High Court clarifies test for ‘exceptional circumstances’ in fixed costs cases
Ferri v Gill [17.04.2019]
The High Court has given a welcomed decision on the test for ‘exceptional circumstances’ to be applied when a claimant argues that fixed costs do not apply to a claim that settled for more than £25,000. Such arguments raised in those cases that have commenced under the Pre-action Protocol for Low Value Personal Injury Claims in Road Traffic Accidents (the Protocol), but subsequently drop out.
In January 2015 the claimant, a self-employed builder and decorator, was injured whilst riding his bicycle, suffering injuries to his arm, abdomen, back, neck and left shoulder. The claimant instructed Leigh Day Solicitors who obtained a GP report confirming a full recovery was expected over a period of a maximum of four months. Leigh Day submitted a Claims Notification Form (CNF) under the Protocol and liability was admitted.
In November 2015, the claimant instructed new solicitors, Fieldfisher, in place of Leigh Day. Fieldfisher wrote to the defendant’s representatives stating that they did not consider the case to be a ‘fast track portal claim’ as the claimant had suffered a serious shoulder injury, had ongoing loss of earnings, and required private treatment. An orthopaedic report was obtained, diagnosing damage to the acromioclavicular and advised that the claimant be referred for possible corrective surgery.
The claimant subsequently underwent an arthroscopy to his left shoulder with bursoscopy, arthroscopic sub-acromial decompression, arthroplasty and biceps tenodesis. In February 2017, the claim settled prior to issue of proceedings in the sum of £42,000.
The defendant argued that the costs were fixed by CPR 45 Section IIIA because the case had started in the Portal and ‘dropped’ out. The claimant argued that fixed costs did not apply and issued costs proceedings under the Part 8 procedure.
At first instance, Master McCloud (sitting as a Deputy Costs Judge) held that the test for exceptionality was a ‘low bar’ because “the portal was intended to deal with, in my judgement, simple cases which would typically be fast track cases and, for the factual circumstances that I have set out, it is on balance outside the general run of such cases”, so held that costs were to be subject to a detailed assessment pursuant to CPR 45.29J.
CPR 45.29J allows the court to award costs greater than FRC ‘if it considers that there are exceptional circumstances making it appropriate to do so…'
The defendant appealed the decision on the grounds that:
- The Master had made an error of principle in considering the circumstances against which exceptionality should be judged
- The Master made a second error in regarding the test as a ‘low bar’ and evaluating accordingly
- The Master made a third error in not considering whether any reportedly exceptional circumstances had caused any significant additional cost
- The Master’s decision was wrong and in the event outside the ambit of reasonable disagreement.
Mr Justice Stewart allowed the appeal finding that the Master had erred in law on the two central questions raised in the appeal namely, (i) was the Master right in her test of ‘exceptional’ and (ii) was she right in deciding against what ‘basket’ of cases a case needs to be exceptional.
Mr Justice Stewart found that the test of exceptionality was a high bar and had been confirmed in Hislop v Perde , which had been handed down after the Master had made her decision. He added that the test required the court to consider whether a case was exceptional in the context of cases that had left the Protocol and were subject to the regime in CPR 45 section IIIA. In comparing the case to an ordinary ‘portal’ case, the Master had considered the wrong ‘basket’ of cases.
The case has been remitted back to the Senior Costs Office for reconsideration and for the correct test of exceptionality to be applied.
The decision at first instance setting a ‘low bar’ test of exceptionality could essentially have paved the way for claimants to easily remove claims from the Protocol and argue against fixed costs. We often see arguments that the claim exceeds the £25,000 limit and has dropped out of the portal so the decision by the High Court is a welcome one providing further clarity for cases that have dropped out of the Protocol and settle before allocation.
This case further confirms that the value of the damages does not automatically stop the application of FRC where the claim started life in the portal. Only time will tell if claimants seek to opt out of the Protocol at the outset or push claims through to allocation before agreeing settlement to avoid fixed costs.