W Portsmouth and Company Ltd v Lowin  EWCA Civ 2172
The Court of Appeal has delivered a welcome boost to the provisional assessment regime by confirming that the cap on costs still applies even where indemnity costs are ordered. The claimant beat their costs Part 36 offer by obtaining a higher provisional assessment amount and an order was made for indemnity costs. However, the provisional assessment costs cap is not trumped by indemnity costs.
As summarised in the judgment, ‘…provisional assessment is a paper based form of detailed assessment which has been compulsory since 1 April 2013 in relation to bills up to £75,000, unless the Costs Judge considers otherwise. It was introduced as part of the reforms to the costs regime brought about following the review conducted by Jackson LJ. As well as assessing the bill of costs, the Costs Judge determines who should pay for the provisional assessment itself and assesses those costs.’ In an effort to make a more accessible and stream-lined paper based process without an oral hearing and all the resources that entails, a cap on the costs that can be awarded for provisional assessment was introduced at £1,500 plus VAT and court fees. If a party wishes to challenge a provisional assessment then an oral hearing can be requested which then brings the matter out of the costs cap.
This was a personal injury claim for damages arising from mesothelioma. The main action settled when the claimant accepted the defendant’s damages offer. When it came to costs, the claimant presented her bill at just over £55,000, making a Part 36 offer to accept £32,000. At provisional assessment the costs were assessed at a slightly higher amount than the claimant’s part 36 offer. It was held by Master Whalan that the costs would be assessed on the indemnity basis but the assessment would be subject to the usual provisional assessment cap.
The High Court decision
The High Court reversed the initial decision and held that the cap would not apply as the Part 36 costs rules would trump the costs cap. The principle from Broadhurst v Tan  EWCA Civ 94 was applied, with reference to the way the Part 36 costs rules displaced Part 45 fixed costs rules. It was held that indemnity basis costs applied under Part 36 and the cap would not apply, with the provisional assessment costs assessed at some £12,000. The Court of Appeal reversed the High Court decision. It was held that the provisional assessment cap would still apply despite the order being for indemnity basis costs.
Summarising the main points:
- The case of Broadhurst was not relevant in this situation and should not have been followed as it was in relation to a conflict between Part 36 and fixed costs rather than a costs cap, as in this case.
- There is no material conflict between costs assessed on the indemnity basis and costs assessed on that basis subject to a cap.
- There is nothing in the CPR to suggest that there were situations when the provisional assessment cap would not apply.
What this means for you
There have been some concerns expressed that this decision discourages the use of Part 36 offers in provisional assessment. However, there are clear incentives when recovering costs to try and beat a Part 36 offer. Where a recovering party successfully beats their own Part 36 offer on costs there will be the usual 10 percent uplift on the assessed amount and better interest terms. This is an excellent result for the whole provisional assessment regime. On the whole this works well and enables access to a fairly swift paper assessment at a sensible cost to both parties. Hopefully the decision will encourage efficiencies and discourage temptations to unnecessarily build up the costs relating to provisional assessment. The costs cap on provisional assessment is clearly here to stay and long may it continue to withstand attempts to circumvent it.