What are Standard Basis Costs?

CPR 44.3 governs the bases of assessment, with standard basis costs being one of two approaches, the other being indemnity basis.

When it has been agreed that costs will be assessed on the standard basis (and this is the default basis if no specific agreement is reached), via detailed assessment, the Court ensures that costs claimed relating to the dispute, are proportionate and have not been unreasonably incurred.  

Can a Party Opt to use Standard Basis Costs in a Fixed Costs Matter?

Case law has demonstrated that parties have to be very specific in their wording when they want to opt for standard basis costs, in a case when fixed costs would usually apply.

Doyle v M&D Foundations and Building Services Ltd [2022]

In the low-value personal injury case of Doyle v M&D Foundations and Building Services Ltd [2022] EWCA Civ 927, it was disputed whether the receiving party could ‘contract out’ of using the fixed costs regime based upon the specific wording of the offer and acceptance.  

Subsequent to the issuing of the matter, negotiations commenced between the parties. The first offer made was the Defendant’s Part 36 Offer for £5,000. The Claimant did not accept this offer.  

In response to the Defendant’s offer, the claimant proposed a Consent Order. The party said that this costs order was necessary in accordance with Civil Procedure Rule r.36.13(4)a. Though the number of damages remained the same at £5,000, the Claimant stipulated in the order that “the defendant do pay the claimant’s costs, such costs to be subject of detailed assessment if not agreed.”

At this point, the Claimant began to prepare a Bill of Costs, intending for this costing instrument to be assessed on the standard basis. The Defendant disputed this however, and stated that under the Civil Procedure Rules 45, the matter was strictly fixed costs. In response to this dispute, the Claimant referred the specific wording in their consent order. 

At Doncaster County Court, the judge at first instance decided in favour of the receiving party, the Claimant. His rationale was that the consent order was an agreement to assess costs on the standard basis, as opposed to via fixed costs.  

In the end, the dispute made its way to the Court of Appeal.  

Again, the Defendant’s appeal was rejected, with the Judge stating that:

“there is no ambiguity whatsoever as to the natural and ordinary meaning of “subject to detailed assessment” in an agreement or order as to costs. The phrase is a technical term, the meaning and effect of which is expressly and extensively set out in the rules. It plainly denotes that the costs are to be assessed by the procedure in Part 47 on the standard basis (unless the agreement or order goes on to provide for the assessment to be on the indemnity basis).” [44]

This matter showed that if a party is specific in their phrasing when preparing settlement orders, the fixed costs regime can be ‘contracted out’ of. Parties may wish to do this as it is a method by which costs recovery can be maximised. 

Does this Exclusion Always Work?

As the matter of Adelekun v Ho [2019] EWCA Civ 1988 demonstrated, the ‘contracting out’ method does not always work.

The road traffic accident case of Ho settled when the parties agreed on a Part 36 offer. Following this acceptance, a Consent Order very similar to the one in Doyle was signed. Nevertheless, the Court did not allow a deviation from the fixed costs regime.  

In the case of Doyle, Lord Justice Phillips explained this decision,  stating that “something had “gone wrong” with the wording used in the offer letter considered in Adelekun, justifying reading the term detailed assessment as applying to fixed costs”. He went onto explain that “if parties wish to settle on terms that fixed costs will be payable, it is easy enough to say so.” 

If the parties in Doyle had agreed upon the original Part 36 Offer, the receiving party would have been unable to ‘contract out’ of fixed costs, in line with the court of appeal’s decision in Adelekun v Ho [2019] EWCA Civ 1988.

The statements from Phillips LJ highlight that parties must be very clear in the wording when attempting to ‘contract out’ of fixed costs. Otherwise, they will risk the Court reading their orders in a way which does not agree with their original intentions. 

How can ARC Costs Assist?

Our team of Costs Draftsman and Costs Lawyers can be relied upon to provide a multitude of services. Our 20 years of experience in the costs law industry has equipped us with the knowledge to expertly handle matters. Whether you need assistance with a standard basis costs, indemnity basis costs, or fixed costs dispute, we can help. 

Depending on what is necessary for your case, we can prepare comprehensive Bills of Costs, Costs Budgets and Points of Dispute, alongside other costing instruments.  

If you would like to find out more about how we can help you, please telephone us at 01204 397302 or email an expert directly at info@arccosts.co.uk.

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