horwich farrelly

Bird v Acorn: A Disappointing Decision

November, 14, 2016

The Court of Appeal has now handed down judgment in favour of the claimant in the long awaited appeal in Bird v Acorn. This is a disappointing decision for defendants.

The appeal concerned the fixed costs payable in a claim that fell within CPR 45 Section IIIA which had been listed for disposal but settled before that disposal hearing took place.

The Court dealt with two key issues:-

  • Is a disposal hearing a trial?
  • Is it possible to reach the final stage of the FRC without first going through the allocation stage?

On both questions they reached a positive conclusion, which now has significant ramifications for defendants in terms of fixed recoverable costs (“FRC”) payable on Fast Track matters.

The Court’s interpretation of the Rules

CPR 45 Section IIIA applies to RTA or EL/PL claims which were started in the MOJ portal but no longer continue under that portal. The FRC are set out in Table 6B (CPR 45.29C) and Tables 6C & 6D (CPR 45.29E).

These can be found here: https://www.justice.gov.uk/courts/procedure-rules/civil/rules/part45-fixed-costs#sectionIII

The tables are further split between claims that settle pre issue (Part A) and claims that settle post issue but before trial (Part B).  Part B is then further broken down into 3 stages (post issue/ pre allocation, post allocation/ pre listing and post listing/ pre-trial). The FRC  are calculated by reference to a differing formula for each stage.

It was the application of these stages that the Court of Appeal was concerned with.

In this case the matter had been listed for a disposal hearing prior to being allocated to a track.  The defendant’s case was that as the matter had not been allocated the FRC were limited to those applicable to the post issue/ pre allocation phase.  The claimant’s case was that the matter had been listed for trial and as such the post listing/ pre trial stage costs were recoverable.    In RTA claims the monetary difference between these stages is £1,495 plus VAT, in EL/PL claims it is £1650 plus 10% of the damages

Is a disposal a trial?

‘Trial’ within CPR 45 Section IIIA is defined as ‘the final contested hearing’.  The Court of Appeal found that a disposal hearing fell within that definition.  In doing so they rejected the defendant’s arguments that a disposal hearing can alternatively be used for directions and thus cannot be said to be final.  The Court also rejected the suggestion that if a disposal hearing was used to provide directions then the parties were effectively moved back through the stages and found that once the final stage was reached there was no going back!

Is it possible to reach the final stage of the FRC without first going through the allocation stage? 

The defendant’s argument that the stages needed to be passed sequentially was rejected.  Whilst this involved an analysis of LJ Jackson’s interim report, when he outlined how the stages were intended to be steps on a ladder, it was found that his general observations in that report did not detract from the conclusion reached regarding the definition of a trial.

As such it was concluded that the listing of a matter for a disposal rendered the claimant entitled to costs applicable to the third stage of FRC.  Furthermore it was found that the listing of a matter for trial before allocation would also entitle the claimant to the applicable third stage FRC costs.

The implication of the findings

It is questionable and open for debate as to whether the Court of Appeal’s findings are consistent with the intentions of the Jackson reforms.  It seems clear from LJ Jackson’s interim report that he intended the stages to be passed sequentially.  Furthermore the costs formulas in the various stages of the tables were calculated by referencing whether a claim had passed allocation or listing.

In our view the decision creates anomalies and unfairness that go beyond the “swings and roundabouts” that have to be accepted as part of a fixed costs regime. For example:

Scenario 1A: The defendant in an RTA case files a defence denying liability but decides to settle.  The court orders directions questionnaires to be filed.  An offer is made which the claimant accepts prior to the case being allocated under Part 26.  Accordingly the FRC are £1,160.00 (“base fixed costs”) plus 20% damages.

Scenario 1B: The defendant, on the same facts as Scenario 1A, admits liability.  The defendant makes an offer that does not expire until after the court has listed a disposal hearing and the claimant subsequently accepts the defendant’s offer.  Based on Bird v Acorn, the claimant is entitled to base fixed costs of £2,655.00.

The defendant in Scenario 1B, who has acted reasonably and narrowed the issues, is penalised in costs.

It is also regrettable that the Court of Appeal looked at the rule in CPR 28.2(2)(a), which provides that the court may list a Fast Track case for trial on allocation as supporting the decision. It is questionable that this rule was accounted for when the FRC rules were drafted because it too can create unfairness:

Scenario 2A: The court provides fast track directions as anticipated in CPR PD28, up to and including filing pre-trial checklists, but the case will not be listed for trial until after the pre-trial checklists have been filed.  The defendant contests the case.  It proceeds through the stages of disclosure, exchange of witness statements, and possibly Part 35 questions to experts, before the defendant decides to settle and makes an offer that is accepted prior to the trial being listed.  Accordingly the base fixed costs are £1,880.00.

Scenario 2B: The court provides standard fast track directions but also lists the case for trial on allocation.  The defendant makes an offer at that stage which is accepted by the claimant before the parties have dealt with disclosure, exchange and any other procedural steps.  The claimant’s base fixed costs are £2,655.00, which is £775.00 more than the claimant in Scenario 2A above, who had done most of the work to trial, would receive.

It seems to us that the staged increase in the fixed costs in Tables 6B to 6D must have been intended to reflect the additional work that claimant solicitors would have carried out before a case settles.  It therefore follows that the consequences in the above two examples cannot be what was intended.

Further this decision will potentially create greater anomalies if, as expected, fixed costs are introduced on the lower end of the multi-track. Those courts such as Birkenhead that routinely list cases for disposal hearings do not limit that practice to cases under £25,000.

What does this mean for insurers?

Whilst problematic, this decision does give certainty to the fixed costs regime and the thousands of cases that had been stayed pending this appeal can now be resolved.

It places even more importance on defendant insurers getting their claims handling strategies right – in particular keeping cases where liability should be admitted within the Claims Portal.

In cases that do exit the Portal insurers may only get “one shot” at making a protective Part 36 offer before proceedings are issued.    Such a protective offer, if accepted late or not beaten at a disposal hearing will potentially entitle the defendant to a greater level of costs.  Such offers are also likely to encourage claimants to settle claims without issuing proceedings.

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