Shortchanged or overcharged

Part 45.1 and 45.3 of the CPR provide for fixed costs is a limited set of circumstances (see table below).

In each case the costs are fixed 'unless the court orders otherwise'. To date there has been very little guidance on when the court should exercise its discretion and inevitably decisions by the county courts have been inconsistent.

Room for debate

The provisions pre-date the Woolf reforms having their roots in RSC Order 62 Appendix 3. Some room for debate remains about what constitutes a 'specified sum'. Under Order 62, reference is made not to a 'specified sum' but to a claim for a 'liquidated sum' or 'debt'. This would not include a claim for damages. In Amber Construction Services Limited v London Interspace HG Limited [2007] EWHC 3042 (TCC), Mr Justice Akenhead recognised the application of the current section to debt collection claims:

'CPR 45 recognises that many sets of proceedings brought in court will be in the nature of debt collection exercises. Many such claims will not involve the use of independent solicitors but will be handled internally by the claimants in question. In many such cases the claimants will not incur significant costs and may well not want to incur further costs arguing that they are entitled to more than fixed amounts'.

For instance, fixed costs suit energy companies seeking payment from huge numbers of customers. The work involved is typically minimal while the debtors are often impecunious. However, that is not the end of the story. Referring back to RSC Order 62, certain claims for damages, including claims for repairs, were brought within the fixed costs provisions by further rules. Against this background, it would appear that the concept of a 'specified sum' is designed to be broader in application than the former concepts associated with debts. It could be argued that claims for hire and/ or repair in RTAs are covered by section I. This appears to be how the courts have approached the question when asked.

When should the court exercise its discretion?

Consider the case of Provident Personal Credit v Securicor Omega Containers (York County Court, 21 November 2005). The judge found that a claim for a 'liquidated sum' of £18,923.38 following a road traffic accident was not a case where the court should order otherwise than in accordance with the fixed costs under rule 45.3.

The judge suggested that additional costs may be appropriate where a case is 'hugely complicated'. This raises the bar too high and does not reflect the test imposed by the rule.

Some general principles can be gleaned from the Amber case. The claimant, a contractor, was engaged by the defendant to demolish residential structures. An adjudicator decided the claimant was entitled to a total payment of approximately £80,000, which the claimant sought to recover by letter dated 17 October 2007. The defendant disputed the jurisdiction of the adjudicator and maintained that it had a defence and counterclaim. Shortly thereafter the claimant issued proceedings claiming the court fee and costs 'TBA'. At the same time the claimant applied for abridgment of the time for acknowledgment of service and for summary judgment. Witness evidence and exhibits were attached. The defendant responded by filing an acknowledgment of service admitting the claim in full and then sought to restrict the claimant to fixed costs.

The claimant's first argument, that fixed costs did not apply since fixed costs had not been claimed in the claim form, was met with short shrift. Such a solution would render the fixed costs provisions worthless in any case where the claimant sought additional costs. In rebutting this argument, the court makes it clear that the discretion lies in the hands of the court and not the claimant. However, Mr Justice Akenhead exercised his discretion to award the reasonable costs of theproceedings for the following summarised reasons:

• summary and prompt enforcement of the decision of an adjudicator is appropriate;
• the defendant had received a very clear warning that proceedings would be issued without further notice;
• the defendant put forward an apparently comprehensible defence to enforcement;s
• given the nature of the proceedings, the defendant should have been appreciated that significant costs could be incurred; and
• the claimant was justified in issuing proceedings and it would not be fair to limit the claimant's costs in the circumstances.

Over £6,000 costs were ultimately allowed. It would appear therefore that the full costs of the proceedings were allowed, as opposed to just the costs caused by the intransigence of the defendant. Overall, the justification for departing from fixed costs is focused on fairness.

Further assistance is gained by comparing other fixed costs provisions. Section I of Part 45 is utilised to fix small claims track costs save where a party has 'behaved unreasonably' (CPR 27.14(2)(g)). This is plainly a more restricted discretion. Also, a distinction can be drawn with the wording of r.45.12, which allows the court to entertain costs claims that depart from section II fixed costs where there are 'exceptional circumstances'. The discretion under section I is clearly much broader. Costs should be recoverable generally where:

• the defendant has unreasonably delayed or indicated an intention to fight the case and the claimant has thereby incurred reasonable costs significantly in excess of the fixed costs; or
• the nature/ complexity of the case at hand is such that the claimant has reasonably incurred costs significantly in excess of the fixed costs in resolving the matter.

Such an approach recognises the rights of a claimant to institute proceedings and recover costs where appropriate, and the rights of a defendant not to be unnecessarily lumbered with costs in addition to damages where the claim is admitted or not defended. Even if the defendant has reasonably delayed settling a case, the claimant may have necessarily incurred significant costs by that point. In such circumstances it will generally be just for the defendant, who let us not forget is ultimately the wrongdoer, to pay the costs.

RTA claims with no personal injury element

The Amber case is a clear example of where it is fair to award full costs. What about when a case is, contrary to proceedings in the TCC, entirely straightforward and commonplace? Take the example of a RTA claim for hire and repair that is valued at £5,025. In such a case the claimant's costs are vulnerable to attack from all sides. For instance, the defendant can settle part of the claim so that the case is allocated to the small claims track. Rule 26.8(2) provides that in assessing the financial value of a claim the court will disregard any amount not in dispute. Where the small claims track is not appropriate, the position is complicated by the predictable costs regime under section II of Part 45. If the case is settled pre-issue then the claimant solicitor should recover predictable costs in accordance with section II of Part 45.

Incidentally, it should be remembered that to settle without making provision for costs will, in all likelihood, result in costs being irrecoverable (see Lloyds TSB Group Plc v Allen (Medway County Court, 20 October 2005)). However, if no settlement can be reached proceedings have to be issued. If the defendant pays within 14 days of receiving the particulars of claim, fixed commencement costs are recoverable, 'unless the court orders otherwise'. The court should exercise its discretion in every case where fixed costs would have applied to a pre-issue settlement. Otherwise, two main problems arise:

Uncertainty prevails and satellite litigation is likely. Defendants will refuse to settle cases with provision for predictable costs thereby forcing the claimant to issue proceedings. It follows that court time and resources are wasted. While the same problem arises with every claim for a specified sum, it should not be forgotten that fixed fees were introduced to increase certainty, promote early settlement and save costs;

The fixed level of predictable fees is called into question. Given the inclusion of 'property damage only' claims within the scheme, it is fair to assume that such cases were included within the statistical analysis of what the fixed rate should be. In Fenn and Rickman's report of 31 January 2003, the statistical data refers to a claim in which base costs plus disbursements amounted to £125. This points to section I fixed costs. Claims that don't involve a personal injury element will typically fall at the bottom of the scale in terms of the costs. If such cases don't result in the payment of predictable costs in practice then their inclusion in the predictable costs regime is likely to have unfairly distorted the predictable costs in favour of defendants (NB I have not been able to obtain the actual statistical data used).

Various authorities have made it clear that the fixed costs regime must be considered as a whole. Accordingly, section I must be considered in light of section II. In the Lloyds case above, the judge envisaged an application for the court to exercise its discretion under section I of Part 45 where a defendant refused to settle with provision for predictable costs. Assuming the court takes this approach, a final problem arises.

Once proceedings have been issued, predictable costs under section II are not allowable and the court will have to assess what costs have been reasonably incurred. In such circumstances a diligent and efficient solicitor may ultimately recover less than the predictable costs. There would appear to be no remedy for this anomaly. In Butterworths Personal Injury Litigation Service, Issue 88, V-19, the suggestion is that the rules should provide for minimum costs in line with what the predictable costs would have been.

With repair/ hire claims worth in excess of £10,000, which fall outside the predictable costs regime, the application of the discretion is not coloured by the wider fixed costs regime so normal principles arguably apply. Here there are no swings and roundabouts to bear in mind and cases should be rewarded according to fairness in the particular case. The result may be that the costs recoverable on a claim for hire and repair worth £10,500 are lower than for a predictable costs claim worth less!

Until there is a higher authority specifically addressing the position with regard to hire and repair claims, the fight will go on. Both claimants and defendants have legitimate arguments to advance. It remains to be seen whether anyone has the wherewithal and inclination to pursue an appeal. For now, claimants should ensure that the defendant receives an early letter of claim with supporting evidence. How much work is done on a file should largely depend on the stance taken by a defendant in response.

What is clear is that the fixed costs provisions are in need of harmonisation. Given the anomalies that have been identified in the recent cases of Kilby v Gawith [2008] EWCA Civ 812, where recovery of a success fee was allowed despite the availability of insurance, and Burton v Lamont [2007] EWCA Civ 429, where the impact of Part 36 offers on fixed costs were considered, a full review of fixed costs generally is probably now appropriate.