FIXED RECOVERABLE COSTS, PART 36 AND “EXCEPTIONAL CIRCUMSTANCES”: A CIRCUIT JUDGE DECISION
I am grateful to my colleague Erica Bedford for sending me a copy of the decision of HHJ Godsmark QC in Young -v- AXA Insurance UK Ltd, a copy of which is available here LN2018-15 Young v AXA Judgment as handed down . It deals with the question of fixed costs, Part 36 and “exceptional circumstances”.
“I consider that it should be exceptional in a Part 36 settlement case to have to make an application for entry of judgment for the settlement sum and costs. Thus the CPR 45.29J gateway for the court to consider a claim for costs greater than those allowed in the FRCR is engaged… However on the facts of this case I decline to make any order for other than the fixed costs”
The claimant brought an action for damages for personal injury. The defendant made an offer of settlement this was accepted. The defendant did not pay within the relevant period. The claimant issued an application for judgment 7 days after the defendant was in default. The defendant paid the sums due after the application was made. The only remaining issue on the application was whether the defendant should pay the costs of the claimant’s application. In particular whether the costs could be recovered under the Fixed Recoverable Costs Regime.
THE DECISION OF THE DEPUTY DISTRICT JUDGE
The DDJ decided that the costs were not covered by the FRCR and ordered that the defendant pay the costs of £2,000.
THE DECISION ON APPEAL
HHJ Godsmark allowed the defendant’s appeal. He considered the competing arguments and the judgment of the Court of Appeal in Sharp v Leeds City Council  EWCA Civ 33. The judge held that a failure to pay damages and costs within the required period would normally amount to exceptional circumstances to permit an order to be made outside the fixed costs regime. However the claimant’s conduct in this case was over-hasty, ” Simply to issue an application without warning strikes me as precipitate.”
THE JUDGMENT ON THIS ISSUE
“25. What can be taken from the case of Sharp is the strong presumption that the FRCR is meant to apply to the whole of a claim once it enters the regime, without implied exceptions. It is recognised that sometimes work may need to be undertaken in one case which was not necessary in others. However as Briggs LJ points out in paragraph 41 the judgment in Sharp, this is all part of the swings and roundabouts of the FRCR.
26. The clear purpose of the FRCR is that it should apply to all parts of all claims up to a particular point. That point is before enforcement of any judgment or order obtained not least because a separate fixed costs table applies to enforcement under CPR 70 to 73. So much was common ground between the parties. The hub of this dispute lies in determining whether the FRCR in a Part 36 case stops at:-
a) Acceptance of the Part 36 offer; or
b) Obtaining a judgment or order.
27. In considering where Part 36 ceases to govern the disposal of a case subject to the FRCR it is important in my judgment to recognise the “Sharp principle” that the FRCR is intended to define what costs are recoverable during a claim for the whole of that claim. It is not intended that there be gaps which may need costly bridging. A purposive approach to construction needs to be adopted, if necessary, to achieve that outcome.
28. In my judgment it is important to step back and consider what role CPR 36 plays in litigation of claims like this. If a Part 36 offer is not accepted and the claim goes to trial and is successful then the Claimant will be the beneficiary of an order containing a judgment sum and, probably, an order for costs. The costs will be easily calculated by reference to the Stage C fixed costs formula. The Claimant will then be able, if necessary to enforce that order.
29. Where a Part 36 offer is accepted there is no order generated either for the judgment sum or costs. In the vast majority of cases one is not needed. But Part 36 itself provides for steps to be taken within the Part 36 procedure which will allow a Claimant to reach the same point in terms of a judgment order as would have been reached following trial. Those steps are contained in CPR 36.14(5) – (enforcement of settlement and costs) and in CPR 36.14(7) – (entry of judgment). Thus Part 36 itself provides for the Claimant to obtain parity with the Claimant who gets an order following trial.
30. In my judgment the FRCR applies to a low value RTA claim which was started in but has left the portal up to and including the obtaining of a judgment order. That is the position with a case which goes to trial. There is no reason why it should be different in a case which settles within CPR 36.
31. With CPR 36.14 identifying the route by which a claimant can move from beneficiary of a Part 36 settlement to judgment creditor, that route is simply a step along the way during the life of a claim subject to the FRCR.
32. That fact that not all Part 36 settlement cases will involve obtaining a judgment order is part of Briggs LJ’s swings and roundabouts. The FRCR identifies different stages within which a claim may settle. Stage B (between Part 7 issue and trial) is itself sub-divided into 3 stages:-
i) Between issue and date of allocation;
ii) Date of allocation to date of listing;
iii) Date of listing to prior to date of trial.
These sub-stages are themselves quite wide but the fee payable does not vary depending on where within the sub-stage a case settles. A case may settle before or after witness statements have been obtained and served, the fee is the same.
33. Similarly with a case which settles under Part 36. The fee recoverable is not governed by precisely what work is done but rather by the point of settlement. Sometimes witness statements will have been prepared, sometimes not. Sometimes judgment to enforce the settlement will be needed, sometimes not.
34. The better, and to me more obvious, construction of the rules is as follows:-
a) In a RTA Protocol claim like this the only costs allowed are those under
the FRCR which are as set out in the Tables (CPR 45.29B).
b) Where such a claim settles by acceptance of a Part 36 offer the same fixed
costs are recoverable (CPR 36.20).
c) The FRCR applies up to and including a judgment order in a case which
goes to trial. There is no reason why the FRCR should not apply up to and
including judgment in a case which settles via Part 36.
Such a construction of the rules maintains internal consistency and results in a seamless and gapless application of the FRCR to the same end point (judgment order) by whichever route that end point is reached.