Factual and Procedural Background
The appeal concerns the appropriate approach to costs when a claimant unreasonably fails to follow a Pre-Action Protocol which allows for recovery of fixed costs and disbursements only, where the claim is settled before proceedings commence. The claimant brought a noise-induced hearing loss ("NIHL") claim which should have been pursued under the Pre-Action Protocol for Low Value Personal Injury (Employer's Liability and Public Liability) Claims ("the EL/PL Protocol") and its Claims Portal. The claim was not pursued under this Protocol, and was settled before proceedings were issued.
The claimant was employed by the defendant and another company during the relevant periods. The claimant’s solicitors sent letters of claim to both employers but did not use the EL/PL Protocol or Claims Portal. The defendant warned that if the claim was not submitted through the Claims Portal and was settled, they would seek an order for fixed costs under CPR Part 45.24. The claimant’s solicitors continued to pursue the claim against the other employer initially, but later withdrew that claim and pursued the defendant alone.
The claim was settled by acceptance of a Part 36 offer. Subsequently, the defendant argued that the claimant should be limited to fixed costs under the EL/PL Protocol because the claim should have been brought under it. The dispute was heard by Deputy District Judge ("DDJ") Morris, who held the claim should have been brought under the EL/PL Protocol and limited costs accordingly. Judge Godsmark QC disagreed on the application of CPR 45.24, ordering a provisional assessment of costs but indicating fixed costs might still be appropriate.
Legal Issues Presented
- Whether, on proper interpretation of the EL/PL Protocol and/or CPR Parts 36 and 45, fixed costs under the EL/PL Protocol apply where a claim is settled before proceedings are started and the Protocol was not followed.
- Whether CPR Part 44 rules on costs assessment and conduct apply in such circumstances and, if so, whether they lead to limiting the claimant to fixed costs and disbursements under the EL/PL Protocol.
- Whether CPR 45.24 can be interpreted or rewritten to apply to settlements before proceedings are issued, despite its express terms requiring Part 7 proceedings and judgment.
Arguments of the Parties
Defendant's Arguments
- The claim should have been brought under the EL/PL Protocol and Claims Portal, limiting recoverable costs to fixed costs and disbursements.
- CPR 45.24 applies to cases where the Protocol was not followed, entitling the defendant to fixed costs even if the claim was settled before proceedings.
- The rule should be purposively interpreted or rewritten to cover settlements before proceedings, consistent with Ministry of Justice policy to prevent avoidance of fixed costs.
- If the Part 36 offer had been limited to fixed costs, the claimant’s recovery would have been restricted accordingly.
- Part 44 conduct provisions provide a mechanism to limit costs where a claimant unreasonably fails to follow the Protocol.
Claimant's Arguments
- CPR 45.24 does not apply because there were no Part 7 proceedings or judgment; the fixed costs regime under the Protocol only applies when proceedings have been issued and judgment given.
- The settlement was made under Part 36, which provides for costs on the standard basis unless fixed costs are specified.
- The defendant did not expressly limit their Part 36 offer to fixed costs, so the claimant is entitled to costs assessed on the standard basis.
- Part 44 conduct provisions do not exclude the claimant’s entitlement to costs on the standard basis and cannot be used to limit costs to the fixed costs regime.
Table of Precedents Cited
| Precedent |
Rule or Principle Cited For |
Application by the Court |
| Dalton v BT PLC [2015] EWHC 616 (QB) |
NIHL is a disease claim for the purposes of the EL/PL Protocol |
Confirmed that NIHL claims fall within the EL/PL Protocol’s scope |
| Solomon v Cromwell Group PLC [2011] EWCA Civ 1584; [2012] 1 WLR 1048 |
General and specific CPR provisions conflict; specific rules prevail |
Distinguished from the present case as no rules cover settlement before Part 7 proceedings under the EL/PL Protocol |
| Qader & Ors v Esure Services Ltd & Ors [2016] EWCA Civ 1109; [2017] 1 WLR 1924 |
Obvious drafting errors in CPR rules and their correction |
Held that CPR rules should not be rewritten without clear legislative intent; no such error found here |
| Inco Europe Ltd & Ors v First Choice Distribution & Ors [2000] 1 WLR 586 |
Three-stage test for identifying legislative drafting errors |
Applied to reject rewriting of CPR 45.24 in this case |
| O'Beirne v Hudson [2010] EWCA Civ 52; [2010] 1 WLR 1717 |
Costs assessment may be conducted by reference to the track appropriate to value and conduct |
Supported the application of Part 44 conduct provisions to limit costs when Protocol was unreasonably avoided |
| Javed v British Telecommunications PLC [2015] EWHC 90212 (Costs) |
Part 44 conduct provisions applied to costs assessment where Protocol was not followed |
Confirmed that unreasonable conduct can limit recoverable costs to fixed costs |
Court's Reasoning and Analysis
The court began by confirming that the claim should have been brought under the EL/PL Protocol but was not, due to an unreasonable failure by the claimant to follow the Protocol. The DDJ found that the claimant’s solicitors should have realised the claim against the second employer was weak and pursued the claim solely against the defendant under the Protocol.
CPR 45.24, which limits recoverable costs to fixed costs where the Protocol is not followed, expressly applies only where Part 7 proceedings have been issued and a judgment given. Since no proceedings were issued and the claim was settled by Part 36 offer, the court held that 45.24 does not apply to this case. The DDJ’s broader interpretation was rejected as inconsistent with the clear wording of the rule and the CPR’s overall scheme.
The court declined to rewrite CPR 45.24 to cover pre-proceedings settlements despite Ministry of Justice policy papers advocating such a regime, noting that the Civil Procedure Rules Committee (CPRC) is not bound to implement all policy proposals and that no obvious drafting error existed.
The court then turned to CPR Part 44, which governs costs generally and includes provisions to reduce or disallow costs unreasonably incurred. The Part 44 conduct provisions provide a comprehensive mechanism by which a court may limit recoverable costs where a claimant has unreasonably failed to follow a Protocol.
Applying Part 44, the court concluded that a claimant who unreasonably fails to use the EL/PL Protocol should generally be limited to recovering the fixed costs and disbursements that would have been recoverable under that Protocol. This approach aligns with the aims and warnings contained in the Protocol itself and avoids the need for rewriting CPR 45.24.
The court also considered the procedural aspects of raising such a costs limitation, noting that a defendant should raise arguments about restricting costs to fixed costs as early as possible in Part 8 costs-only proceedings, typically when filing an acknowledgment of service.
Holding and Implications
The court DISMISSED the appeal on the first ground, holding that neither the EL/PL Protocol nor CPR 45.24 applies automatically to claims settled before proceedings are issued, and that there is no drafting error in the CPR requiring reinterpretation or rewriting of CPR 45.24.
The court ALLOWED the appeal on the second ground, holding that the Part 44 conduct provisions provide the appropriate mechanism to limit costs where a claimant unreasonably fails to follow the EL/PL Protocol. In such cases, the claimant will generally be limited to recovering the fixed costs and disbursements permitted by the Protocol.
The direct effect is that the claimant’s costs are to be assessed under Part 44 with regard to conduct, typically restricting recovery to the fixed costs under the EL/PL Protocol. No new precedent was created altering the scope of CPR 45.24, and the decision clarifies the interaction between the Protocol, CPR Parts 36, 44, and 45 in the context of pre-proceedings settlements.