Ho v Adelekun: Court of Appeal re-establishes fixed cost provisions under Part 36 offer


In the recent case of Ho v Adelekun [2019] WL 06119464 the Court of Appeal has provided further guidance on the relevant costs regime in relation to claims subject to fixed costs, by way of reaffirming the importance of a ‘correctly construed’ Part 36 offer.

By way of background, the parties were involved in a road traffic accident (RTA) in 2012 but the Defendant did not admit liability under the RTA Portal which is the Pre-Action Protocol for Low Value Personal Injury Claims. Due to this inadmissibility, the claim exited the portal and proceedings under fast track were subsequently commenced in January 2015. As the claim surpassed the maximum of £25,000 allowed for this track, the Claimant applied for reallocation to multi track, the hearing for which was listed to be heard on 24 April 2017. However, prior to this hearing the Defendant received a Part 36 offer from the Claimant to the sum of £30,000.  The main area of contention within this offer was the following,

“ If the offer is accepted within 21 days, our client will pay your client’s legal costs in accordance with Part 36 Rule 13 of the Civil Procedure Rules such costs to be subject to detailed assessment if not agreed”.

After accepting this offer, a consent order was produced reaffirming the settlement terms that were agreed, stating that the Defendant,

“Would pay the reasonable costs of the Claimant on the standard basis to be the subject of detailed assessment if not agreed”.

As the hearing for allocation was never heard due to the above settlement, the case remained on the fast track. There was confusion by both parties, as to the true intentions of the cost regime to be followed. The Defendant believed that fixed costs should apply, owing no more than £16,000 under CPR 45 IIIA whereas the Claimant argued that the Tomlin Order provided for disapplication of the fixed costs seeking to recover costs upwards of £42,000.

After the judge at first instance held that the fixed costs were applicable, the Claimant appealed successfully on the basis that paying standard costs conforms with the requirements of reallocation to multi-track, thus contracting out of the fixed cost provisions.

This has been further appealed by the Defendant.

The Respondents’ argument against this appeal was based on CPR 36.5(1) that they relied on reference in the offer letter to ‘CPR 36.13’ and ‘detailed assessment’. The former applies when a Part 36 offer is accepted, entitling the Claimant to the costs of the proceeding (including pre-action costs) up to the date on which notice of acceptance was served, whereas the correct provision in this scenario would be CPR 36.20, which applies where a claim no longer continues under RTA or PL/EL protocol but a Part 36 offer is accepted, and entitles the claimant to only fixed costs.

It was held that incorrect reference to 36.13 is not enough to contract out of fixed costs because 36.5(1) refers to the period in which offer is to be accepted and does not provide an obligation to say which rule would be in point.

The wording ‘detailed assessment’ provided more controversy as for its use in the context of the offer letter. However, following the decision in Broadhurst v Tan [2016] EWCA Civ 94, [2016] 1 WLR 1928, it was held that ‘assessment’ which fixed cost regime may occasionally require and ‘assessment on standard basis’ are conceptually different thus ‘detailed assessment’ shouldn’t be taken to imply intention to displace the fixed costs regime.

Although this matter relates to an RTA, it has wider application to other PL/EL protocol claims falling under Pre-action Protocol and Part 36 provisions. The Court of Appeal decision has reaffirmed the importance of referring to CPR 36.20 rather than 36.13 in fixed cost cases and to quote Lord Justice Males in the appeal,

“parties who wish to settle on terms that fixed costs will be payable would be well-advised to avoid reference to assessment on ‘the standard basis’ in any offer letter or consent order which may be drawn up following acceptance of an offer”.

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