Under the new Fixed Recoverable Costs regime, there are various exceptions where the court may allow an amount greater than the specified fixed costs. In particular:
- The Court may consider a claim for an amount of costs which is greater than the fixed recoverable costs where there are “exceptional circumstances” (CPR 45.9(1)).
- CPR 45.10(1) allows the court to consider a claim for an amount of costs which is greater than the fixed recoverable costs where a party or witness is vulnerable, that vulnerability has required additional work to be undertaken and by reason of that additional work alone, the claim is for an amount that is at least 20% greater than the amount of fixed recoverable costs.
The rules provide no guidance as to how the additional amount is to be calculated.
The most obvious approach would be to simply disapply fixed costs where CPR 45.9(1) is engaged and assess all the costs on the ordinary time/hourly rate basis. To the extent to which CPR 45.10(1) applies, the receiving party would identify the “additional work” required and the court would assess those costs on the ordinary time/hourly rate basis (with this needing to produce a figure at least 20% greater than the fixed costs to recover anything further).
An alternative option, which has been suggested, is that the court might allow a percentage uplift to the fixed recoverable costs. For example, a 30% uplift might be allowed where there were “exceptional circumstances” and, on a broad-brush basis, the judge decided a 30% uplift would adequately compensate the receiving party for the additional work generated by those exceptional circumstances.
The problem with this approach is that it would appear to immediately crash into the old problem of the indemnity principle. To the extent to which the costs are fixed, the indemnity principle does not apply (as per Butt v Nizami [2006] EWHC 159 (QB)). The recoverable costs are determined by rules of court, not what costs the receiving party has incurred. In certain circumstances the rules of court also provide for a fixed uplift on the fixed recoverable costs (e.g. a 35% uplift where a claimant succeeds on a Part 36 offer (CPR 36.24(5)) and a 50% uplift where there is unreasonable behaviour (CPR 45.13(2)). Again, this is prescribed by rules of court and the indemnity principle does not come into play.
However, it is far from clear that the same would apply to any application under CPR 45.9(1) or 45.10(1). The rules of court do not set the additional amount that may be allowed. As such, even though the power to depart from the fixed recoverable costs clearly exists, it is difficult to see how this power can be exercised in such a way as to depart from the indemnity principle. At the very least, the court would need to have a Bill of Costs or Statement of Costs (containing the standard statement that the overall costs claimed did not exceed the amount the client was liable to pay) to show the proposed percentage uplift would not exceed the total costs incurred. Even that is probably not enough as the indemnity principle is not simply applied on a global basis but also on an item-by-item one (as per General of Berne Insurance Co v Jardine [1998] 2 All ER 30). As such, it appears that a summary or detailed assessment would be necessary in respect of any attempt to depart from the fixed recoverable costs.
