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Lahey v Pirelli Tyres Ltd, Court of Appeal, 24 January 2007

20 February 2007
The issues

Costs – whether Costs Judge may in the course of a detailed assessment order a paying party to pay only a proportion of the costs ultimately assessed – Percentage Order – costs – Detailed Assessment – unreasonable conduct.

The facts

The Claimant brought a claim for personal injuries. Before proceedings were started the Defendant offered £5,000.00. The offer was not accepted and proceedings were begun. The claim was quantified at approximately £150,000.00. The Defendant made a Part 36 payment of £2,000.00 which was increased later to £4,000.00. The Claimant accepted that second payment and became thereby entitled to his costs up to the date of serving Notice of Acceptance on a standard basis if not agreed. The Claimant’s solicitors began proceedings for a Detailed Assessment. The Bill drew at £27,029.63 including a 75% success fee. The Defendant served Points of Dispute arguing that the success fee should be reduced to 25% and arguing that the claim had been conducted disproportionately. At the outset of the hearing the Defendant asked the District Judge to order, prior to the Detailed Assessment, that the Claimant be awarded only 25% of assessed costs. The District Judge doubted that he had jurisdiction to make such an order. He found that the Bill, as presented, was disproportionate and reduced it to £15,182.71. The Defendant appealed to the Judge. The Judge concluded that the District Judge had reached the right conclusion, namely that he did not have the necessary jurisdiction when carrying out an assessment consequent upon the automatic order for costs following acceptance of a Part 36 payment. The Court of Appeal gave leave for a second appeal.

The decision

The effect of Rule 36.13(1) and 36.13(4) and 44.12.(1)(b) was that on acceptance of a Part 36 payment the Costs Order was deemed to have been made on the standard basis and the Claimant was therefore entitled to 100% of his assessed costs. The District Judge had no power to vary this Order and decide that the Claimant would be entitled to only 25% of the assessed costs.

The Defendant had argued that it was necessary to give the Costs Judge that jurisdiction because without such a power the Costs Judge could not arrive at a fair result in certain situations. In the view of the Court however it was unnecessary to give such power to the Costs Judge. If a Costs Judge considered that a Claimant had acted unreasonably and refusing an offer to settle made before proceedings were issued, he was entitled to disallow all the costs post-issue on the basis that they were costs “unreasonably incurred”. Similarly, if the Costs Judge decided that a party was unreasonable to raise and pursue an issue, the Costs Judge was entitled to disallow the costs relating to that issue on the grounds that they were unreasonably incurred. In this case it was open to the Defendant to raise during the course of the Detailed Assessment all the points which he relied on in support of the submission that there should be a percentage reduction.

Appeal dismissed.

Rule 36.13(1) provides “where a Part 36 offer is accepted without needing the permission of the Court the Claimant will be entitled to his costs of the proceedings up to the date of serving Notice of Acceptance”. 36.13(4) provides that costs under this Rule will be payable under the standard basis if not agreed. Part 44.12(1)(b) provides that where Rule 36.13(1) applies then a Costs Order will be deemed to have been made on a standard basis.

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