Hislop v Perde [23.07.18]
20/08/2018
Hislop provides a welcome clarification to costs following late acceptance of Part 36 offers in low value claims. It confirms that fixed costs will apply but for exceptional circumstances. This is certainly good news but what does it mean in practice?
Hislop was a modest claim arising from a road traffic accident. The defendant accepted the claimant’s Part 36 offer shortly before trial and some 19 months after the offer was made. The claimant argued that fixed costs were applicable up to the expiry of the relevant 21-day period and sought indemnity costs thereafter until the date of acceptance.
The Court of Appeal disagreed and held that save for ‘exceptional circumstances’ fixed costs should apply. In doing so, they confirmed that there is no presumption in favour of indemnity costs on late acceptance of a claimant’s Part 36 offer
1. Increased certainty/proportionality
The decision confirms fixed costs are effective in most cases. Insurers now have certainty regarding their cost exposure and it ensures that costs remain proportionate. The decision also reduces the likelihood of high indemnity costs in claims where early Part 36 offers are made prior to receipt of appropriate evidence, allowing the defendant to accurately value the claim.
Whilst presumably this hurdle will be challenging to overcome, claimant solicitors will inevitably seek to ‘test the waters’ regarding what might pass this hurdle. This has already happened in the recent case of Holmes v West London Mental Health NHS Trust [2018] where the High Court ruled that a defendant, who had waited 15 months to accept a Part 36 offer with a ‘worse than hopeless’ case, should pay indemnity costs covering the period of delay.
2. Settlement negotiations
The lack of a presumption for indemnity cost negates a claimant’s ability to use it as a threat to ‘strong-arm’ defendants into settlement negotiations. This is particularly beneficial in those cases where medical records are outstanding and required before the defendant can carry out a reasonable quantum valuation. The Hislop decision reduces the pressure to accept an offer ‘blind’.
Defendants now have greater scope to make their own settlement offers rather than feeling trapped to accept a claimant’s unreasonable offer with the threat of indemnity costs if the 21-day period elapses. There is still the incentive for defendants to accept good Part 36 offers within a reasonable period, as a long delay without explanation may trigger indemnity costs. A short delay with a reasonable explanation would not.
3. Liability investigations
Hislop may be even more welcome in liability cases where the litigation milestones of disclosure and witness evidence exchange can significantly alter the evaluation of the case. Arguably, even when faced with an early Part 36 offer on liability, the defendant can wait for exchange of witness statements to assess the offer. The decision does not however allow the defendant to run a ‘worse than hopeless’ case until exchange.
This judgment has effectively brought the parties onto an even footing with late acceptance of Part 36 offers and cost consequences. The defendant’s entitlement to costs if a claimant accepts their Part 36 offer late cannot exceed the applicable fixed recoverable costs and it therefore has to be right that the claimant cannot exceed this sum if the tables are turned.
This is undoubtedly a positive step but we need to monitor claimants arguing ‘exceptional’ circumstances in the upcoming months. Defendants should continue to review settlement offers promptly and enter into reasonable negotiations early to limit the fixed costs applicable. Where no assessment of a claimant offer can be made, the defendant should advise that the offer cannot be responded to without the required information.
Read other items in Motor Brief - January 2019
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