Legal Cost Specialists

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 [1956] 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 [1999] 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) [2001] 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 [2004] 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 [2001] 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.

10 thoughts on “Fixed costs – "exceptional circumstances"”

  1. I don’t think there is any real tension. All the “second approach” cases you cite are ones that went to trial and concern costs orders made by trial judges. If you run the ball that far and lose on an issue, you may be deprived of your costs of it, by the trial judge. But it is a quite different thing to say that the proportionate cost of initially investigating and excluding a condition that might realistically be connected to the accident should be disallowed. Moreover, since this was a CPR 45(II) case, the defendant must have agreed to pay the claimant’s costs in principle – see CPR 44.12A. This being so, it was not open to the costs judge to disallow any part of the claimant’s costs on any grounds other than reasonableness/disproporionality – see Lahey v Pirelli Tyre.

    The obiter dictum of Chadwick LJ in Shirley v Caswell is just that – it is a statement of what the judge believed, wrongly, was the approach on detailed assessment. The SCCO judges do not take this as a correct statement of the law, in my experience. The Francis v Francis was authoritively restated and approved by the Court of Appeal in U v Liverpool CC of course.

  2. Correction:

    The Francis v Francis TEST was authoritively restated and approved by the Court of Appeal in U v Liverpool CC of course.

  3. Jacques, thank you for another valuable contribution (as always).

    What about the case of McGlinn v Waltham Contractors Ltd & Others [2005] EWHC 1419 (TCC)?

    There Judge Peter Coulson QC held: “Accordingly, as a matter of general principle, it seems to me that claims which were made at the time of the Pre-Action Protocol procedure, but which were then deliberately excluded from the court proceedings (because those proceedings were ‘framed narrowly’) bear, in Sir Robert Megarry’s words, ‘no real relation’ to the subject of the litigation. The costs incurred in dealing with them would not therefore be costs incidental to those proceedings.”

    The Carlon v Domino’s Pizza case concerned a case that settled pre-proceedings but surely the same applies. If you don’t pursue the head of claim it is not “incidental” to the claim.

  4. The situation in Carlon v Domino’s Pizza is far from clear.

    If I raise allegations x, y and z and the defendant specifically denies z, but makes an offer in full and final settlement, does that mean I have only won on x & y?

    No, the claim has settled at a compromise avoiding the litigation risk. No issues have been abandoned and therefore all costs incurred are payable subject to reasonableness.

    I couldn’t see anythng in the judgmemt that would give the impression that the psychiatrical injury claim was abandoned, merely that the treating practitioner’s evidence was 50/50.

    I admit I have only scanned through it.

    ——————————————-

    To me, the issue of recovery and disallowance must be dealt with on a case-by-case basis.

    On one hand, the court can’t allow all costs incurred by a claimant no matter how far the settled claim falls from the primary allegations, but I think there is reasonable scope to recover the costs of preliminary investigations that are necessary to refine or crystalise the claim.

  5. I think it all boils down to the claim that is actually brought. Suppose the case of an RTA where a pregnant woman suffers classic whiplash symptoms, but also miscarries 7 days later. The solicitor instructs a gyno, who opines there is no relation, so issues just for the spinal injury. I would be confident that a judge would hold the gyno’s fee recoverable, as incidental to the claim which was made, that being a PI claim. I would add that any other result would seem quite wrong. And, if not recoverable in costs, surely in these circs the gyno’s fee would be a foreseeable result of the RTA which could be recovered in damages?

  6. I agree with Jacques example above. Stretching it further the solicitor would potentially be negligent if the miscarriage was actually attributable so they have to confirm the position why way of other

    A solicitor should not have to face a situation whereby he has to to exclude a possibility / head of loss otherwise face a potential negligence action but then be out of pocket for doing so as the actual report wasnt favourable to the PI claim.

    In my opinion there is a difference to considering and excluding a head of loss to that of failing on a head of loss that was pursued

  7. Whilst it is fair to say that Carlon settled on commercial terms having regard to the litigation risk and without any aspect of the claim formally being abandoned, had the treating consultant been more supportive, quantum would have far exceeded the eventual settlement sum.

    Going back to basics, I prefer the first school of thought. The question to be considered at assessment of costs (particularly in the context of a minor where any settlement would be subject to court approval), is whether a particular step was reasonable. It is implicit in the Judgment that the judge considered that a full investigation of the Claimant’s anorexia was a reasonable step. He doubted whether the settlement would have been approved without it. In fact he went further by reaching the conclusion that the fact that these investigations were required was enough amount to “exceptional circumstances” in order to dis-apply the limits of the FRC regime.

    In the context of any claim for personal injury, a proper investigation of the Claimant’s symptoms will generally be reasonable, particularly where an expert (or indeed the client) eludes to the possibility of a causative link. Obviously the less serious the incident, the greater level of scrutiny that will be paid to the question of whether instruction of a particular expert was reasonable, regardless in my view, whether the expert evidence was supportive (assuming that to some extent the Claimant succeeded in relation to a claim for general damages). I consider that the “second school” can only apply in situations where the Claimant was unsuccessful in relation to an entirely separate head of claim, i.e. loss of earnings. In those circumstances, one can see how an issue based costs Order would be more attractive.

    I also consider that it goes without saying that continuing to prosecute elements of a personal injury claim without supportive evidence (or as it often turns out, the practice of shopping around for a helpful expert) will generally fail the test of reasonableness.

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