Part 36 offers, contracting out of fixed costs and re-allocation
This case related to an RTA matter that first proceeded through the Portal. It subsequently left the Portal following the Defendant’s Insurer’s failure to respond on liability. The matter was allocated to the fast track. An Application was made to re-allocate the matter to the Multi-track in light of the value exceeding the Portal limit.
Before the Application was heard the Defendant made a Part 36 offer in the sum of £30,000.00. The Part 36 offer included the term ‘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’.
The Claimant obtained instructions to accept the offer and prepared a Tomlin Order setting out the terms of settlement and requesting the vacation of the forthcoming Application hearing. The terms included the Defendant to pay ‘the reasonable costs of the Claimant on the standard basis to be the subject of detailed assessment if not agreed.
However, the Court of Appeal has held that the terms of the Part 36 offer, under the correct construction, did not offer to pay conventional rather than fixed costs. As such, it was held that the parties did not contract out of the fixed costs regime. Furthermore, the failure for the re-allocation to be made also blocked the alternative escape route from fixed costs.
The Court stressed that Defendant’s making offers in future 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.
When considering the comments above it highlights that clarity and certainty are key and that the inverse can also be true, namely, that if Claimant wishes to contract out of fixed costs then they must make it clear within the Consent Order.
The full judgment can be read here.