Broadhurst & Anor v Tan & Anor

Where a claimant in the fixed-costs regime for lower-value personal injury claims makes a successful Part 36 offer, the claimant receives fixed costs up to the last applicable staging point and indemnity costs from the expiry of the relevant period. The unmodified indemnity-costs consequence in Part 36 prevails over the general restriction to fixed costs.

Fixed costs and assessed costs are conceptually distinct. Fixed costs do not depend on the work undertaken, whereas assessed costs reflect costs actually and reasonably incurred. They cannot be equated merely because combining them may produce practical difficulties or a generous result.

These conjoined appeals concerned claims for personal injury arising from road traffic accidents which began under the RTA Protocol and later fell within the fixed-costs regime in section IIIA of Part 45 of the Civil Procedure Rules 1998. Each claimant made a Part 36 offer which the defendant rejected and then obtained a more advantageous judgment.

In Ms Broadhurst’s case, HH Judge Robinson held that Rule 36.14(3) applied but equated indemnity costs with the fixed costs in Table 6, subject to the exceptional-circumstances provision. In Ms Smith’s case, HH Judge Freedman held that Rule 36.14(3) applied without equating the two forms of costs.

The central issue was whether a claimant making a successful Part 36 offer could recover indemnity costs in addition to the prescribed fixed costs.

1. The Broadhurst appeal was allowed and the Smith appeal was dismissed. Rule 36.14A provided that Rule 36.14 applied to claims within section IIIA of Part 45 subject only to specified modifications. As Rule 36.14(3) had not been modified, its provision for indemnity costs following a successful claimant’s Part 36 offer retained full force. The apparent tension with Rule 45.29B was therefore resolved in favour of Rule 36.14A.

2. The structure of the rules confirmed that construction. Rule 36.14A(8) expressly preserved disbursements allowed under Rule 45.29I but contained no corresponding provision preserving the limitation to fixed costs under Rules 45.29B(a) and 45.29C. Other Part 36 provisions expressly prescribed fixed costs where that was intended.

3. A successful claimant receives the fixed costs prescribed by Rule 45.29C and Table 6B up to the last applicable staging point. The claimant then receives, in addition, costs assessed on the indemnity basis from the date on which the Part 36 offer became effective. No apportionment is required.

4. Fixed costs and assessed costs are conceptually different. Fixed costs are recoverable irrespective of whether they were incurred or represent reasonable and proportionate compensation for the work undertaken. Assessed costs reflect the work actually done and require consideration of whether the costs were incurred and were reasonable. Practical difficulties could not justify equating the two.

5. The generous result accorded with the policy of Rule 36.14(3): to encourage claimants to make offers and defendants to accept appropriate offers. If the rules had been ambiguous, the Explanatory Memorandum accompanying the amending rules could have been used under the conditions in [1993] AC 593. It clearly confirmed that a successful claimant was not confined to fixed costs.

McCombe and David Richards LJJ agreed with the Master of the Rolls.

• Court of Appeal (Civil Division): In [2016] EWCA Civ 94, allowed Ms Broadhurst’s appeal and dismissed Ms Smith’s appeal.
• Sheffield County Court: HH Judge Robinson held that Rule 36.14(3) applied, but that indemnity profit costs were equivalent to the prescribed fixed costs, subject to Rule 45.29J.
• Newcastle-upon-Tyne County Court: HH Judge Freedman held that Rule 36.14(3) applied and did not equate indemnity costs with fixed costs.