Question: How are defendant’s fixed recoverable costs calculated?
Answer: The extension of Fixed Recoverable Costs sets the level of recoverable costs for both claimants and defendants.
Where the claimant wins, the claimant’s costs are set by reference to the damages as agreed/awarded (see CPR 45.45(1)(a)(iv) and CPR 45.50(2)(b)(iv)). It is the settlement value which is determinative.
The position is very different when the defendant is awarded costs.
CPR 45.6(2) and (3) provide that the defendant’s costs shall be calculated by reference to the value of the claim and that this shall be based on “the amount specified in the claim form, without taking into account any deduction for contributory negligence, but excluding – (i) any amount not in dispute; (ii) interest; or (iii) costs”.
Previously, the only likely sanction for a claimant serving a claim form giving an unrealistically high value to the claim was the possibility that the issue fee might be knocked down at detailed assessment. Now, there is the risk that any adverse costs may be significantly higher as a consequence.
Certainly, outside personal injury, solicitors need to give very careful advice to their clients when deciding at what level to pitch a claim.
Even in personal injury claims, there is a danger in submitting inflated claims, notwithstanding Qualified One-Way Costs Shifting:
- If the claimant does not have the benefit of ATE/BTE cover that provides protection against failing to beat Part 36 offers, an inflated claim may lead to a much higher proportion of damages being eroded for the period where the defendant is awarded costs. Claimant solicitors leave themselves open to negligence claims if they have encouraged their clients to submit claims at an unrealistic level.
- Even if the claimant has the benefit of ATE/BTE protection against failing to beat a Part 36 offer, insurers may not be willing to fully cover the adverse costs order if it is unnecessarily high as a result of pitching the claim at an unrealistic level.