By Matthew Best, Director – ATE Partnerships, Head of Personal Injury & Clinical Negligence
(Estimated reading time: 5 minutes 31 seconds)
As everybody may now know, 6th April 2023 will see significant changes to CPR 44.14. From this date defendants will also be able to enforce costs orders up to the aggregate amount in money terms of any settlement, including cases concluding by way of acceptance of Part 36 offers and Tomlin Orders.
The principal effect of these changes is that for personal injury proceedings issued after 6th April 2023 an adverse costs order made against a claimant will be enforceable against:
a. The award by way of judgment of damages and interest to the claimant,
Alternatively, against
b. An agreement to pay or settle damages, costs, and interest to the claimant,
And against,
c. The costs awarded to the claimant.
Effectively, the new rule will reverse the decisions in Cartwright v Venduct Engineering Ltd [2018] EWCA Civ 1654; [2018] 1 WLR 6137 (which precluded enforcement in cases where settlement had been agreed, rather than the court ordering an award of damages) and Ho v Adelekun [2021] UKSC 43; [2021] 1 WLR 5132 (which precluded the offset of costs against costs).
I think it would be useful for us to look at a few scenarios to see what we are dealing with.
Damages and costs payable after acceptance of a Part 36 offer
Acceptance within “the relevant period”:
If either a defendant accepts a claimant’s Part 36 offer, or a claimant accepts a defendant’s Part 36 offer within “the relevant period”, then damages will be paid to the claimant and “the Claimant will be entitled to the costs of the proceedings (including their recoverable pre-action costs) up to the date on which notice of acceptance was served on the offeror” (CPR 36.13(1)).
However, if, for whatever reason, there had been a prior costs order made against the claimant and in favour of the defendant (i.e. as part of a prior interlocutory application) then, by reason of the new wording of CPR 44.14(1) and the operation of CPR 44.14(3), the defendant is now able to enforce against the claimant’s damages and/or costs to ensure recovery of the costs to which it is entitled.
Acceptance of an offer made less than 21 days before the start of trial.
In these circumstances the liability for costs must be determined by the court unless the parties have agreed the costs. The court’s discretion is not expressly fettered in any way. If the claimant agrees to or is ordered to pay any of the defendant’s costs then the damages, costs, and interest to which the claimant is entitled are all available as a “pot” against which any costs order made in favour of the defendant may be enforced.
Damages and cost payable after a non-Part 36 settlement
Often, such as at a Joint Settlement Meeting (JSM), Round Table Meeting (RTM) or simply by exchange of correspondence or emails on a non-Part 36 basis, cases can be settled in terms that then lead either to a Tomlin Order or a Consent Order, or simply to a binding contract based on that correspondence or emails. Indeed, oral contracts count too, as do Calderbank offers.
All the above are different mechanisms for achieving “agreements to pay or settle a claim for damages, costs and interest” that now create the fruits of litigation by which a claimant maybe liable to meet a defendant’s entitlement to be paid costs.
But when will costs payable by a successful claimant be due?
An interlocutory application may result in an adverse costs order being made against a claimant. However, CPR 44.14(3) provides that “orders for costs against a claimant may only be enforced after the proceedings have been concluded and the costs have been assessed or agreed”, thereby postponing the day upon which
those costs must be paid.
If the damages and interest alone are insufficient to satisfy the defendant’s entitlement to be paid costs, then regard must also be had for CPR 44.12. This states that where one party is both entitled to be paid costs and liable to pay costs, “the court may assess the costs which that party is liable to pay and either –
(a) set off the amount assessed against the amount the party is entitled to be paid and direct that party to pay any balance, or
(b) delay the issue of a certificate for the costs to which the party is entitled until the party has paid the amount which that party is liable to pay”.
In other words, assessment of the amount of costs due in each direction may have to be done first before a final order is made. But note, the wording of the rule is “may” not ‘must’.
Finally, in some cases there may be significant sums due in each direction and it may not be possible to determine the true value of “the aggregate amount in money terms of any orders for, or agreements to pay or settle a claim for damages, costs and interest made in favour of the Claimant”, until the claimant’s costs have been assessed. Moreover, with interest on the claimant’s costs accruing at the Judgments Act rate of 8% from the date upon which the entitlement to costs arose, the value of the interest may constitute a considerable element of the aggregate amount.
It is clear that the rule changes will see greater risks for claimants themselves and their lawyers, and greater rewards for defendants and their legal representatives.
Are these changes really ‘levelling the playing field’ as ‘intended’?
Personally, I don’t think so; they appear to shift the power balance firmly in the favour of defendants. The real losers are the claimants, yet again. They will now likely have to shoulder (rightly or wrongly) the costs of the increased risk. There will be greater pressure on claimant lawyers. Which leads to the question around whether ATE insurance premiums are to increase. There is certainly an increased risk to insurers which cannot be denied. Another important point that becomes evident, is that the changes increase the need for ATE insurance.
The Temple Perspective – no increase in premium levels
Here at Temple Legal Protection, we strive to keep our premiums low. Claimants, their legal representatives and the insurers are on the same side. We will not be increasing our premiums; or changing our cover at this time. The data we hold does not cause immediate concern. Behaviours may change post 6th April 2023 and we will be keeping an eye on that; but, for now, we do not feel any drastic changes are needed.
Is your law firm looking to partner with a reliable and fair ATE insurer? One to protect your clients; and navigate through what is going to be a very testing time? If yes, then please do get in touch with me on 01483 514804 or via email to matthew.best@temple-legal.co.uk.
Matthew Best Cert CII
Head of Personal Injury & Clinical Negligence
01483 514804
Matthew Best Cert CII
Matt has an insurance background and joined Temple in 2011 having worked for 4 years in a leading insurance company where he was dealing with personal injury work. Matthew was promoted to Underwriting Manager and subsequently Senior Underwriting Manager taking on overall responsibility for Temple’s personal injury and clinical negligence underwriting department.
In 2022 Matt joined the board of directors as Director of ATE Partnerships. Matthew has cultivated fantastic relationships with our business partners for many years. His ability to build a clear understanding of their requirements and more importantly what is required to fulfil such requirements means he is ideally placed to support the strategic direction of the company.
Matt remains the head of the personal injury and clinical negligence department and is committed to all Temple’s business partners in order to deliver the highest level of service they expect. He is also responsible in making sure that Temple’s ATE and disbursement funding products remain competitive, but most importantly that they are fit for purpose for solicitors and their clients.
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