Beware a Claimant Bearing Fixed Costs Consent Orders

Thu, 14 Jul 2022

Beware a Claimant Bearing Fixed Costs Consent Orders: Reference to ‘detailed assessment’ disapplies fixed costs

Woe betide the Defendant who takes great efforts to amicably settle a fixed costs case and then finds themselves having to pay costs on the standard basis. But that is the effect of what the Court of Appeal decided in Doyle v M&D Foundations & Building Services Ltd [2022] EWCA Civ 927.

The phrase ‘costs to be subject to detailed assessment if not agreed’ had long been regarded as somewhat of a ‘safe haven’ or ‘backstop’ for Judges and practitioners when drafting orders. It was hoped that such a phrase neatly allowed parties to attempt to agree the costs between themselves without the need for Court intervention.

The question facing the Court of Appeal in Doyle was whether a consent order bearing the phrase “such costs to be the subject of detailed assessment if not agreed” had the effect of the parties contracting out of the fixed costs regime. That it was technically possible to contract out of the fixed costs regime was accepted in the Court of Appeal in Solomon v Cromwell Group plc [2011] EWCA Civ 1584 and Ho v Adelekun [2019] EWCA Civ 1988. In Ho, to simplify matters greatly, settlement by way of a Part 36 offer meant that the cross-references between Part 36 and Part 45 Section IIIA precluded anything other than fixed costs being agreed. In Doyle the Court of Appeal confirmed settlement other than by Part 36 and encapsulated in a consent order that provided for detailed assessment did indeed have the effect of contracting out of the fixed costs regime.

The Judgment in Doyle

The case concerned an accident at work which had been commenced by way of the EL Protocol but had left the Protocol when the Defendant denied liability. Consequently, the matter was, ordinarily, subject to the fixed costs under Section IIIA of CPR 45.

The matter was settled via consent order shortly before trial, with damages agreed at £5,000 and the Defendant to pay the Claimant’s costs, with the aforementioned offending provision that “such costs to be the subject of detailed assessment if not agreed.”

It is worth noting that the sum of £5,000 had originally been offered by the Defendant to the Claimant in a Part 36 offer, however the Claimant’s solicitors had responded stating that whilst they were willing to settle at £5,000, they would not accept the Part 36 offer as it had been made at a late stage and they considered that an order was required to finalise the proceedings. Consequently, the Claimant’s solicitors enclosed a consent order that included the costs provision which was subject to the appeal.

Lord Justice Phillips, with whom both Lord Justice Baker and Lord Justice Edis agreed, gave the only judgment. Phillips LJ found that the reference to ‘detailed assessment’ was a clear and unambiguous indication that the costs would be assessed on the standard basis, for the following reasons:

  1. It is a technical term and refers to the detailed assessment procedure under CPR 47. The phrase of ‘detailed assessment’ cannot be read as providing for an ‘assessment’ of disputes as to fixed costs under CPR 45.
  2. CPR 44.3(4)(a) provides that where an order for costs does not indicate the basis of assessment, the costs will be assessed on the standard basis. The phrase ‘subject to detailed assessment’ is an order that costs would be assessed on the standard basis. As such, a consent order bearing the same phrasing should be construed accordingly.
  3. CPR 44.6(1) in setting out the Court’s power to assess costs, specifically and expressly provides that this power does not relate to fixed costs. As such, Phillips LJ considered that “it could not be clearer that an agreement or order for detailed assessment of costs does not (unless something has ‘gone wrong’) relate to fixed costs.”
  4. The wording of CPR 45.29J and 45.29K indicates that there is a difference between ‘assessed costs’ and fixed costs.

Phillips LJ also attached weight to Lord Dyson MR’s comments in Broadhurst v Tan [2016] EWCA Civ 94, where it was stated, “the starting point is that fixed costs and assessed costs are conceptually different.”

Phillips LJ went on to consider whether, despite his views that the “natural and ordinary meaning of the relevant words is entirely clear”, considered objectively this was the meaning that was truly intended by the parties.

Phillips LJ considered that it was, holding the solicitors must have been taken to have been aware of two principles: “(i) that the fixed costs regime can be disapplied by agreement; and (ii) that an order providing for detail assessment (without more) entails an assessment on the standard basis.” In light of this, Phillips LJ considered that there was “no objective reason to believe that the solicitors did not intend the term to bear its natural, ordinary (and in my judgment, obvious) meaning”.

Analysis

Whatever your views on the fairness of the fixed costs regime, it unapologetically had a purpose. That purpose, to control and introduce certainty into costs falling within the regime, has to date has been ruthlessly applied by the Court of Appeal. In an individual case it might bring about a result that seemed unfair, but that flowed from the ‘swings and roundabouts’ as described by Lord Justice Briggs (as he then was) in Sharp v Leeds City Council [2017] 4 WLR 98. Briggs LJ explicitly stated at [31] in Sharp that to “recognise implied exceptions… would be destructive of the clear purpose of the fixed costs regime”. That sentiment was repeated by Lord Justice Coulson in Hislop v Perde [2018] EWCA Civ 1726, where at [50] he stated, “The whole point of the regime is to ensure that both sides begin and end proceedings with the expectation that fixed costs is all that will be recoverable.” One might think it was precisely to avoid the type of satellite litigation, now having taken up the time of the Court of Appeal on two occasions, seen in Ho and Doyle, that underpinned this reasoning.

The logic supporting the interpretation favoured in the Court of Appeal in Doyle is attractive, applying consistency of meaning of words across the CPR. However, the decision ignores the clear wording of r45.29B and r45.29D which both explicitly state “the costs allowed are…” the fixed costs in cases to which they apply. Whilst it is entirely open to the parties to contract out, in keeping to the purpose as previously and repeatedly expressed by the Court of Appeal, it is suggested that the issue is whether contracting out can arise implicitly by reference to other parts of the CPR, such as to r44.6, the reference to ‘detailed assessment’ and therefore Part 47 in this case, or only by specific exclusionary reference to the opting out from Part 45 Section IIIA.

The reason that the distinction between implied or explicit contracting out is important can be found within the judgment in Doyle itself. As noted above, at [49] Phillips LJ notes “Notwithstanding that the natural and ordinary meaning of the relevant words is entirely clear… it remains necessary and appropriate to consider the context to determine whether, judged objectively, that meaning was truly intended”. That would arguably appear to be something of an invitation for just the satellite litigation that fixed costs was designed to avoid. Whereas a clear and unequivocal reference to costs being determined otherwise than in accordance with Part 45 Section IIIA, or whatever part of the fixed costs regime applied, would make it quite clear. That is certainty.

This is perhaps where Phillips LJ, in our view, went astray; it is the second of the starting points (point (ii) above) that is not in-keeping with the stringency of the fixed costs regime. It is questionable whether, particularly in light of the previous decisions in Sharp, Hislop and Ho, the reference to ‘detailed assessment’ was sufficient to indicate an intention to have costs determined on the standard basis in a case where fixed costs would ordinarily apply. No doubt many Judges and practitioners throughout the Country have agreed such wording in fixed costs cases without any consideration to the possibility that they were in fact contracting out of fixed costs entirely.

Two Final Points of Note

The decision also engaged two other points which are worth picking out. Firstly, the Court of Appeal’s decision was decided by reference to areas outside of Part 45 Section IIIA. This touches on the split, albeit an obiter one, of an earlier Court of Appeal in Aldred v Cham [2020] 1 WLR 1276, between Coulson LJ on the one hand and McCombe and Nicola Davies LLJ on the other, as to the use of other parts of the CPR to interpret the application of the fixed costs regime. The problem may well stem from the fact that the fixed costs rules, and Section IIIA, does not appear to have been written with a view to being part of the overall CPR, introducing apparently different answers to the same questions that are already dealt with elsewhere, such as recoverability of multiple counsel fees when representing multiple claimants. There are undoubted arguments both ways, but it is clear that reference to interpretative aids outside of the fixed costs may yet be an important point of principle that needs to be authoritatively decided one way or another. 

Secondly, Phillips LJ held at [47] that in his view the agreed position between counsel in Ho was wrong. He preferred the views expressed in various cases by Judges of the Senior Courts Costs Office, which set out that an application should simply be made to the court rather than detailed assessment under Part 47 started to determine any disputes in fixed costs, such as recoverability of disbursements.

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