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Broadhurst v Tan – a Sorely Misunderstood Judgment

March, 8, 2016

At the end of February we reported on the judgment in Broadhurst v Tan. This involved a decision surrounding the impact of Part 36 offers on Part 45 fixed costs. See here for details.

Since we published our report a wide variety of commentators have written extensively about the case. In our opinion it is clear that some have misinterpreted the judgment in a number of key areas.

Having been directly involved in this case, it is our view that some of the interpretations are incorrect on a number of fronts, and would therefore wish to clarify the position as we see it.

 

Misinterpretation 1 – a claimant who beats their own Part 36 offer gets both their fixed costs to trial and indemnity costs based on time spent from the date of expiry of the offer.

In Broadhurst the court has ordered that the claimant is entitled to their fixed costs up to the date of expiry of the Part 36 offer (“Post Allocation, Pre Listing” (£1,880.00 plus 20% of damages)) and indemnity costs thereafter.

As a result the interpretation some commentators are trying to place on the decision is unsustainable.

Their alternative requires one to disregard the provisions of Part 36 whereby standard basis costs (fixed costs) are recoverable to the point of expiry of the offer and indemnity basis costs (hourly rate/time spent costs) are recoverable thereafter.

The fact a party is entitled to indemnity basis costs does not mean they are also entitled to the fixed costs. The Court of Appeal was clear that there is a distinction between fixed costs and indemnity costs, and that the latter do not include the former.

 

Misinterpretation 2 – the decision extends to mean the removal of the cap on provisional assessment costs.

Fixed costs are obviously not subject to assessment. For other costs, where costs proceedings do not go beyond provisional assessment, the costs of the assessment itself are capped at £1,500 (CPR 47.15).

The costs of provisional assessment can also be determined on either the standard or the indemnity basis before the cap is applied. The only differences that exist between a standard and indemnity basis assessment is that for the latter:

  • Proportionality does not apply.
  • The benefit of doubt is shifted from the paying party to the receiving party.

(CPR 44.3 (1) makes it abundantly clear that, regardless of the basis of assessment, costs must be both reasonably incurred and reasonable in amount).

The Court of Appeal’s decision in Broadhurst does not provide an authority for the suggestion that an order for costs on the indemnity basis renders void the cap on provisional assessment costs.

In Broadhurst the Court of Appeal concentrated on resolving a specific conflict between Part 36 and Part 45. A similar conflict does not exist between CPR 36 and CPR 47 (Procedure for Assessment of Costs and Default Provisions), so to extrapolate the argument in this way is, in our opinion, wrong.

To argue that the cap is dis-applied where indemnity costs are ordered must also infer that the cap is dis-applied where standard basis costs are ordered (because any conflict between indemnity costs and the cap also exists between standard basis costs and the cap). The cap is then rendered null and void which cannot have been the intention of Parliament when establishing CPR 47.15 in the first place.

 

Misinterpretation 3 – indemnity costs are also awarded on late acceptance of a Part 36 offer.

Costs following acceptance of a Part 36 offer were never considered by the Court of Appeal in Broadhurst. Again, to extrapolate the decision further is unmerited and appears to be hung on the Court of Appeal’s reference to the last staging point in paragraph 31 .  That reference relates to the staging point at which the Part 36 offer expires.  That analysis sits neatly with our assessment of point 1 above which in turn ties in exactly with the orders made by the Court of Appeal in Broadhurst.

It is important to note the distinction between CPR 36.17 (Costs Consequences Following Judgment) and CPR 36.13 (Costs Consequences Following Acceptance of a Part 36 Offer).

CPR 36.17 (CPR 36.14A in the Court of Appeal’s judgement) is concerned with those cases in which judgement has been entered and a claimant is only entitled to the Part 36 “benefits” where “judgment against the defendant is at least as advantageous to the claimant as the proposals contained in a claimant’s Part 36 offer”.

Various commentators have suggested that as CPR 36.17 refers to “judgement” rather than “a trial” then a claimant whose Part 36 offer is accepted after the relevant period has expired will be entitled to the Part 36 “benefits”.

To apply that interpretation would be to completely ignore CPR36.13(5) which specifically considers the costs consequences of accepting a Part 36 offer after the relevant period has expired. CPR 36.13(5) is clear regarding the costs orders applicable where a Part 36 offer is accepted out of time and neither indemnity costs nor any of the other Part 36 benefits are applicable.

 


 

The debate sparked by the decision in Broadhurst v Tan will no doubt continue to rumble on.  It must be remembered that the Court’s focus was in dealing with a conflict between CPR 36 and CPR 45.  It did not seek to address any other actual or perceived conflicts in the Rules. Whilst some commentators may have extended the decisions in this case to other areas, ultimately their arguments will need to be tested in court.

We will continue to monitor the situation and advise clients appropriately.

To discuss any of the issues raised contact Patrick McCarthy on 0161 413 1342 or email patrick.mccarthy@h-f.co.uk.

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