Solomon v Cromwell Group Plc

Factual and Procedural Background

These two appeals were heard together as they concern common issues regarding the interpretation of Part 36 of the Civil Procedure Rules (CPR) and its interaction with Part 44 (general rules on costs) and Section II of Part 45 (rules on costs in certain road traffic accident claims). Both cases involved claims for damages from road traffic accidents where the defendants made Part 36 offers totaling less than £10,000. The defendants agreed to pay the claimants' costs, but the parties could not agree on the amount, leading the claimants to initiate proceedings under rule 44.12A for cost assessment.

The claimants sought orders for costs to be assessed on the standard basis relying on rules 36.10(1) and (3), which provide that where a Part 36 offer is accepted within the relevant period, the claimant is entitled to costs up to the date of acceptance, assessed on the standard basis if not agreed. The respondents contended that costs should be awarded under Section II of Part 45, which prescribes fixed costs for certain low-value road traffic accident claims with damages not exceeding £10,000, unless exceptional circumstances justify more.

Lower courts diverged on the application of these rules. One judge held that rule 36.10 applied and that an order for costs on the standard basis was deemed made, excluding Section II of Part 45. Another judge held rule 36.10 applied only to costs "of the proceedings" and since no substantive proceedings had started, it did not apply, so the fixed costs regime under Section II of Part 45 governed. Both claimants appealed against refusal to award costs on the standard basis.

Legal Issues Presented

1. Whether rule 36.10(1) of the CPR applies to Part 36 offers made and accepted before the commencement of proceedings.
2. How rule 36.10(1) interacts with rule 44.12 and Section II of Part 45 in the context of costs assessment for low-value road traffic accident claims.
3. Whether parties can contract out of the fixed costs regime prescribed by Section II of Part 45 through the terms of their settlement agreements.

Arguments of the Parties

Appellant's Arguments

• Rule 36.10(1) creates a right to costs assessed on the standard basis upon acceptance of a Part 36 offer, which cannot be overridden by Section II of Part 45.
• Where a Part 36 offer is accepted, the claimant is deemed to hold an order for costs on the standard basis and may commence detailed assessment without starting separate proceedings, effectively bypassing Section II of Part 45.
• In one case, the parties’ settlement agreement expressly provided for costs on the standard basis, supporting recovery beyond the fixed costs regime.

Respondent's Arguments

• Section II of Part 45 provides a special, fixed-costs procedure for low-value road traffic accident claims and applies where damages do not exceed £10,000 and costs are disputed.
• Rule 36.10 applies only to costs "of the proceedings," and since no substantive proceedings had commenced, it does not apply to pre-issue Part 36 offers.
• Costs-only proceedings under rule 44.12A must be assessed in accordance with Section II of Part 45, which takes precedence over the general rules.
• Parties cannot contract out of the fixed costs regime prescribed by Section II of Part 45 in costs-only proceedings.

Table of Precedents Cited

Court's Reasoning and Analysis

The court began by examining the language and purpose of the relevant CPR provisions. It noted that Part 36 was designed to encourage settlement by providing protection against costs liability and incentives, originally applying only after proceedings commenced. The Rules evolved to allow Part 36 offers before proceedings began, and rule 36.3(2) explicitly permits this.

The court agreed with prior authority that the word "proceedings" in rule 36.10(1) should be given a purposive and broad construction to include pre-issue steps taken in contemplation of proceedings. This interpretation prevents a gap in the Rules concerning costs consequences of accepting pre-issue Part 36 offers.

However, the court recognized a tension between the general costs provisions in Part 36 and the specific fixed costs regime in Section II of Part 45, which applies to low-value road traffic accident claims. The specific provisions in Section II of Part 45 are intended to control costs in these cases and provide certainty by prescribing fixed costs, overriding more general rules.

The court concluded that rule 44.12 cannot operate to deem an order for costs on the standard basis to exist before substantive proceedings have commenced, as an order cannot exist without proceedings. Instead, rule 44.12A provides a simplified procedure for costs assessment in pre-issue settlements but mandates assessment under Section II of Part 45 where applicable.

The court emphasized that allowing standard basis costs in low-value claims simply because a Part 36 offer was accepted pre-issue would undermine the fixed costs regime, disincentivize defendants from making Part 36 offers, and conflict with the overall scheme of the CPR.

Regarding the terms of settlement, the court held that while parties can agree costs terms outside the Rules, such agreements cannot expand or limit the court’s statutory powers. The settlement letters in these cases did not clearly indicate a departure from the fixed costs regime, and thus the fixed costs rules applied.

Holding and Implications

The court dismissed both appeals.

The holding establishes that in low-value road traffic accident claims settled by acceptance of Part 36 offers before proceedings commence, costs must be assessed under the fixed costs regime of Section II of Part 45 when proceedings under rule 44.12A are brought. Rule 36.10(1) does not operate to deem an order for costs on the standard basis prior to the commencement of substantive proceedings.

This decision confirms the primacy of the fixed costs regime in its specific context, preserves the intended cost control in low-value claims, and clarifies the interplay between Part 36 offers and costs-only proceedings under rule 44.12A. No new precedent was established beyond the interpretation of these rules, and the ruling applies directly to the parties in these appeals.