W Portsmouth and Company Ltd –v- Lowin [2017] EWCA Civ 2172
There has been an interesting decision to come out of the Court of Appeal recently, where it was held that even when the Receiving Party has beaten their own Part 36 Offer on costs, the cap on the costs of Provisional Assessment still continues to apply. Therefore, an award of indemnity costs after a successful Part 36 Offer in a Provisional Assessment does not remove the £1,500.00 cap.
The Facts
In W Portsmouth and Company Ltd v Lowin [2017] EWCA Civ 2172, the substantive Mesothelioma claim settled for £70,200.00.
On 3rd March 2015, Ms Lowin made a Part 36 Offer of £32,000.00 in respect of her costs. Detailed Assessment Proceedings were subsequently commenced with Ms Lowin claiming £55,086.00 in respect of her costs. On 8th December 2015, Master Whalan provisionally assessed her costs at £32,255.00. Having beaten the Offer, he made an order for costs on the indemnity basis.
Ms Lowin claimed £6,091.00 in respect of the costs of Detailed Assessment. Though it was ordered that W Portsmouth and Company Ltd should pay the costs on the indemnity basis, Master Whalan capped these costs pursuant to CPR 47.15(5), to £2,805.00; £1,500.00 plus VAT in costs and the £1,005.00 court fee in addition.
The Appeal
On appeal, Mrs Justice Laing reversed Master Whalan’s decision following the Court of Appeal’s ruling in Broadhurst v Tan, which decided that a party that beat a Part 36 Offer in a case where fixed costs applied was eligible for indemnity costs.
However, giving the ruling, Lady Justice Asplin commented that Broadhurst was not relevant and that Master Whalan had taken the correct approach; unlike with fixed costs, a cap did not prevent costs being assessed on the indemnity basis, “or affect the quantum of the costs which are being assessed under that rule…It merely inhibits the amount which can be awarded, the assessment of the party’s costs having taken place on the indemnity basis as required by CPR rule 36.17(4)(b). If the party’s costs assessed on the indemnity basis were less than the cap, the full sum would be awarded…”
Lady Justice Asplin concluded that there was nothing in CPR to suggest that the cap should be disapplied; “CPR rule 47.20(4) provides expressly that Part 36 shall apply to the costs of a detailed assessment subject to four express modifications which are irrelevant for these purposes. No mention is made of CPR Part 47.15(5) and it is not modified in any way. It seems to me that if it had been intended that that rule was to be disapplied in the case of an assessment of costs on the indemnity basis under CPR rule 36.17(4)(b) there would have been an express reference to it in either or both of the provisions or in rule 47.20(4). There is nothing in any of those rules to suggest that rule 47.15(5) should be disapplied or modified.”
Conclusions
This is a very harsh decision given that there will be numerous instances where the paying party does not accept a Part 36 Offer and the receiving party therefore spends significantly more in dealing with the cost issues, and the Association of Costs Lawyers has “called on the Civil Procedure Rule Committee to consider the impact and fairness of [the] ruling.”
However, even though the cap still applies, it is always advantageous to make Part 36 Offers during Costs Proceedings as the receiving party will be awarded additional interest and costs, should these be beaten at Assessment:
“Master Whalan made an order confirming the provisional assessment of £32,255.35 and ordered that pursuant to CPR rule 36.17(4) the Company pay: interest on the sum of £32,255.35 at the rate of 10% per annum from 24 March 2015; Ms Lowin’s costs of the Provisional Assessment to be summarily assessed on an indemnity basis if not agreed; and interest on the costs payable to Ms Lowin at the rate of 10%. By consent, the additional amount pursuant to CPR rule 36.17(4)(d) was agreed at £3,225.54.”