W Portsmouth and Company Ltd v Lowin

The issue raised by this appeal is the relationship between CPR rule 47.15(5) and CPR rule 36.17(4). The question is whether a cap on the amount of costs which can be allowed in respect of the costs of a provisional assessment of costs under CPR rule 47.15(5) applies where the receiving party is awarded costs on the indemnity basis because she has beaten her own Part 36 offer or whether CPR Part 36 entitles the successful receiving party to costs assessed on the indemnity basis without being subject to the cap.

Provisional assessment is a paper based form of detailed assessment which has been compulsory since 1 April 2013 in relation to bills up to £75,000, unless the Costs Judge considers otherwise. It was introduced as part of the reforms to the costs regime brought about following the review conducted by Jackson LJ. As well as assessing the bill of costs, the Costs Judge determines who should pay for the provisional assessment itself and assesses those costs.

In this case, the claim was for damages arising out of the death of the Respondent’s mother who died from malignant mesothelioma. The Appellant, W Portsmouth & Company Limited (the “Company”), was held liable. The claim was settled on 20 October 2014 by the acceptance of the Company’s Part 36 offer of £70,200. On 3 March 2015, the Respondent, Ms Lowin, made a Part 36 offer of £32,000 in respect of the costs of the claim. On 16 March 2015, District Judge Cohen ordered the Company to pay Ms Lowin’s costs to be decided at a provisional assessment if not agreed.

On 1 April 2015, the detailed assessment process began when a notice of commencement of assessment of a bill of costs was filed in which Ms Lowin claimed £55,086.52. On 8 December 2015, Master Whalan provisionally assessed the costs payable by the Company to Ms Lowin at £32,255.35 and Ms Lowin’s costs of the assessment itself (subject to offers) at £2,805 as a result of the cap in CPR rule 47.15(5). On 8 February 2016, having been informed of the Part 36 offer, 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.

The assessment gave Ms Lowin a better result than the terms of her Part 36 Offer in relation to costs. Her statement of costs dated 6 August 2015 in respect of the detailed assessment proceedings themselves was in the sum of £6,091.20. On 17 February 2016, Master Whalan made a final costs order in relation to the costs of the provisional assessment. He decided that Ms Lowin’s costs should be capped pursuant to CPR rule 47.15(5) and ordered that the Company pay her costs of the assessment on the indemnity basis in the sum of £2,805. The Master’s reasons for his decision were:

Ms Lowin sought permission to appeal the decision to cap her costs pursuant to CPR rule 47.15(5) on the basis of the decision in Broadhurst v Tan[2016] 1 WLR 1928 which was handed down on 23 February 2016. Permission was refused by the Master. His reasons were:

The appeal was heard by Elisabeth Laing J sitting with Master Leonard as a costs assessor. By an order of 20 June 2016, sealed on 24 June 2016, the Judge allowed the appeal, set aside the order of 17 February 2016, remitted the matter to Master Whalan for summary assessment of the costs of the detailed assessment on the basis that the cap did not apply and ordered the Company to pay Ms Lowin’s costs of the appeal, summarily assessed in the sum of £12,002.

Elisabeth Laing J’s reasoning when allowing the appeal is set out at [25] – [33] of the judgment. She dealt first with the submission that there was no conceptual difference between fixed costs and assessed costs subject to the cap, which she rejected, and then went on to consider the Broadhurst decision and construe the relevant Rules as follows:

The Company appeals to this court on six grounds which are that: the Judge was wrong to hold that there was a tension between an award of costs on the indemnity basis under CPR rule 36.17(4)(b) and the cap on costs of a provisional assessment under CPR rule 47.15(5) and therefore, was wrong to consider that the Broadhurst case had any application; if there was a tension, the Judge was wrong not to resolve it in favour of CPR rule 47.15(5) in accordance with the principle that general provisions should give way to specific ones; the Judge failed to take account of the fact that her construction would lead to the disapplication of the cap in other situations arising on provisional assessment where it was intended to apply; the Judge failed to consider that her construction would result in caps on recoverable costs imposed by other parts of the CPR being disapplied in similar circumstances including, for example, scale costs for claims in the Intellectual Property Enterprise Court (Section IV of CPR Part 45), costs limits in Aarhus Convention claims (Section VII of CPR Part 45) and cost caps ordered under Section III of CPR Part 3; the Judge gave insufficient weight to the fact that her construction would undermine the intention that the provisional assessment regime was intended to be low cost; and she failed to consider the practical difficulties which would arise from her construction where some of a party’s costs were subject to the cap and some were not.

It is well known that CPR Part 36 is concerned with the effects of offers to settle and is a self-contained code. In its present form, CPR rule 36.17 which is headed “costs consequences following judgment” is, so far as material, as follows:

Subject to rule 36.21 this rule applies where upon judgment being entered . . .

CPR rule 36.14A (which is now re-enacted as rule 36.21(1)), in so far as it is relevant provides:

CPR Part 44 is entitled “General Rules about Costs” and CPR rule 44.3(1) provides that where the court is to assess costs it will do so either on the standard or the indemnity basis “but. . .will not in either case allow costs which have been unreasonably incurred or are unreasonable in amount.”

CPR Part 47 is concerned with the procedure for the detailed assessment of costs. CPR rule 47.20 deals with the liability for the costs of the detailed assessment proceedings themselves. CPR rule 47.20(1) provides that the receiving party is entitled to the costs of the detailed assessment proceedings except where any Act, the Rules or a Practice Direction provide otherwise or the court makes some other order in relation to all or part of the costs of the detailed assessment. CPR rule 47.20(3) provides that the court must have regard to all of the circumstances when determining whether or not to make some other order, including: (a) the conduct of the parties; (b) the amount, if any, by which the bill of costs has been reduced; and (c) whether it was reasonable for a party to claim the costs of a particular item or to dispute that item. CPR rule 47.20(4) provides that:

CPR rule 47.15, which is headed “Provisional assessment”, is concerned with any detailed assessment proceedings commenced on or after 1 April 2013 in which the costs claimed are £75,000 or less. It applied, therefore, in this case. CPR rule 47.15(5) provides as follows:

The decision of the Court of Appeal in Broadhurst v Tan is central to the grounds of appeal and therefore, I will deal with it in some detail. It was concerned with an apparent conflict between the fixed costs regime for low value personal injury cases including claims started under the Pre-Action Protocol for Low Value Personal Injury Claims in Road Traffic Accidents or which are employer’s or public liability claims under Section IIIA of CPR Part 45 and the CPR Part 36 regime.

The specific tension under consideration was between CPR rules 36.14A and 45.29B. As I have already mentioned, the provisions contained in CPR rule 36.14A are now to be found in CPR rule 36.21. In its present form, CPR rule 36.21 is headed “Costs consequences following judgment where Section IIIA of Part 45 applies”. CPR 36.21(1) provides that where a claim no longer continues under the RTA or EL/PL Protocol pursuant to rule 45.29A(1), rule 36.17 applies with the modifications which are set out in the subsequent sub-rules. CPR rule 36.17 is concerned with assessed costs. However, CPR rule 45.29B (which is subject to rule 45.29F amongst others (which is concerned with the defendant’s costs)) imposes a fixed costs regime.

Lord Dyson MR with whom McCombe and David Richards LJJ agreed construed the Rules to mean that a claimant who obtained a judgment in his favour which exceeded his Part 36 offer should be entitled to costs to be assessed on the indemnity basis despite the fixed costs regime in Rule 45. He came to this conclusion as a result of a straightforward interpretation of the Rules. His precise reasoning was as follows:

The Master of the Rolls went on at [30] to distinguish between “fixed costs” and “assessed costs”, the former being awarded whether or not they are incurred and the latter reflecting the work actually done. At [31] he dealt with what had been considered to be the practical difficulties of his interpretation. He accepted that there would be bound to be “some difficulties of assessment where the costs are partly fixed and partly assessed” but considered them to be overstated. He concluded:

Mr Carpenter on behalf of the Company submits that there is no tension here between fixed and assessed costs and therefore, there is no analogy to be drawn with the Broadhurst decision. There is no appeal against the decision that capped costs are different from fixed costs. Mr Carpenter says that CPR rule 36.17 is merely concerned with the basis of assessment and not the quantification of costs and accordingly, there is no conflict or tension between CPR rule 36.17 and the cap on costs contained in CPR rule 47.15(5). He points to CPR rule 44.3(1) which provides that costs will be assessed either on the standard or the indemnity basis but that in either case the court will not allow costs which have been unreasonably incurred or are unreasonable in amount and to CPR rule 44.3(3) which provides that where costs are to be assessed on the indemnity basis any doubt as to whether costs were reasonably incurred or were reasonable in amount will be resolved in favour of the receiving party. He says, therefore, that there is no room for an interpretation of costs assessed on the indemnity basis as if it meant an “indemnity for all one’s costs.” He submits that this is where the Judge went wrong, because at [28] of the judgment, she assumes that the receiving party was entitled to all its costs on the indemnity basis to start with and that therefore, a cap on those costs amounts to a derogation of that entitlement. He says that she then resolves a tension which she herself has created. Mr Carpenter submits that CPR rule 47.15(5) merely limits the result of the assessment which takes place on the indemnity basis and there is no tension between the Rules which must be resolved.

Had it been intended to disapply or restrict the effect of CPR rule 47.15(5), Mr Carpenter says that there would be an express provision to that effect. He also adds that to do otherwise is to make an unjustified distinction between costs assessed on the indemnity basis under CPR rule 36.17 and those assessed on that basis in the normal way under CPR rule 44.3(1).

In addition, Mr Carpenter says that the Judge was wrong to apply the scheme or reasoning in the Broadhurst case because it was wrong to equate CPR rule 47.20(4) with CPR rule 36.14A. The latter made specific provision for the very circumstances in question and applied without incorporating itself into the fixed costs regime. This is to be contrasted with CPR rule 47.20 which merely incorporates Part 36 and provides that it applies to the costs of detailed assessment proceedings with certain modifications. There is nothing to suggest that the draftsman had the issue of the relationship between CPR rules 47.15(5) and 36.17(4) in mind.

Secondly, and in the alternative, Mr Carpenter says that if there is a tension it should be resolved in favour of CPR rule 47.15(5) which he says is the specific provision concerned solely with provisional assessments which should have precedence over Part 36 which is of general application. In this regard, he referred to Solomon vCromwell Group plc[2012] 1 WLR 1048 which was concerned with whether the fixed costs regime applicable to certain road traffic accidents under CPR Part 45 Section II applied when the claim was concluded by the claimant’s acceptance of a defendant’s pre-action Part 36 offer which gave rise to a right to have costs assessed on the standard basis under what was then CPR rules 36.10(1) and (3). At [19] Moore-Bick LJ, with whom agreed Aikens and Pill LJJ agreed, concluded that it was inescapable that there was a degree of conflict between the two. At [21] he held that: where there is a conflict, the general provision is intended to give way to the specific; and that rule 36.10 contains rules of general application whereas Section II of Part 45 contains rules directed to a narrow class of cases. He stated that he had no doubt that Section II of Part 45 should govern the cases to which it applies to the exclusion of other rules that make different provision for the general run of cases.

Mr Carpenter says that in the same way, CPR rule 47.15(5) is the specific provision intended to apply to the narrow class of cases in which there is a provisional assessment. He also submits that the ground upon which the Judge stated that she and Master Leonard were not assisted by the Solomon decision, at [29] of the judgment is incorrect, something which Mr Taussig on behalf of Ms Lowin did not dispute. The Judge stated that it applied a version of the Rules which has since been amended materially.

Mr Carpenter also submits that the Judge’s construction would also affect a paying party’s costs under CPR rule 36.17(3). In circumstances where the receiving party failed to beat a paying party’s Part 36 offer, the paying party’s costs to be assessed on the standard basis would also be free of the cap. He also says that if the Judge’s interpretation is right, in reality, the cap would not apply where a Part 36 offer is accepted.

Mr Carpenter also submits that the construction would undermine scale costs in the Intellectual Property Enterprise Court, Aarhus Convention claims under Section VII of Part 45 and the costs capping regime in Section III of Part 3. In relation to the IPEC regime, Mr Carpenter referred to the recent decision in Phonographic Performance Ltd v Hagan[2016] EWHC 3076 (IPEC) in which HHJ Hacon overruled himself in OOO Abbott v Design & Play Ltd[2014] EWHC 3234 (IPEC). He applied the principles in the Broadhurst case and decided that the scale costs cap was disapplied on an award of indemnity costs under the old CPR rule 36.14. Mr Carpenter says that he fell into error in so doing.

Lastly, in this regard, Mr Carpenter referred to the costs cap in CPR 3.19(1) and (7) and submits that if the Judge’s construction is right such a cap would not apply where a right to costs was derived from CPR Part 36. He also submits that the construction would undermine the intention that the provisional assessment should be low cost and that hearings should be avoided. He says that it would also create practical difficulties.

Mr Taussig on behalf of Ms Lowin says that the costs with which CPR rule 36.17(4)(b) are concerned is “all” the party’s costs incurred from the date on which the relevant period expires and not just the basis of the assessment. He submits therefore, that there is a tension between CPR rules 36.17(4)(b) 47.15(5) which must be resolved by analogy with the reasoning in the Broadhurst case. He relies upon Courtney Webb (by her litigation friend Miss Stacey Keira Perkins) v Liverpool Women’s NHS Foundation Trust[2016] EWCA Civ 365. That was a case in which the claimant brought a claim in medical negligence on two grounds. She succeeded on the first but not the second. Since she was entitled to full recovery of the damages she had claimed, the judgment was more advantageous to her than her Part 36 offer to the defendant which had been rejected. The judge awarded her costs arising out of the first allegation with all the consequences of CPR rule 36.14(3) (now rule 36.17(4)) but did not award her any of her costs arising out of the second allegation. The claimant appealed on the basis that where rule 36.14(3) (rule 36.17(4)) applied the court’s discretion was restricted to determining the extent to which the enhancements set out in (a) to (d) of that rule would be applied and did not extend to depriving a claimant of part of her costs.

Sir Stanley Burnton, with whom Simon and Gloster LJJ agreed, held at [30] that the word “costs” in CPR 36.14(3)(b) (now 36.17(4)) refers to all of the successful claimant’s costs unless it would be unjust for her to be awarded them: At [38] he stated as follows:

Mr Taussig submits therefore, that CPR rule 36.17(4)(b) is concerned not only with the basis of assessment but also with an entitlement to “costs” in the sense of all the party’s costs assessed on the relevant basis. He submits that the tension which arises between CPR rule 36.17(4)(b) and the limitation or cap contained in CPR rule 47.15(5), which would deprive the party of “all” their costs, should be resolved in favour of CPR 36.17(4)(b) and there is no need to turn to the principle of general and specific provisions in order to do so. Following the reasoning in the Broadhurst decision he says that: Rule 36.17(4)(b) is expressly incorporated into Part 47 by Rule 47.20(4); the only modifications to Part 36 are set out at Rule 47.20(4)(a) to (e) which are irrelevant for these purposes; if costs under CPR rule 36.17(4)(b) were limited by the cap in rule 47.15(5), it would say so expressly; and following the logic in Broadhurst, the fact that rule 36.17(4) is incorporated without modification means that it applies to Part 47 with full force and effect. Accordingly, the Judge was right to find that the costs of the provisional assessment should have been assessed on the indemnity basis and the cap should not have been applied.

In the alternative, he says that, if it is necessary to consider the general and specific, rule 47.15 is the general provision and rule 36.17(4)(b) the specific because rule 47.15(5) applies to all detailed assessment proceedings up to £75,000 and rule 36.17(4)(b) is specific to the situation in which the party has achieved a result at least as advantageous as his Part 36 offer. Lastly, in this regard, he submits that, as the Judge found, Solomon v Cromwell GroupPlc[2011] EWCA Civ 1584 is of no assistance in this matter.

Mr Taussig also submits that Mr Carpenter’s perceived difficulties with other areas of the CPR either do not arise, are not relevant here. For example, in relation to the IPEC regime, Mr Taussig says that Part 36 is not expressly incorporated into Section IV of Part 45 and therefore, that regime would not be affected by the principles in this case. In addition, he says that there is nothing extraordinary about the fact that in certain circumstances, the paying party might also benefit from the lack of a cap under rule 36.17.

Lastly, Mr Taussig says that there is no tension in terms of policy objectives if the Judge is right about the interpretation of the Rules. He says that a rule which caps the costs to which a party is entitled as a result of a Part 36 offer, diminishes the effectiveness of that regime.

First, I agree with the Judge that the Broadhurst decision is not directly applicable in this case. As she pointed out, different provisions of the CPR were under consideration and that case was concerned with a conflict between fixed costs and assessed costs provisions in the CPR. CPR rule 47.15(5) is not a fixed costs provision like those under consideration in the Broadhurst case. As Lord Dyson MR pointed out at [30] of his judgment, fixed costs and assessed costs are conceptually different. Fixed costs are awarded whether or not they are incurred. As the Judge pointed out, CPR rule 47.15(5) is different. Rather than provide for fixed costs of £1,500 plus VAT whether costs are incurred or not, it inhibits or caps the amount of costs which can be awarded as the cost of the assessment where the proceedings do not go beyond the provisional assessment stage. Unlike fixed costs, the specified sum would not be awarded if no costs or a lesser sum had actually been incurred and assessed on the indemnity basis. As Mr Carpenter pointed out, there is no appeal against the Judge’s decision that capped costs are different from fixed costs.

Is there, nevertheless, a tension or conflict between the provisions of the CPR which must be resolved? The Judge found at [31] that there is such a conflict between the Rules because the cap potentially derogates from a right to have costs assessed on an indemnity basis. I disagree. There would be a conflict or tension like the one in Broadhurst v Tan if CPR rule 47.15(5) provided for a fixed costs regime but it does not do so. The cap or limitation on the costs which can be recovered does 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.

As Mr Carpenter points out, there is no absolute entitlement to “all” of one’s costs whether under CPR rule 36.17 or at all. CPR rule 44.3(1) makes clear what is well known. The court will not allow costs which have been unreasonably incurred or are unreasonable in amount, whether they are assessed on the standard or the indemnity basis. Therefore, the reference to an entitlement to “costs” in CPR rule 36.17(4)(b), should not be construed as a reference to indemnification in relation to all one’s costs. As Mr Carpenter submits, if it were construed in that way, there would be an unjustified distinction between costs assessed on the indemnity basis under rule 36.17(4)(b) and those assessed on the same basis under rule 44.3(1).

In my judgment, such a conclusion is not contrary to the decision in the Courtney Webb case. In that case, the Court of Appeal was concerned with whether it was possible to make a proportionate or issue based costs order under CPR rule 36.14(3)(b) (now rule 36.17(4)) or whether under that rule, the court’s discretion was restricted to determining the extent to which the enhancements set out in rule 36.14(a)-(d) would be applied. It decided that the court’s discretion under CPR rule 36.14(3) related both to the basis of assessment and the determination of what costs were to be assessed. Therefore, a proportionate order could be made if in the exercise of its discretion the court found that it would be unjust to order that the party was entitled to all its costs on the indemnity basis. Sir Stanley Burnton’s interpretation of “his costs” in CPR 36.14(3)(b) as “all his costs” should be read in that context. The court was not concerned with whether an assessment on a particular basis amounted to an indemnity for “all” costs which could not be subject to any limitation.

It follows that, with great respect, I do not consider that the Judge was right to conclude as she effectively did at [28] and [31] of the judgment that there is a material conflict between costs assessed on the indemnity basis and costs assessed on that basis subject to a cap.

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.

In my judgment, therefore, no tension or conflict arises in this case. I also agree with Mr Carpenter that the decision in Broadhurst is not relevant here. As the Judge pointed out, it was concerned with a direct conflict between provisions as to fixed and assessed costs and with completely different CPR provisions. Furthermore, CPR rule 36.14A (now 36.21) made and makes express reference to the precise circumstances where a claim no longer proceeds under the RTA or EL/PL protocol which is subject to the fixed costs regime. By contrast, CPR rule 47.20 merely applies Part 36 to the costs of detailed assessment proceedings with certain modifications and no express reference is made to the relationship between rules 47.15(5) and 36.17(4) and there is nothing else to suggest that the draftsman had the issue of the relationship between those rules in mind. It seems to me that Master Whalan’s approach to the matter was entirely correct.

Such a construction is also consistent with the policy behind both CPR rule 47.15 and Part 36. It does not undermine the intention to encourage the quick and cheap resolution of the assessment of costs in cases in which the costs claimed are £75,000 or below. Nor does it deprive the successful party of the not inconsiderable benefits in CPR rule 36.17(4)(a) - (d) albeit that the costs under (b) are subject to the cap.

It is not necessary, therefore, to consider the principle applied in the Solomon decision. It was concerned with Rule 36.10 (now rule 36.13) and Section II of Part 45. Moore-Bick LJ held at [21] that Rule 36.10 contained rules of general application whereas Section II of Part 45 was specifically directed to a narrow class of cases, being low value road traffic cases. Had it been necessary, I would have concluded that CPR Part 36 contains general provisions which apply, for the most part, across the spectrum of civil litigation whereas rule 47.15 applies to a discrete class of cases to which the provisional assessment provisions apply. Accordingly, rule 47.15 would have taken precedence.

It also follows that the question of whether the Judge took proper account of the disapplication of the cap in CPR rule 47.15(5) in other situations arising on provisional assessment, does not arise. I should add, however, that were it a correct interpretation of the Rules that the cap was disapplied under CPR rule 36.17(4)(b) I do not consider that it would be a surprising or extraordinary proposition that the position would be the same in relation to the paying party’s costs under CPR rule 36.17(3).

It is also unnecessary to consider the alleged effect in relation to claims in the Intellectual Property Enterprise Court under Section IV Part 45, Aarhus Convention claims or to comment upon HHJ Hacon’s decision in the Phonographic case and whether the Judge gave proper consideration to the effect of her construction upon the provisional assessment regime which was intended to be low cost and to the alleged practical difficulties which would arise from her construction. It is equally unnecessary to consider whether the Judge gave proper weight to the alleged practical difficulties arising from her conclusions.

For all the reasons set out above, I would allow the appeal.

I agree.

I also agree.