Costs recoverable in claims that should be allocated to SCT
Where a consent order provided for costs to be paid on the standard basis, the Costs Judge could still consider whether it was reasonable for the paying party to pay more than would have been recoverable had the case been allocated to the SCT. (O'Beirne v
O'Beirne v
Background
The Claimant was hit from behind at a roundabout and issued proceedings claiming general damages exceeding £1,000. Prior to the case being allocated to any track, settlement was agreed at £400 general damages and £719.06 hire charges. The Defendant signed a consent order which included the provision:
"The defendants do pay the claimant's reasonable costs and disbursement on the standard basis, to be subject to detailed assessment if not agreed".
The Claimant provided a Bill of Costs and the Defendant served Points of Dispute which made a general point that, if the case had been allocated, it ought to have been allocated to the small claims track (SCT) so the Claimant could recover fixed costs only. At assessment, the District Judge held that the terms of the Order fettered her discretion and precluded the matter being limited solely to the SCT. She assessed the costs at £3,987.29.
The appeal Judge held that the DJ was wrong and that there was nothing in the Order which took away from the Defendant the right to argue that costs should be assessed by reference to the SCT. It was a matter that remained within the discretion of the Court on assessment. The Claimant appealed.
Court of Appeal decision
The Court held that, to the extent that the appeal Judge could be understood to be saying that the Court would be entitled simply to assess costs by reference to the SCT regime, he was wrong. But a Costs Judge is entitled to take account of all circumstances (CPR 44.5(1)), including the fact that the case would almost certainly have been allocated to the SCT and what could or could not be recovered if the case had been so allocated. At that stage the Costs Judge must question whether, if it could have been fought in the SCT, it is reasonable that the paying party should pay the costs of a lawyer. The Costs Judge would not be bound only to allow the costs as per a case on the SCT but it would be a "highly material circumstance" in considering what by way of assessment should be payable.
Simon Cradick's comment:
The Court of Appeal said that the test was whether it is reasonable for the paying party to pay more than would have been recoverable in a case that should have been allocated to the SCT. Where a claim should have been allocated to the SCT but settles beforehand, a Costs Judge should consider whether it had been necessary to have had lawyers and, if so, if it is reasonable for the paying party to have to pay for lawyers.
This is an important decision for insurers and Defendants. It is often possible to settle a claim below £1,000 general damages but Claimants will insist on having costs paid as part of the agreement. An offer of, say, £500 plus fixed costs is unlikely to be accepted and the Defendant must then decide whether to press on and seek allocation to the SCT, which is often difficult because DJ’s are reluctant to assume on the papers alone that a claim could not exceed £1,000. Acceptance of an offer of £500 when liability is not in issue is good evidence of the claim’s value. Defendants can now offer to pay standard costs knowing that they can ask the Court to assess costs by reference to the question whether it is reasonable to pay more than would have been recoverable in a case that should have been allocated to the SCT. Whilst it is perhaps unlikely that Courts will routinely allow fixed costs only, the test is a powerful negotiating tool and should enable substantial savings in recoverable costs in low value claims.
Arguably, the same test could extend to the situation where a claim is allocated to the fast track but, in retrospect, should have been allocated to the SCT.
Simon Cradick, Partner
T: 029 2038 5464
E: simon.cradick@morgan-cole.com
