Fixed Costs Regime and Late Acceptance of Part 36 Offers: Hislop v Perde ([2018] EWCA Civ 1726)

Introduction

Hislop v. Perde ([2018] EWCA Civ 1726) is a pivotal case adjudicated by the England and Wales Court of Appeal (Civil Division) on July 23, 2018. This case addresses the intricate interplay between the fixed costs regime under Section IIIA of Part 45 of the Civil Procedure Rules (CPR) and the acceptance of Part 36 offers. Specifically, it examines whether a claimant can recover standard or indemnity costs when a defendant accepts a Part 36 offer after the stipulated period within a fixed costs framework.

The appellants involved in this case are Ms. Hislop and Mrs. Kaur, who sustained injuries in road traffic accidents, filing claims under the Road Traffic Accident (RTA) and Employers' Liability/Public Liability (EL/PL) protocols, respectively. Both claims were governed by the fixed costs regime, which aims to streamline cost recovery in low-value claims.

Summary of the Judgment

The core issue in both appeals revolved around the appropriate approach to costs when a defendant accepts a claimant's Part 36 offer after the typical acceptance period has elapsed. In Ms. Hislop's case, the defendant accepted the offer 19 months after it was made, leading to a dispute over indemnity costs. Similarly, in Mrs. Kaur's case, the defendant made a higher Part 36 offer months after the claimant's initial offer, prompting questions about cost recovery.

The Court of Appeal overturned the previous decisions that allowed claims for indemnity costs beyond fixed costs, holding that under the fixed costs regime, the general rules of Part 36 do not apply. Instead, fixed costs govern the cost recovery, even in instances of late acceptance of offers. The judgment emphasizes adherence to the specific provisions of the CPR over general rules in the context of fixed costs cases.

Analysis

Precedents Cited

The judgment extensively references prior cases to delineate the principles governing cost recovery in fixed costs regimes:

Solomon v Cromwell Group Plc [2012] 1 WLR 1048: Established that in fixed costs cases, acceptance of a Part 36 offer within 21 days limits cost recovery to the fixed costs regime.
Broadhurst v Tan [2016] EWCA Civ 94; [2016] 1 WLR 1928: Determined that if a claimant recovers more than a Part 36 offer at trial, they are entitled to indemnity costs from the offer's effective date.
Sharp v Leeds City Council [2017] 4 WLR 3465: Highlighted the comprehensive nature of Section IIIA of Part 45 and its limited exceptions, reinforcing the fixed costs framework.

These precedents collectively underscore the precedence of the fixed costs regime over general Part 36 rules in relevant cases.

Legal Reasoning

The court's legal reasoning hinges on the interpretation of the CPR, particularly the relationship between general rules under Part 36 and specific provisions under Part 45 governing fixed costs. The judgment clarifies that:

The fixed costs regime under Section IIIA of Part 45 takes precedence over general Part 36 rules when applicable.
Acceptance of a Part 36 offer outside the relevant period does not permit recovery of indemnity or standard costs within the fixed costs framework.
The specific rules in r.36.20 fully govern the cost consequences of late acceptance in fixed costs cases, excluding r.36.13.

Furthermore, the court emphasizes the importance of maintaining the autonomy and certainty provided by the fixed costs regime, discouraging the expansion of indemnity costs within this context unless exceptional circumstances under r.45.29J are demonstrated.

Impact

This judgment has significant implications for future litigation involving the fixed costs regime:

Cost Certainty: Parties involved in low-value claims can anticipate that cost recovery will be confined to fixed costs, even if Part 36 offers are accepted late.
Encouragement of Timely Settlements: By limiting indemnity costs, the ruling incentivizes defendants to respond to Part 36 offers within the stipulated timeframe without fear of excessive cost liabilities.
Limited Scope for Indemnity Costs: The decision restricts the circumstances under which indemnity costs can be claimed in fixed costs cases, preserving the regime's integrity and proportionality aims.

Additionally, the judgment reinforces the structured approach of the CPR, ensuring that specific provisions govern their designated scenarios without overreaching into areas meant to be controlled by specialized rules.

Complex Concepts Simplified

Fixed Costs Regime (Part IIIA of Part 45)

A mechanism within the Civil Procedure Rules designed to simplify cost recovery in specific types of claims, such as low-value road traffic accidents or employers' liability claims. Under this regime, costs are predetermined and do not require detailed assessment, promoting efficiency and predictability.

Part 36 Offer

A formal offer to settle a claim under Part 36 of the CPR. Acceptance of such an offer can influence the costs order at the end of the case. If accepted within the designated period, it typically limits cost recovery to fixed amounts unless exceptional circumstances are proven.

Indemnity Costs

A higher level of cost recovery than the standard basis, intended to cover all reasonable costs. Indemnity costs are awarded in situations where one party's conduct is deemed unreasonable to a significant degree.

Standard Basis Costs

The normal level of cost recovery based on what is reasonable and proportionate to the conduct of the case. It does not cover all expenses but seeks to balance fairness and cost control.

Exceptional Circumstances (r.45.29J)

Specific conditions under which the court may deviate from the fixed costs regime, allowing for indemnity or standard costs even in cases governed by fixed costs. These are rare and require clear justification.

Conclusion

The Hislop v. Perde judgment serves as a definitive clarification on the application of the fixed costs regime in conjunction with Part 36 offers. By affirming that the fixed costs framework supersedes general cost rules in relevant cases, the court upholds the principles of cost certainty and proportionality inherent to low-value claims. This decision restricts the avenues for claiming indemnity costs in fixed costs cases, thereby reinforcing the structured and efficient nature of the Civil Procedure Rules. Legal practitioners must now navigate these clarified boundaries, ensuring that Part 36 offers and their timing are managed within the confines of the fixed costs regime to avoid unintended cost liabilities.

Overall, this judgment emphasizes the supremacy of specific procedural regimes over general rules, maintaining the balance between facilitating access to justice in low-value claims and ensuring that cost recovery remains fair and predictable for all parties involved.