Strategic costs issues concerning Part 36 and QOCS reach the Court of Appeal in June
Satellite litigation arising out of the Jackson reforms – now over five years old – continues to occupy the appeal courts, and June will see two costs issues of particular interest reach the Court of Appeal. Both issues have occupied much time in the lower courts, with several seemingly contradictory judgments, so all interested parties are likely to be hoping for definitive guidance from the Court of Appeal.
Costs after late acceptance of a Part 36 offer
The first issue, to be determined on two appeals being heard together, relates to the extent of a claimant's entitlement to costs where a defendant accepts the claimant's Part 36 offer after the expiry of the relevant 21 day period in a case to which the fixed recoverable costs regime applies.
The cases, Hislop v Perde and Kaur v Committee for the time being of Ramgarhia Board, due to be heard on 20 June 2018, concern the correct interpretation of CPR 36.13, and in particular sub-rules (4), (5) and (6). Rule 36.13(4) provides that where an offer is accepted after the expiry of the relevant period, the court must determine the liability for costs in default of agreement.
However, rule 36.13(5) places some limits on that apparently wide discretion, requiring the court in such circumstances to order (unless it is unjust to do so) that the defendant pays the claimant's costs up to the expiry of the relevant period and that the party accepting the offer pay the party making the offer its costs thereafter (in most of the cases that have come before the courts, that has meant the defendant paying the claimant's costs).
The parties to litigation in such cases have tended to make one (or more) of three arguments in respect of the "post-expiry" costs. Firstly, defendants argue that the fixed recoverable costs regime prevails and that the applicable fixed costs only are payable (as held by HHJ Tindal in his tour de force of a judgment in Parsa v Smith (September 2017). Secondly, claimants will say that an order for costs to be assessed on the standard basis is the correct one (the decision of the lower court in both appeals). And thirdly, in some cases claimants will go on to suggest that indemnity costs should be payable (the view of DJ Besford in Sutherland v Khan (April 2016), one of the first cases to consider the issue).
It is unsurprising that the apparently wide discretion afforded by the rules in these circumstances has led to the volume of satellite litigation that we have seen, and perhaps surprising that the issue has not been ventilated before the Court of Appeal sooner. We will hopefully soon have a definitive answer.
Effect of QOCS where damages are recovered from another defendant
The second issue before the Court of Appeal concerns the qualified one-way costs shifting (QOCS) regime found in Part 44 of the CPR, the aim of which is generally to disentitle defendants from enforcing costs orders against claimants in personal injury claims subject to some specific exceptions. One of those exceptions arises where an order for damages is made in a claimant's favour; in those circumstances the defendant can enforce its costs order to the extent of the order for damages.
What happens, however, in circumstances where a claimant obtains an order for damages against one defendant but is (subject to QOCS) liable for a costs order in favour of a different defendant? In Cartwright v Venduct Engineering (December 2017), DJ Hale (sitting as the regional costs judge) found that in such circumstances the defendant which has the benefit of the costs order is entitled to enforce it to the extent of the claimant's order for damages.
However, the defendant failed in that case on a different point: the claimant's damages were recorded in the schedule to a Tomlin order, and the DJ held that this did not constitute an "order for damages" and so the defendant's costs order was unenforceable.
Whilst the issue has seemingly given rise to less satellite litigation than the first discussed above, it is one that is likely to arise in a large number of personal injury cases, particularly in those fields (such as noise-induced hearing loss) where multiple defendants are commonplace. The appeal in Cartwright is due to be heard on 26/27 June 2018 and the judgment will no doubt also be keenly awaited.
Nick Thornsby, DWF Advocacy, M 07738 886 339 firstname.lastname@example.org
This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.