Part 36 indemnity costs do not remove provisional assessment cap, says CA

The ACL has called on the Civil Procedure Rule Committee to review this week’s ruling of the Court of Appeal that an award of indemnity costs after beating a part 36 offer in a provisional assessment does not remove the £1,500 costs cap.

The association described the outcome as “harsh” for its members, who may be penalised in circumstances where their receiving party/client enjoys other part 36 benefits.

The appeal court overturned Mrs Justice Laing’s decision in W Portsmouth and Company Ltd v Lowin [2017] EWCA Civ 2172.

In a statement, the ACL said: “While the clarity provided by the ruling was needed, the outcome is very harsh for Costs Lawyers.

“There will be plenty of cases where the paying party does not accept a part 36 offer and instead causes the other side to spend significantly more than £1,500 in dealing with costs issues.

“But on beating their own offer at assessment, the receiving party enjoys all the usual benefits, except in relation to this one aspect of their case. And it will be their Costs Lawyer who suffers through no fault of their own.

“We call on the Civil Procedure Rule Committee to consider the impact and fairness of this ruling – making this exception seems at odds with the thrust of the whole part 36 scheme.”

Having settled her case favourably, Ms Lowin made a part 36 offer of £32,000 in respect of her costs in March 2015. A month later, the detailed assessment process began with her claiming £55,086.

In December 2015, Master Whalan provisionally assessed her costs at £32,255. Having beaten the offer, he made the usual part 36 order.

Ms Lowin claimed £6,091 for the costs of the assessment proceedings. Master Whalan ordered the company to pay the costs on the indemnity basis, but then applied capped pursuant to CPR 47.15(5). This led to a total costs award of £2,805 – £1,500 in costs plus VAT and the £1,005 court fee.

Mrs Justice Laing reversed him on appeal, citing the Court of Appeal’s early 2016 ruling in Broadhurst v Tan. This decided that a party awarded indemnity costs after beating a part 36 offer in a case where fixed fees applied was eligible for indemnity costs as there was tension between the two concepts.

But giving Tuesday’s ruling, Lady Justice Asplin approved Master Whalan’s approach. Broadhurst, she said, was not relevant – unlike with fixed costs, a cap did not prevent costs being assessed on the indemnity basis “or affect the quantum of the costs which are being assessed under that rule,” she said.

“It merely inhibits the amount which can be awarded, the assessment of the party’s costs having taken place on the indemnity basis as required by CPR rule 36.17(4)(b). If the party’s costs assessed on the indemnity basis were less than the cap, the full sum would be awarded…

“It follows that, with great respect, I do not consider that the judge was right to conclude… that there is a material conflict between costs assessed on the indemnity basis and costs assessed on that basis subject to a cap.”

There was nothing in the CPR to suggest that the cap should be disapplied, Asplin LJ said: “Such a construction is also consistent with the policy behind both CPR rule 47.15 and part 36. It does not undermine the intention to encourage the quick and cheap resolution of the assessment of costs in cases in which the costs claimed are £75,000 or below.

“Nor does it deprive the successful party of the not inconsiderable benefits in CPR rule 36.17(4)(a)-(d) albeit that the costs under (b) [indemnity costs] are subject to the cap.”

Jamie Carpenter (instructed by DAC Beachcroft Claims) acted for the appellant and Gurion Taussig (instructed by Boyes Turner) for the respondent.



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Costs News
Published date
20 Dec 2017

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