horwich farrelly

The exceptional test for fixed costs cases

April, 18, 2019

Following an appeal brought by Horwich Farrelly, the High Court has given a binding decision on the exceptional circumstances test under the fixed costs rules. Mr Justice Stewart has confirmed that the test of exceptionality is a high hurdle, not a low one, and that a case must be exceptional when compared to the category of claims that drop from the portal, and not simply in the context of a case that starts or stays in it.

Background

Ferri v Gill was a case that arose from a Road Traffic Accident. The claimant was knocked from his bike by the Defendant and suffered injury and loss.  He instructed solicitors, Leigh Day, who submitted his claim to the portal under the protocol for low value personal injury claims in road traffic accidents.  An initial medical report was obtained and the claimant then transferred his instructions to new solicitors, Fieldfisher.  He required an operation on his shoulder, and quantifying his loss of earnings was somewhat involved.  The claim settled without the need for substantive proceedings in the sum of £42,000.

The claimant put forward a claim for costs.  The defendant contended that costs were fixed by CPR 45 Section IIIA because this was case that had started in the portal and “dropped” out of it.  The claimant contended that there were exceptional circumstances under CPR 45.29J, and that costs in excess of the fixed amounts should be allowed.  The matter came before Master McCloud, who found that the test of exceptionality under CPR 45.29J should be a “low bar” and that it was enough that the case was exceptional compared to those cases that the Low Value RTA protocol was intended to cover. On that basis she found that there were exceptional circumstances. The defendant appealed.

The Appeal

The appeal was heard by Mr Justice Stewart, with the Senior Costs Judge, Master Gordon-Saker, sitting as an assessor.

On appeal, the defendant essentially repeated the arguments made below; that the exceptional circumstances test was a high one, for strong policy reasons, and that the test required the Court to consider whether a case was exceptional in the context of a case that had “dropped” from the portal. When the Master set a “low bar” and when she compared this case to the sorts of cases with which the low value RTA protocol was intended to deal, she had fallen into error.

Mr Justice Stewart agreed with those arguments.   He found that the provisions in rules 45.29K and L, (which require a claimant to achieve more than a 20% margin on the fixed costs, once a court has made a finding of exceptional circumstances) were irrelevant to the exceptionality test itself, and he was not persuaded that a strict approach to CPR 45.29J would discourage claimants from using the protocol.

The need for the exceptionality test to be a high bar was confirmed by the comments of the decision of the court in Hislop v Perde, which had been handed down after the Master had made her decision, and it was also a requirement of the policy behind the fixed costs regime. The exceptionality test required the court the context in which a particular case was said to be exceptional.  The correct context was the category of cases that had left the protocol and were subject to the regime in CPR 45 Section IIIA. In comparing this case to an ordinary “portal” case, the Master had looked at the wrong basket of cases.

The case has been remitted back to the Senior Courts Costs Office, reserved to Master Gordon Saker, for the correct test of exceptionality to be applied.

Comment

We had been concerned that the decision at first instance could effectively have led to a finding of exceptional circumstances for any case which left the protocol.  As far as we aware, this is the first binding decision to consider the exceptional circumstances test in detail. In the circumstances, the decision by the High Court to underline the strictness of the test and to confirm the “basket” of cases to which comparison should be made is welcome one.

We frequently see claims for exceptional circumstances which purport to be based simply on the fact that a claim dropped from the portal and settled in excess of £25,000. On the basis of the appeal decision, such claims would not be well founded.

Questions of when or whether parties might “contract out” of the fixed costs regime are still live ones, but this decision emphasises that if a case has left the portal and has settled without being allocated to the multi-track, the starting point will always be fixed costs.

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