Breaking out of fixed costs - Part 36 loophole for Claimants

Claimant lawyers have been given a boost recently by the Court of Appeal in Broadhurst v Tan and Smith v Taylor 2016 EWCA Civ 94. The issue before the Court related to costs in cases operating in the fixed costs regime and where a Defendant fails to beat a Claimant's offer to settle.

The Court of Appeal held that Claimants who achieve an outcome equal to or better than their Claimant offer to settle will be entitled to both their fixed costs up to the relevant stage in the case and indemnity costs from the effective date of the offer - which means costs on an hourly rate basis.

This is a potential disaster for Defendants who need to review their reserves and consider Claimant offers very carefully, particularly early offers which, if successful will result in an overall costs assessment significantly higher than fixed costs.

Compensators are reminded that this will apply to all personal injury cases in the fixed costs regime. The fixed costs rules for Employer Liability and Public Liability claims have been in operation for all accidents occurring since 31 July 2013 and so it is anticipated this ruling will apply to a significant number of ongoing cases. It is also anticipated that the fixed costs regime could soon extend to cases valued up to £250,000.

Conversely, Defendants are unable to claim similar rights if the Claimant fails to beat a Defendant's offer as Part 36 makes no similar provision for indemnity costs when the Claimant fails to beat the Defendant's offer.