What are the Rules on Costs as Detailed in CPR 46.13?

Within Part 46 of the Civil Procedure Rules, details are given on the Rules applying in costs cases of special circumstances. Specifically, CPR 46.13 relates to costs following allocation, re-allocation and non-allocation. Therein, the Court highlights that Costs Orders that are made prior to a claim being allocated to the small claims track or fast track will not be impacted by allocation.  As such, if a party is ordered to pay costs prior to allocation, and the proceedings are subsequently allocated to the Small Claims Track, costs payable will remain as previously ordered.

Furthermore, it is stated that when a claim is allocated to a track and then the Court allocates the claim to a different track, the specific rules regarding costs applying to the first track will apply to the claim up until the date of re-allocation, unless the Court orders otherwise. Moreover, from the date of re-allocation, any special track rules will apply to the second track.  By way of example, a claim initially allocated to the Small Claims Track will have limited costs recoverable, until such point it is reallocated to the Fast or Multi Track 

The final point within this section relates to when the Court is to determine when costs are to be assessed on the standard basis for claims which have yet to be allocated to a track. This action may restrict costs to those which “would have been allowed on the track to which the claim would have been allocated, if allocation had taken place.”  As such, consideration should be given as to the factors as detailed in CPR 26 for case management at the point an offer is accepted/a case settles, in determining what the appropriate track for the proceedings would have been based on the case circumstances and value.

What is the Purpose of CPR 46.13?

The Court used the cases of Solomon v Cromwell Group plc [2012] 1 WLR 1048 and O’Beirne v Hudson [2010] EWCA Civ 52 to formulate the procedure in Civil Procedure Rules Part 46.13. In the first case of Solomon, the use of a Part 36 offer and a considered Costs Order did not remove the application of the fixed costs regime. In the second case of O’Beirne, a Consent Order for standard basis costs did not prevent fixed small claims track costs from being applied. The Court of Appeal was concerned in both matters that the manner of settlement of a low value claim should not grant a superiority on the receiving party, in relation to costs.

Following these cases, the Court considered how to proceed and put CPR 46.13 in place. This guideline assures that cases are treated fairly and consistently, and that proportionate costs are allocated consistently on cases that are either allocated to the Fast or Multi Track or would otherwise be allocated to the Small Claims Track.

Disputes can however, still arise.  Commonly in a vehicle-related damages claim for instance, the case value may be pleaded at over £10,000 (for instance for credit hire) which would make the Fast Track applicable, but may subsequently settle under this threshold, leading to an argument that the Small Claims Track would have been appropriate.  On assessment, the Court is likely to consider how reasonable the pleading of the claim was at above £10,000, and to consider how the Court would have approached allocation at the time.  Value of the claim is not the only factor that will be taken into account, and the more complex the matter, the more likely that Fast Track costs would apply in this example. 

CPR 46.13 should motivate the parties to settle the matter quickly and efficiently, as it makes clear that there is a risk of ‘standard costs’ applying, and can therefore encourage commercial costs offers to be made.

Implementation of the CPR 46.13 Guidelines & Conflicts Arising

Whilst CPR 46.13 was introduced to provide clarity, it has caused some conflict with CPR 45 fixed costs.

In the 2018 matter of Scutchings v Gibbs and Liverpool Victoria Ltd, District Judge Davies ruled that the Claimant should be limited to Fixed Recoverable Costs, subsequent to an acceptance of a Part 36 Offer in the sum of £40,000. This offer was proposed by the Defendant prior to the allocation to a track.

The circumstances of the case involved a road traffic accident in August 2013, following which a claim was commenced. One month later, the Claimant notified the claim on the Portal. Due to the Defendant’s denial of liability, the claim exited the Portal. Medical evidence was gathered, and the claim was issued in July 2016. The Defence was filed in January 2017 and the Court provided a Notice of Proposed Allocation to the Multi-Track at the end of the same month.

Prior to the proposed allocation, the Defendant made a Part 36 Offer to settle in the sum of £40,000. The Claimant accepted this offer on the 19th of January 2017.

Arguments ensued as the applicability of Fast Track or Multi Track type costs.  On the face of the claim value, it would have been a Multi-Track matter however, it had been placed on the Portal as if it were a Fast Track claim.

The Claimant prepared a Bill of Costs for standard basis, hourly rate costs. Following the receipt of this document, the Defendant challenged this and stated that fixed costs should apply. Provisional assessment of this matter took place and the Court disagreed with the Defendant’s statement; therefore, allowing costs on an hourly rate basis. The Defendant was not satisfied with this result, thus, objecting to the provisional assessment decision by maintaining that a three-stage test should take place.

The first step of the test asks the Court to assess whether fixed costs pursuant to Part III A of CPR 45.29 apply. If so, it must be considered whether the parties contracted out of that application by virtue of the express final provisions of the Court order. If the parties have completed this action, then the case is concluded. If they have not, then it must be contemplated whether the Claimant can seek to argue exceptional circumstances relief under Civil Procedure Rule Part 45.29J.

Following the Defendant’s three stage test proposal, the Claimant presented their arguments to contest fixed costs on this matter. They stated that they had placed the case on the MOJ Portal “by mistake” and also highlighted that CPR 46.13 applies and that the Court, where allocation has not yet taken place, can restrict the costs which are recoverable in line with the likely track it was to be allocated to. Furthermore, the Claimant submitted that the offer was made under CPR 36.13 and not 36.20. According to the Claimant, this created a distinct term to the offer that the costs were not fixed. Finally, the Claimant stated that exceptional circumstances exist for the Court to allow the Claimant to escape fixed costs under the discretion the Court has in CPR 45.29J.

Following the Defendant’s submissions, the Court completed the three-stage test. In doing so, they found that fixed costs did apply to the matter. Ultimately, the Court concluded that there was an inadequate amount of evidence to prove that the matter was submitted to the MOJ Portal by mistake. The Court also concluded that CPR 36.20 applies when a claim no longer continues under the low value claims protocol, and CPR 36.13(1) and (3) expressly create a regime of those costs subject to CPR 36.20, specifically where the costs are not fixed. It was also noted by the Court that no exceptional circumstances existed.

How can ARC Costs Assist in Matters Regarding Costs Following Allocation, Re-Allocation or Non-Allocation?

The experienced legal costs team at ARC Costs are independent costs experts that regularly assist either paying or receiving parties in a multitude of different areas of law. Following our inception in 2013, ARC Costs have both recovered and saved our clients millions of pounds in costs.  We pride ourselves on our 5 working day SLA turnaround time as it allows us to provide a time-efficient service to our clients whilst also maximising their recovery.

If you require a Bill of Costs, our Costs Draftsmen can accurately prepare a comprehensive document which outlines the costs incurred.  A recovery target of in between 70-80% is generally achieved, and once the Bill of Costs has been drafted, we regularly assess the progress of the matter once a week. This ensures that negotiations are moving swiftly and being conducted effectively.

If your case proceeds to Provisional Assessment, as it did in the Scutchings v Gibbs and Liverpool Victoria Ltd matters, our Costs Draftsmen can prepare Points of Dispute or Replies to the Points of Dispute. If costs can still not be agreed and a Detailed Assessment hearing is required, the experienced Costs Lawyers within the team can attend. As fully regulated legal professionals, they hold rights of audience, are able to operate costs litigation on the client’s behalf and are highly experienced members of the team.

If you have found this information helpful and would like to request a free quotation for our work, please contact us via email at info@arccosts.co.uk. To speak to one of our experts directly, please call our central office on 01204 397302.

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