal. It later dropped out. The defendant made a number of offers of settlement. The defendant then made a further offer.
THE OFFERS AND ACCEPTANCE
The wording of the correspondence and agreement between the parties here is of some importance.
“6. The second and directly relevant offer is that to which I have referred above, namely a time-limited offer of £60,000 net of CRU and interim payments, said to be open for 14 days and specifically then stand withdrawn, if not accepted by 5pm on 10th July 2017. The email concluded,
“In addition we will pay your reasonable costs, to be assessed if these cannot be agreed.”
7. The Claimant, through her their solicitors, responded in time by way of letter dated 4th July 2017 in this fashion,
“… we have instructions to accept the time-limited offer indicated within your correspondence of the 26th June 2017.
Acceptance of the offer is strictly predicated on the basis as follows:
The Claimant does accept the offer of being paid £60,000 net of CRU and interim payments and this payment will be made within 21 days in relation to her claim for personal injury and loss.
In addition, the Defendants will pay the Claimant’s legal costs to be (sic) detailed assessment if not agreed on the standard basis (and it is strictly accepted by the Defendants that costs will be paid on the standard basis and not in accordance with any portal, fixed costs or predictive costs basis). In terms of costs it is also requested that in (sic) interim payment on account of costs be made for the sum of £40,000 …
On the basis that the terms indicated within this correspondence are agreed we look forward (sic) hearing from you as a matter of urgency.”
8. The Defendant’s insurer file handler responded by email of 6th July 2017 in this fashion,
“Thank you for your letter indicating acceptance, I confirm I will forward a cheque for £60,000 payable to your client immediately.
With regard to your costs, in view of the amount of the interim request, I will be instructing costs draughtsmen (sic) – I would suspect they would want more detail and I will leave the question of any payments on account of costs to them. If you send me details and I will instruct them at that point.”
THE ARGUMENT ON ASSESSMENT: CAN YOU CONTRACT OUT OF FIXED COSTS?
The defendant argued that it was not possible to “contract out” of fixed costs and that it was only fixed costs that were payable. The judge held that the parties could contract out of fixed costs.
“15. In my judgment, despite the undoubted intentions lying behind fixed costs regimes over time in terms of certainty, I am left in no doubt, in particular as a result of the remarks of the Newey LJ in Ho, fortified by those of Males LJ, with which The Chancellor agreed, at paragraph 43,
“Mr Mallalieu advanced a powerful argument that… the offer letter indicated an intention to depart from the fixed costs regime. In the end I have concluded, in agreement with Newey LJ, the taking the letter as a whole those words are not sufficiently clear to demonstrate such an intention and are outweighed by other considerations.”
that it is open to parties to contract out of fixed costs by reaching agreement in that regard. By implication, Males LJ was also, in my view, clearly accepting that departing from or contracting out of fixed costs is permissible and can be found in appropriate cases of sufficient clarity.
In addition, I reject Mrs Robson’s submissions as to any potential for a material differential between Section II of Part 45 in 2011 and Section IIIA in 2019, as the phrases “the only costs which are to be allowed are” (2011) and “the only costs allowed are” (2019) are materially indistinguishable, in my view. I find that the approach in Solomon accordingly holds good and is capable of being applied to these facts.”
THE EXCLUSION OF ORAL EVIDENCE
The defendant attempted to adduce witness evidence as to what the insurer meant when the agreement was made. That evidence was disregarded by the judge.
“17. The Defendant has filed a witness statement from the Defendant’s insurer file handler, namely the author of the correspondence referred to above, Elizabeth Harris, dated 2nd December 2019. In the witness statement she attempts to explain her thinking and actions at the material time.
18. The Claimant, through Mr Roy, has objected to me taking the contents of the witness statement into account, referring the court to Arnold v Britton  UKSC 36 @ para. 15, wherein Lord Neuberger quoted Lord Hoffmann in Chartbrook Ltd v Persimmon Homes Ltd,
“When interpreting a written contract, the court is concerned to identify the intention of the parties by reference to what a reasonable person having all the background knowledge which would have been available to the parties would have understood them to be using the language in the contract to mean”,
and indicated, at factor (vi) following, that subjective evidence of any party’s intentions ought to be disregarded.
19. Once again, although Mrs Robson suggests that I might derive some assistance from the witness statement insofar as it does not specifically represent Ms Harris’s intentions, as I indicated in the course of the hearing, insofar as anything may be discerned within the witness statement as attempting to give evidence of intention, I find that it is appropriate to disregard the same.”
CONSTRUING THE AGREEMENT
The judge then carried out a detailed review of the principles relating to contractual construction.
28. I therefore have no hesitation in concluding, applying the test in and propositions derived fromArnold that the parties have, by concluded agreement, contracted out of the fixed costs regime by the effect of the correspondence between them between 26th June 2017 and 6th July 2017 and therefore that the Claimant is entitled to her costs of the original claim to be determined by detailed assessment on the standard basis, in default of agreement.”