PART 36: FIXED COSTS AND THE TRANSITIONAL PROVISIONS: DELAY IN ISSUING COSTS PROCEEDINGS MEANT THAT CLAIMANT’S COSTS WERE ASSESSED AT NIL

In Bi -v- Tesco Underwriting Limited  HHJ Sephton KC found that the claimant’s delay in issuing costs proceedings meant that the costs were subject to the fixed costs provisions and should be assessed at nil.  I am grateful to barrister Sarah Robson for sending me a copy of this decision, copy of which can be found here. Asmat-Bi-v.-Tesco-Underwriting-Limited-Judgment

“I conclude that the Part 36 offer did not prescribe the basis upon which costs were to be paid. The offer was made and accepted on the basis that the costs would be determined in accordance with the Rules. The Rules were changed in order to implement an extension of the fixed recoverable costs regime. Because the claimant did not issue her costs-only proceedings until after the amendments to the rules came into force, the costs of her claim for damages fall to be determined under the amended Rules.”

THE CASE

The claimant was involved in a road traffic accident on 19th August 2022. She was not injured but a significant claim was made for car hire charges.

(The case involved two of my colleagues John Meehan and Andrew Hogan.)

THE DEFENDANT’S PART 36 OFFER

The defendant made a Part 36 offer which was accepted.

“By letter dated 5 April 2023, the defendant made a Part 36 offer (“the Part 36 offer”), as
follows:

“Inclusive of general and special damages and net of liability, we formally offer to
your Client the gross sum of £3,555.36 in full and final settlement of the hire, storage
and recovery elements of the claim…
The offer is made pursuant to Part 36 r 36.5(1) of the CPR. If the offer is accepted
within 21 days of the date of this letter, we will be liable for the Claimant’s costs in
accordance with Rule 36.13 or 36.20 of the CPR…”
…
4. By email dated 11 April 2023, a solicitor on behalf of the claimant wrote,
“We would like to confirm that your Part 36 offer made on 05/04/2023 for hire,
storage and recovery in the sum of £3,555.36 is accepted.”

The email said nothing about costs.”

THE CLAIMANT’S BILL OF COSTS

In October 2023 the claimant served an informal bill of costs on the defendant which sought costs on the standard basis.  The claimant then issued costs only Part 8 proceedings. The defendant served an acknowledgment of service stating it did not contest the making of a costs order. The District Judge made an order that the defendant pay the claimant’s costs on the standard basis.

THE DEFENDANT’S APPLICATION TO SET ASIDE THE DISTRICT JUDGE’S ORDER

The judge was hearing the defendant’s application to set aside the order of the District Judge and for a Circuit Judge to determine the incidence of costs.

THE ARGUMENTS OF EACH PARTY

The judge considered the fixed costs provisions.

12. The defendant’s case is that the costs of the claim fall to be determined under the
amended rules and should be assessed at nil. Mr Hogan submitted that the claimant’s
claim was a demand for damages and costs (the claim for costs forming an integral part
of the claim). The part of the claim that had not yet been resolved (i.e. the claim for
costs) was the subject of the proceedings commenced on 27 November 2023 and is
therefore subject to the new rules. The costs claimed in the proceedings were “costs”
which are subject to the Amendment Rules. Mr Hogan submitted that the transitional
provisions contained in Rule 2 of the Amendment Rules, being a procedural rule,
should be construed as having retrospective effect. He submitted that the purpose of the
transitional provision was to provide a bright line determining which cases should be
dealt with under the old rules and which under the new.

13. The claimant’s case is that the defendant should pay the claimant’s costs to be assessed
on the standard basis. Mr Meehan submitted that the claimant obtained accrued rights
under the agreement made by acceptance of the Part 36 offer; such rights should not be
removed by the retrospective operation of the transitional provisions of the Amendment
Rules. The Amendment Rules were not merely procedural, but were substantive
because they affect the rights of litigants; accordingly the rule applies that legislative
provisions generally should not have retrospective effect. He submitted that the parties
made an express agreement that the costs would be paid in accordance with CPR 36.13
in its pre-amendment form. Alternatively, he submitted that the Amendment Rules do
not apply to the underlying claim but only to the costs of that claim. He submitted that
the “underlying claim” was the claim for costs and that on a true construction of Rule 2
Amendment Rules, the new rules about costs apply only to the costs relating to
the Part 8 claim and not to the claim itself.

CONSIDERATION OF THE CLAIMANT’S PART 36 OFFER

I deal first with the construction of the Part 36 offer.

15. In my judgment, the Part 36 offer was an offer to settle the claimant’s claim for
£3,555.36, as stated in the first paragraph of the letter dated 5 April 2023.

16. In my view. the second paragraph of the letter is intended to comply with CPR
36.5(1)(c); it uses, word for word, the phrase from CPR 36.5(1)(c) “will be liable for
the claimant’s costs in accordance with rule 36.13 or 36.20”. I do not consider it to be a
promise to pay costs on any particular basis: it merely explains the consequences that
follow if the offer is accepted. The fact that the defendant was not making any hard and
fast offer to pay costs on a particular basis is underlined by the fact that it referred to a
liability under “Rule 36.13 or 36.20 of the CPR (my emphasis).” In my judgment, the
defendant was not committing itself to the payment of costs in a particular amount or
upon a particular basis; on the contrary, it made clear that its liability to costs would be
dealt with in accordance with the (then relevant) rules and made clear that the
consequences of accepting the offer would generate an entitlement to costs to be
quantified by a mechanism set out in the Rules. Put another way, the defendant’s
obligation to pay costs stemmed not from a promise to pay but as a consequence of the
Rules.
17. I am fortified in my conclusion that no contractual promise about costs was made by
the observation that the claimant’s acceptance of the defendant’s Part 36 offer makes no
mention of costs.
18. Further support for my view is provided by the authorities that establish that an offer
that contains terms as to costs departing from the provisions of CPR Part 36 cannot be a
Part 36 offer: see Mitchell v James [2002] EWCA Civ 997 and James v James [2018]
EWHC 242 (Ch), cited with approval in Ho v Adelekun [2019] EWCA Civ 1988 at
[17]. Since the defendant’s offer was plainly intended to represent a Part 36 offer, it
should be construed in a way that achieves that end; that is, in a way that ensures that
the Part 36 rules determine liability for costs…

20. It follows that I reject the submission that the defendant promised to pay costs assessed
on a standard basis or that the parties have “contracted out” of the Rules. The parties’
agreement entailed no more and no less than an assessment of costs in accordance with
the Rules.

THE CONSEQUENCES OF THE CLAIMANT’S DELAY

“21 I accept that at the time at which the claimant accepted the offer, it was open to the
claimant to commence costs-only proceedings under CPR 46.14 at any time. Had she
done so before1 October 2023, the costs would have been assessed on the standard
basis: see (old) CPR 36.13(3) (there being no fixed costs regime that then applied to the
claimant’s claim). I reject Mr Meehan’s submission that the claimant had an “accrued
right” to the costs as they would have been assessed if costs-only proceedings had been
commenced before the Commencement Date: on my analysis, the claimant had an
inchoate right to costs which only crystallised after they had been assessed, allowed or
agreed”

CONSTRUING THE STATUTORY PROVISIONS

The relevant features of the context in which the Amendment Rules were made appear
to me to be as follows:
(a) The Amendment Rules effected a radical change from the previous practice.
(b) The professions and the public have been on notice of the proposed extension of
fixed costs for a long time. Sir Rupert Jackson’s Supplemental Report which
suggested a wide extension of the fixed costs regime was published as long ago as
July 2017. On 28 March 2019, the Ministry of Justice published a consultation
paper (Extending Fixed Recoverable Costs in Civil Cases: Implementing Sir Rupert
Jackson’s Proposals). The Government’s response to the consultation was
published in September 2021. The Civil Rules Procedure Committee (“CPRC”)
published draft rules on 20 April 2023 and the Amendment Rules were laid before

Parliament on 24 May 2023.

(c) The aim of the changes was identified in several of the documents to which I have
just referred. The Government’s response of September 2021underlines the benefits
perceived to come from fixed recoverable costs, namely, that they should be
predictable and proportionate. Other perceived benefits were that fixed costs are
“allowed” and not “assessed,” so that in fixed costs cases, the resources of the Court
and of the parties will be not be expended on assessments. The benefits that the
Amendment Rules were designed to confer were identified in the material published
before the Rules were made. Those benefits were designed to serve the public
interest.

THE MEANING OF THE TRANSITIONAL PROVISIONS

25. In my judgment, the natural meaning of the Transitional Provisions is that the
Amendment Rules apply to the claimant’s claim for costs because:
(a) This was a claim where proceedings were issued after 1st October 2023.
(b) The claimant’s claim could only be determined by reference to the applicable Rules.
(c) The rules by which the defendant’s liability for costs were to be assessed were
amended by the Amendment Rules.
(d) The relevant rules relate to costs.
26. In my opinion, the context in which the Amendment Rules were made is consistent
with the construction I favour. Because significant changes were made to the costs
regime, it was necessary to identify a date from which the changes took effect – what
Mr Hogan identified as a “bright line” beyond which the new fixed costs regime
applied. Such a line provides clarity and certainty, which was one of the aims of the
Amendment Rules. It was not unfair to those who used ordinary care, diligence and
promptness to change the rules in this abrupt fashion; the prudent litigant who might be
adversely affected by the changes in the rules could issue proceedings before the 1
October 2023. The Amendment Rules were intended to benefit everyone concerned by
introducing a certain and proportionate costs regime.

CONSIDERATION OF THE DEFENDANT’S ARGUMENT

27. Mr Meehan was unable to formulate a convincing construction of the Transitional
Provisions to a different effect. He accepted that the general rule is that procedural rules
can have retrospective effect, but he submitted that the Amendment Rules affected the
claimant’s substantive rights and therefore should be construed consistently with the
usual rule against retrospectivity. I reject this submission for two reasons:

(a) I consider the Amendment Rules to be archetypal procedural rules. They were
designed to improve matters for everyone concerned. The real reason that the
claimant is prejudiced by the Amendment Rules is that she failed timeously to
commence costs-only proceedings so as to avoid the consequences of the new rules.
(b) On my construction of the Part 36 offer, the claimant’s right was not to costs
assessed on the standard basis, but costs determined in accordance with the Rules.
Her right to have the costs determined in accordance with the Rules was not
affected. The end result of the determination changed because the Rules changed.
28. Mr Meehan sought to persuade me that the “costs” referred to in the Transitional
Provisions meant only the costs of the Part 8 proceedings; he submitted that the subject
matter of the proceedings (i.e. the claim for the costs of the claim) was not affected by
the Amendment Rules. I reject this submission for the following reasons:
(a) Nothing in the wording of the Transitional Provisions suggests that “costs” should
be confined to the costs of the proceedings.
(b) As explained above, the claimant did not have a right to costs assessed on the
standard basis; rather, she had a right to costs determined in accordance with the
Rules. The only way of determining the claimant’s entitlement to costs is by
reference to the Rules.
29. For the reasons I have explained, I have not been persuaded that the Transitional
Provisions should be given a construction that is different from the natural meaning I
have identified in paragraph 25 above.

LOOKING AT THE CPRC MINUTES

30. I was shown the minutes of a meeting of the CPRC that took place by video link on 3
November 2023. The CPRC expressed the view that
“… where proceedings have not already been issued on or after 1 October and the
parties do not expressly agree to costs on a non-FRC basis, but they agree on the
incidence, but not the amount, of the costs, then they may issue costs only
proceedings for the determination of those costs…
If those proceedings are issued on or after 1st October, [fixed costs] would apply to all
costs in respect of that claim, irrespective of whether they were incurred before or
after 1st October.”
In my view, I am not entitled to rely upon this opinion in construing the Amendment
Rules. It is merely an opinion about the meaning of a statutory provision that was
already in force, though made by the authors of the rules under consideration. It is,
however, gratifying that my view of the matter coincides with that of the eminent
members of the CPRC.

CONCLUSION: FIXED COSTS ARE NIL

“31. I conclude that the Part 36 offer did not prescribe the basis upon which costs were to be
paid. The offer was made and accepted on the basis that the costs would be determined
in accordance with the Rules. The Rules were changed in order to implement an
extension of the fixed recoverable costs regime. Because the claimant did not issue her
costs-only proceedings until after the amendments to the rules came into force, the
costs of her claim for damages fall to be determined under the amended Rules.

32. It follows that I consider that the order made by DDJ Isles should set aside. It appears
that the parties agree that, upon the view I have taken, the fixed costs allowed should be
nil.”