Efficiency in the Fixed Costs Regime

A reluctance to progress cases is an allegation historically levelled against Claimants and Defendants in almost equal measure. However with fixed recoverable costs looming threateningly over the Claimant profession, this is likely to become an increasingly one sided concern.
Under hourly rate costs (in theory at least) there would always be motivation for a paying party to achieve a time efficient conclusion. After all if the Claimant is going to be successful, better to minimise the losses by ensuring legal costs are as low as possible. Under a fixed costs regime can the same really be said?
If compelling the Claimant to progress a case carries a relatively small and calculable cost, or potentially no additional cost at all, the primary motivating factor for the paying party to achieve a swift settlement is gone. To the contrary, for Claimant practitioners working within a fixed costs regime it is critical that settlements are achieved as efficiently as possible. Any inefficiency or delay will compromise the already modest profit margins achievable in such matters. After all, additional work no longer automatically equates to additional costs.

‘Additional work no longer automatically equates to additional costs’  

Fortunately the CPR gifts the Claimant practitioner a potent tool with which they can force Defendants to act in the efficient manner which suits the Claimant; or else suffer considerable consequence for failing to do so. The humble Part 36 offer.
The recent decision in Phonographic Performance Ltd v Raymond Hagan [2016] EWHC 3076 (IPEC) (overview available here) serves to illustrate the value of a well-placed Part 36 offer when operating in a fixed costs regime.


It has now been clearly established that if a Claimant achieves Judgment in excess of their own Part 36 offer they will escape fixed recoverable costs and will (conduct permitting) recover indemnity costs from the date of expiry of the offer instead.
A binding Court decision is not yet available to confirm, but it seems the natural extension of the Court’s stance is that a Claimant will also benefit from indemnity costs should the Defendant accept a Part 36 offer out of time, but prior to a Judgment. If this were not the case, Part 36 offers would not hold any weight over Defendants except in the minority of cases which proceed to a final hearing. This would forgo the generous outcome which Claimants are intended to benefit from when beating their Part 36 offer as per Broadhurst & Anor v Tan & Anor [2016] EWCA Civ 94.

While we await a decision to confirm the above, the lesson to learn as a Claimant practitioner is to make your reasonable Part 36 offer to the Defendant as soon as you can properly value the case. This will be in your client’s best interests as they will be far more likely to benefit from an uplift to their damages in accordance with CPR 36.17(4)(d). It will also be in your own interests as making a reasonable Part 36 offer opens up the possibility of recovering indemnity costs on further work undertaken. Such costs are likely to be considerably higher than the equivalent fixed costs.

‘The lesson to learn is to make your reasonable Part 36 offer to the Defendant as soon as you can properly value the case.’

Any offers must of course be placed in the best interest of your client, but the days of extended negotiations suiting Claimant solicitors and for that matter their clients, are over.