Ho v Adelekun: Court of Appeal restores order over attempts to contract out of fixed costs

21 Nov 2019

The Court of Appeal has robustly slammed the door shut on the latest attempt to escape and get paid more than the fixed costs that apply in personal injury cases that have fallen out of the portal. In Ho v Adelekun [2019] EWCA Civ 1988, the Court of Appeal has confirmed that acceptance of a Part 36 offer which makes reference only to r.36.13 (which refers to assessed costs rather than expressly to r.36.20 which sets out entitlement to fixed costs) and offers to pay assessed costs, does not lead to a contracting out of the fixed costs regime. This has been a troublesome issue ever since the determination by the Court of Appeal in Broadhurst v Tan [2016] EWCA Civ 94 that fixed costs and assessed costs are conceptually different. It is good news for paying parties that the door has been firmly closed on arguments that compromising claims on the basis of Part 36 consequences contracts out of fixed costs. 

Background of Adelekun

The claimant’s RTA claim fell out of the portal and was allocated to the fast track. The claimant made an application to reallocate the claim to the multi-track and shortly before it was listed to be heard, the defendant made a Part 36 offer for £30,000 damages and for costs to be paid in accordance with CPR 36.13, subject to detailed assessment if not agreed. On the following day, the defendant confirmed agreement for the case to be reallocated to the multi-track and pressed for a response to the offer. On the next day, the claimant accepted the offer and submitted a consent order confirming settlement to vacate the upcoming reallocation hearing.

The consent order was agreed which stated that costs would be assessed on the standard basis if not agreed and the court approved this. The claimant sought standard costs in the bill and detailed assessment proceedings were put on hold after the defendant made an application for fixed costs to apply under CPR 45 IIIA.  The hearing for reallocation to the multi-track was never heard due to the settlement, so it remained on the fast track. The defendant was successful and fixed costs were applicable after it was ordered for there to be a variation of the consent order. However, the claimant appealed against this decision. 

Circuit Judge Appeal decision in Adelekun

It was held that the parties can contract out of fixed costs in principle, noting that the parties had agreed to reallocation to the multi-track and agreed to standard costs in the consent order. As the defendant agreed to the reallocation of the claim to the multi-track the day after making the Part 36 offer, paying standard costs would have been ‘in line’ with such a reallocation. Therefore, the surprising conclusion was reached that the parties had contracted out of the fixed costs provisions. The defendant appealed to the Court of Appeal.

Court of Appeal decision of Adelekun

The two principle issues determined were as follows:

  1. The offer that was accepted did not include a provision to pay ‘conventional’ as opposed to fixed costs; and
  2. In any event the claim should not be reallocated to the multi-track with retrospective disapplication of the fixed costs regime.

It was common ground that the existence of the consent order was in fact irrelevant as this was an acceptance of a Part 36 offer

In arriving at these determinations, it was confirmed that the accepted offer was a Part 36 offer and did not need to specifically refer to r.36.20 as r.36.13 makes reference to r.36.20 in any event. The fact that the offer was plainly a Part 36 reinforced the finding that the fixed costs regime was being offered as Part 36 expressly caters for fixed costs.

Having concluded that there was no provision to contract out of fixed costs overturning the Circuit Judge’s decision below, the Circuit Judge’s dismissal of the reallocation point was maintained. There was no power to reopen reallocation as the claim was automatically stayed having been concluded by the acceptance of a Part 36 offer.

What Adelekun means for you

There was some publicity previously suggesting Adelekun is authority that agreeing to costs being assessed on the standard basis means fixed costs will not apply. Much seems to have been made of the fact that the Part 36 offer did not refer to CPR 36.20. However, despite the Court of Appeal making it clear such arguments are no longer sustainable, there is guidance that in future defendants would be well-advised to refer to CPR 36.20, and not CPR 36.13 in fixed costs cases. It was also advisable to omit reference to the costs being ‘assessed’ or reference to payment of costs on the ‘standard basis’ within a Part 36 offer for fixed costs.  It would be prudent to follow such guidance on current cases but the judgment was clear enough to dispose of any such difficulties that might exist on cases already settled.

 

Written by Adam Burrell, partner and head of costs and Marie Ingoe, professional support lawyer at BLM.

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Disclaimer: This document does not present a complete or comprehensive statement of the law, nor does it constitute legal advice. It is intended only to highlight issues that may be of interest to customers of BLM. Specialist legal advice should always be sought in any particular case.

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