Costs Capping in Part 47 and Part 36 Offers: W Portsmouth And Company Ltd v Lowin [2017] EWCA Civ 2172

The underlying claim in W Portsmouth And Company Ltd v Lowin [2017] EWCA Civ 2172, was a claim for damages arising from the death of the claimant’s mother as the result of mesothelioma, contracted by washing her son’s clothes. Those clothes had been contaminated with asbestos fibres and dust in the course of her son’s employment with the defendant.

On 20 October 2014, the claim was settled for £70,200 when the claimant accepted a pre-issue Part 36 offer. On 3 March 2015, the claimant made a further Part 36 offer for £32,000 in respect of the costs of the claim.

On 16 March 2015, DJ Cohen ordered the defendant to pay the claimant’s costs – to be decided at a provisional assessment if not agreed. On 1 April 2015, the claimant filed a notice of commencement of assessment of a bill of costs, the total amount of which was £55,086.52. On 8 February 2016, the Master provisionally assessed the claimant’s costs and ordered that the defendant pay £32,255.35 and pursuant to CPR r. 36.17(4), the defendant was also ordered to pay the claimant’s interest on that sum at a rate of 10% per annum and the costs of the provisional assessment (on the indemnity basis if not agreed).

This assessment meant that the claimant had achieved a better result than the terms of her Part 36 offer in relation to costs. However, on 17 February 2016, the Master made a costs order in respect of the provisional assessment in which he decided that the claimant’s costs should be capped pursuant to rule 47.15(5).

The reason given for the Master’s decision was:

‘Assessment of the claimant’s costs of the assessment can properly be undertaken pursuant to CPR 36.17(4)©/© but this does not, in my judgment, dislodge the effect of CPR 47.15(5) which has the effect of trapping the ‘maximum amount the court would award’ to the receiving party to £1,500 plus VAT plus court fees which in the case was £1,005’.

The claimant applied to the Master for permission to appeal the decision to cap her costs in the provisional assessment and this was refused. The claimant subsequently filed an appellant’s notice, appealing the decision of the Master and the claimant was in due course given leave to appeal.

The issue on this appeal was whether, if a costs assessment proceeds no further than a provisional assessment, a claimant who has made a successful Part 36 offer is limited to the costs provided for in rule 47.15.5 or whether the provisions of Part 36 entitle the claimant, in this case, to costs assessed on an indemnity basis. This gave rise to the judgment in Lowin v Portsmouth & Co [2016] EWHC 2301 (QB).

Let us consider what each of the relevant rules say respectively. The relevant part of Part 36 is r.36.17 ‘costs consequences following judgment’ and this states so far as is material:

‘(1) Subject to rule 36.2 this rule applies where, upon judgment being entered … [the] judgment against the defendant is at least as advantageous to the claimant as the proposals contained in a claimant's Part 36 offer …

(4) Subject to paragraph (7) where paragraph (1)(b) applies, the court will, unless it considers it unjust to do so, order that the claimant is entitled to –

(a) interest on the whole or part of any sum of money (excluding interest) awarded at a rate not exceeding 10 per cent above base rate for some or all of the period starting with the date on which the relevant period expired;

(b) costs (including any recoverable pre-action costs) on the indemnity basis from the date on which the relevant period expired;

(c) interest on those costs at a rate not exceeding 10 per cent above base rate; and

(d) … an additional amount which shall not exceed £75,000 …’

Rule 47.15(5) provides:

‘In proceedings which do not go beyond provisional assessment, the maximum amount the court will award to any party as costs of the assessment (other than the costs of drafting the bill of costs) is £1,500 together with any VAT thereon and any court fees paid by that party.’

Arguments on Appeal

The claimant argued that the Master had erred in law and in principle when he capped the summarily assessed costs in the sum of £2,805, on the grounds that r.36.17(4) does not dislodge the effect of r.47.15(5).

The claimant also submitted that the Master had erred in not taking the decision in Broadhurst v Tan [2016] EWCA Civ 94, into consideration. In this respect he had concluded: ‘The decision in Broadhurst v Tan has, in my view, no application as there is a conceptual difference between “fixed costs” and, as here, assessed costs subject to the cap in CPR 47.15(5)’.

In Broadhurst, the Court of Appeal considered the effect of rule 36.1(4) on the fixed-costs regime which is set out in Part 45. The Court of Appeal held that, in low value fixed-cost personal injury claims which would normally be governed by section IIIA of Part 5, costs should be assessed on the indemnity basis pursuant to rule 36.14 where a claimant has made a Part 36 offer and then obtained a judgment which was more advantageous than the offer. We discussed this decision in edition XX.

Hearing the appeal, Justice Elisabeth Laing, disagreed with Master’s conclusion and held that the reasoning in Broadhurst was of some assistance. At para 30-32 she stated:

‘We do consider, however, that the general scheme of the reasoning in Broadhurst does assist us because we consider that, as in Broadhurst, the draftsman of Part 47 has made specific provision for the relationship between Part 47 and Part 36. That is the provision made in rule 47.20(4). In other words, the draftsman has considered how Part 36 should apply to the procedural provisions which are contained in Part 47. The provision which he has made is that the provisions of Part 36 apply to the costs of the detailed assessment with the four irrelevant modifications which are set out in sub-rule (4) of rule 47.20.  It seems to us that there is a conflict in a sense between Part 47.15(5) and Part 36. This conflict arises not because Part 47.15(5) provides for fixed costs, because it does not provide for fixed costs. Rule 47.15(5) does potentially derogate from the entitlement to have costs assessed on an indemnity basis which is conferred by Part 36. For it to derogate in fact, the draftsman would, it seems to us, have had to have provided specifically in rule 47.20 that the provisions of Part 36 would apply to the costs of the detailed assessment with modifications that included 47.15(5).  It seems to us that, because he has not so provided, it must follow that the provisions of Part 36 apply to this case and that they are not displaced by a provision of rule 47.15(5). To that extent it seems to us that the scheme of the reasoning in Broadhurst helps us to reach a conclusion on the correct relationship between Part 36 and Part 47 on the facts of this case’.

As such the claimant’s argument was accepted and the appeal was allowed. The defendant appealed this decision and it was subsequently heard in the Court of Appeal.

Court of Appeal Decision

The defendant argued 6 grounds of appeal:

  1. 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;
  2. 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;
  3. 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;
  4. 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, costs limits in Aarhus Convention claims and cost caps ordered under Section III of CPR Part 3;
  5. 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;
  6. The judge 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.

Handing down judgment, Lady Justice Asplin agreed that the case of Broadhurst was not directly applicable as that case was concerned with a conflict between fixed costs and assessed costs provisions in the CPR. CPR 47.15(5) is not a fixed costs provision but rather a cap.

She stated at para 33:

‘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…’.

Despite this, LJ Asplin went on to consider whether there is a tension or conflict between the provisions of the CPR in this case which must be resolved?

As we pointed out above, Laing J found that there was such a conflict because the cap potentially derogates from a right to have costs assessed on an indemnity basis.

LJ Asplin disagreed with this conclusion as held at para 34:

‘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 such, it was concluded that Laing J was wrong to conclude that there was a material conflict between costs assessed on the indemnity basis and costs assessed on that basis subject to a cap.

In relation to the drafting of the rules themselves it was noted at para 38:

‘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’.

For these reasons, the defendant’s appeal was allowed, unanimously, and the cap was applied.

The full judgment can be accessed here.