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Soloman v Cromwell Group PLC; Oliver v Doughty, Court of Appeal, 19 December 2011

27 January 2012
The issues

Costs – fixed costs – how costs in a fixed costs case are to be assessed following a Part 36 offer

The facts

The rules had to be read in accordance with the established principle that where an instrument contained both general and specific provisions some of which were in conflict the general were intended to give way to the specific

Both cases were road traffic claims and in each case the parties reached agreements as a result of the defendants making Part 36 offers in sums less than £10,000. In each case the dfendants agreed to pay the claimants costs but the parties were unable to agree the amount of the costs. Costs only proceedings were therefore commenced in each case. The case involved a tension between Part 36 and Part 45. Part 36 provided that where a Part 36 offer was accepted the claimant would be entitled to the costs of proceedings up to the date on which notice of acceptance was served with such costs to be assessed on the standard basis. S.2 of Part 45 provided for fixed costs. In Soloman v Cromwell the District Judge came to the view that on the acceptance of the defendants Part 36 offer Rule 36.10 came into operation, displacing s.2 Part 45 although on detailed assessment the District Judge took the view it would be open to the Costs Judge to have regard to the costs that would have been recoverable under that section. On appeal the judge reversed that decision. In Oliver v Doughty, the District Judge took the view that s.2 of Part 45 was not displaced by Part 36. In each case the claimant appealed.

The decision

In Soloman the judge had taken the view that Rule 36.10 applied only to costs of the proceedings and since no proceedings had been started in relation to the substantive claim in court have no application. The Court of Appeal took the view that this was the wrong approach. It was true that the word proceedings normally referred to proceedings already pending and Part 36 as a whole was primarily directed to that situation. The terms of Part 36 as a whole made it quite clear however, that steps taken in contemplation of proceedings were to be regarded as proceedings for purposes of Rule 36.10. That was the natural meaning of the language used. The effect of accepting a Part 36 offer made before a claim had been issued therefore, was that the claimant was entitled to recover costs he had incurred in contemplation of the proceedings up to the date of acceptance in so far as they would have formed part of his recoverable costs if proceedings had already been issued.

It was difficult to believe that the Rule Committee could have intended that the claimant in a low value road traffic accident claim who accepted a Part 36 offer before proceedings had been commenced should be entitled to recover costs on the standard basis, whereas a claimant who had accepted an offer to settle in some other way should be limited to the costs prescribed by s.2 of Part 45. The whole purpose of introducing the fixed costs regime was to impose a rough and ready system in a limited class of cases (before) the commercial interest behind the parties who bore the burden of large numbers of such cases considered that taken overall it was fair and saved both time and money. If the claimants argument was correct the acceptance of a Part 36 offer would always result in an order for costs on the standard basis and would therefore undermine the fixed costs regime and provide a powerful incentive for defendants not to make Part 36 offers. None of these consequences fitted well with the broader scheme of the rule which sought to encourage settlement by the use of Part 36. The rules had to be read in accordance with the established principle that where an instrument contained both general and specific provisions some of which were in conflict the general were intended to give way to the specific. Rule 36.10 contained rules of general application where as s.2 of Part 45 contained rule specifically directed to a narrow class of cases. Reading the rules as a whole the court had no doubt that the intention was that s.2 of Part 45 should govern the cases to which it applied to the exclusion of others rules that made different provisions for the general run of cases.

Had the parties departed from this position because of the way in which they had settled? In Soloman the defendant agreed to pay the claimant “reasonable costs”. There was nothing to suggest that the defendant was willing to incur a liability in costs beyond that for which the rules provided. In Oliver the defendant agreed to be liable “for your client’s reasonable costs in accordance with CPR 36.10″. The court did not think that the reference to the Rule 36.10 could properly be read as anything more than an offer to pay costs on the usual basis and certainly not as an offer on a basis more or less generous than that set out in the rules. The parties had not agreed to depart from the consequences for which the rules provided, However, parties ought to do their best to avoid ambiguity about costs when making offers to settle.

Both appeals dismissed.

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