Fixed costs – "exceptional circumstances"
The predictable costs regime allows for costs in excess of fixed fees to be allowed in certain circumstances under CPR 45.12(1):
“The court will entertain a claim for an amount of costs (excluding any success fee or disbursements) greater than the fixed recoverable costs but only if it considers that there are exceptional circumstances making it appropriate to do so.”
The issue of what amounts to “exceptional circumstances” was considered in a recent case by District Judge Wyatt in Carlon v Domino’s Pizza (Birmingham CC 27/8/2010) (judgment available on Lawtel).
The case was a relatively routine fast track road accident case except for the fact that the claimant was a minor and an initial psychological assessment suggested that the accident may have been responsible for the claimant developing anorexia nervosa and further investigations were undertaken.
The judge concluded that:
“I have come to the view that the element of the possibility that there was a connection between her eating disorder or its exacerbation and this accident is and amounts to in itself exceptional circumstances. … [T]he possible connection to a severe eating disorder, particularly one that led to a prolonged period of inpatient treatment, was something that took this case well outside the normal range of orthopaedic and psychological consequences of a road accident that would be otherwise likely to fall within the fast track regime.”
The judge was reinforced in his view by virtue of the fact the claimant was a child and it was appropriate to fully investigate this element.
Costs in excess of fixed costs were therefore allowed.
On the face of it, this decision cannot be criticised. An eating disorder caused by an RTA must be ““exceptional circumstances”. There is, however, one further element that does not appear to have been argued before the judge.
Upon further investigation the treating psychiatrist was unable to directly attribute the onset or acceleration of the eating disorder to the accident. The claim therefore settled for £3,950 with, presumably, no element to reflect the eating disorder.
This raises an interesting issue of law and one in which there appear to be two schools of thought.
The first one is that the reasonableness of work claimed is to be judged as at the date it was undertaken. Hindsight should not be applied (Francis v Francis and Dickerson  P 87 at 91.). The legal representatives would have clearly been negligent not to explore this issue (although that might be regarded as being a solicitor/own client problem) and therefore acted entirely appropriately investigating the issue further. The additional costs incurred should be allowed to reflect this “reasonable” work even if it did not result in higher damages being recovered.
The second school of thought, and one that has found increasing favour in recent years, is that a party may be deprived of costs in relation to a head of claim on which they have lost and regardless of whether they were “unreasonable” in pursuing that head:
• In AEI Ltd v Phonographic Performance Limited  1 WLR 1507, Lord Woolf MR stated at 1523H:
“…it is no longer necessary for a party to have acted unreasonably or improperly to be deprived of his costs of a particular issue on which he has failed.”
• Referring to this judgment Longmore LJ, in Summit Property Ltd v Pitmans (A Firm)  EWCA Civ 2020, at paragraph 16, approved this view and went further:
“In my judgment, it is also no longer necessary for a party to have acted unreasonably or improperly before he can be required to pay the costs of the other party of a particular issue on which he (the first party) has failed. That is the substance of what the Master of the Rolls was there saying.”
• In Dudley Fleming v Chief Constable of Sussex  EWCA Civ 643, Potter LJ observed at paragraph 36:
“The principles are too well known to require to be set out in detail. The pre-CPR working rule to be found in the judgment of Nourse LJ in Re Elgindata Ltd (No 2) 1 WLR 1207 was modified by the observations of Woolf Lord in AEI Rediffusion Music Ltd v Phonographic Performance Ltd to the effect that it is no longer necessary for a party to have acted unreasonably or improperly to be deprived of his costs on a particular issue on which he has failed.”
• In the case of Shirely v Caswell  1 Costs LR 1, Chadwick, LJ, giving the judgment of the Court of Appeal, stated:
“The costs of issues abandoned, or not pursued at trial, ought, prima facie, to be disallowed against the party incurring them on an assessment of the costs of that party by the costs judge – because, again prima facie, they are costs which have been unnecessarily incurred in the litigation.”
In this case the claimant was awarded additional costs (ie non-fixed costs) in relation to work undertaken pursuing a potential head of claim that was then abandoned (ie the eating disorder).
There remains a tension in the authorities as to the correct approach to the “blameless”, but ultimately unsuccessful, claimant who fails in relation to a specific head of claim.