Hislop v Perde: a shift in the claimant/defendant balance for Part 36 offers?

On 23 July 2018 the Court of Appeal handed down its decision on the appeal of Hislop v Perde [2018] EWCA Civ 1726. It held that in cases where a Claimant’s part 36 offer is accepted out of time and where the claim is subject to the fixed costs regime of CPR 45, the fixed costs regime continued to apply until the eventual date of acceptance. In this case the claimant was not entitled to standard or indemnity costs for the period between the expiry date and the late acceptance date of the Part 36 offer.

Background

The claim arose from a road traffic accident on 17 December 2013. The claimant brought a claim for damages for personal injury on 7 April 2014, commenced under the Pre-Action Protocol for Low Value Personal Injury Claims in Road Traffic Accidents.

On 11 November 2014 the claimant, Ms Hislop, offered to accept £1,500. The expiry period was 21 days as is standard for Part 36 offers. The defendant subsequently made an offer of £1,000 inclusive of interest, though this was rejected by the claimant. In June 2016, a week before trial was due to commence, the defendant finally accepted the claimant’s £1,500 offer settle.

The claimant’s response was that "the offer is accepted on the condition that you accept responsibility for our costs and disbursements to be calculated on the fixed recoverable costs and indemnity costs basis". The fixed recoverable costs up to the date of the expiry of the Part 36 offer were £2,372, whilst the costs for the remaining period up to the defendant’s acceptance of the offer sought were £5,534 on an indemnity basis.

On 3 October 2016 the first instance judge, DDJ Lenon QC at the County Court at Willesden, rejected the claim for indemnity costs. This was decided on the basis that, to make good an application for indemnity costs, "there has to be a standout point that can be quickly drawn to the court’s attention and which makes it obvious that the case has been conducted abnormally and that, exceptionally, an indemnity costs order is justified" [6]. The decision held that this was no such exceptional case. Therefore, indemnity costs were refused for the remaining period.

Ms Hislop appealed. On 8 August 2017 Judge Walden-Smith overturned the District Judge’s order on the basis that he had erred in determining that the order for costs ought to have been fixed costs throughout. She did not interfere with his decision not to award costs on an indemnity basis, but ruled that the costs after 2 December 2014 should be assessed on the standard basis.

Appeal

Ms Perde then sought to appeal the decision. The question for the Court of Appeal was, when a defendant accepts the claimant's Part 36 offer many months after it was made (and the 21 day period has expired), and the case does not then go on to trial:

"does the case remain within the fixed costs regime, or can the claimant escape its confines and recover standard or even indemnity costs from the date that the offer became effective?’" [2]

The Court of Appeal overturned the previous decision, stating that the fixed costs regime made mandatory by r.45.29B and r.45.29D CPR continued to apply to those cases covered by it unless there was an express exception (Solomon v Cromwell Group Plc [2011] EWCA Civ 1584, [2012] 1 W.L.R. 1048). It was held that despite the delay of 19 months, this did not trigger the exceptional circumstances provision set out in r. 45.29J. The claimant would therefore be limited to fixed costs right up to the point where the offer was accepted.

The correct interpretation of the rules was that, in a fixed costs case, r.36.20 applied where an offer was accepted late and r.36.13 did not apply at all [44-47].

Commentary

It is clear from this judgment that in fixed costs cases, the application of indemnity costs is not subject to judicial discretion. Further, there is a presumption to award fixed fee costs pursuant to a successful Part 36 offer and only in exceptional circumstances will this be departed from. But has this judgment shifted the balance towards favouring claimants or defendants in Part 36 claims?

Matthew Hoe, solicitor-advocate representing the defendant, is reported to have said that the judgment has resolved a difficult point, and stressed that Part 36 was not aimed at awarding costs greater than at fixed levels. He also called the appeal sought by the claimants a ‘policy change’ that would have to be considered by the Ministry of Justice. This would take into account the balance of Part 36 between claimant and defendant.

Meanwhile, Matthew Stockwell, a barrister and former president of the Association of Personal Injury Lawyers, stressed that ‘Currently things are arguably skewed in favour of defendants’, and that the Civil Procedure Rule Committee should consider ‘stronger, but more balanced penalties for late acceptance, whether through costs or interest’. Similarly, John McQuater, APIL secretary and partner at Doncaster firm Atherton Godfrey, agreed that if Hislop is to be applied, the court should at least consider adding interest on to the settlement offer to take account of the delay in it being accepted: ‘The route the [Court of Appeal] has gone down does seem harsh and doesn’t reflect the reality of what is happening.’