County Court considers costs rules in personal injury case (Khan v Aviva Insurance Ltd)
What are the practical implications of this case?
The decision offers a useful affirmation of the default costs rules that will be applied by the courts in fast track claims:
- implicit in the wording of CPR 26.5 is the principle that individual parts of a claim cannot be allocated to different tracks. Where a party believes a case to have been wrongly allocated, the proper remedy is to apply for re-allocation to the proper track
- the starting point remains the familiar rule at CPR 44.2, whereby unsuccessful parties will be ordered to pay the costs of the successful party. When identifying the successful party, the ‘most important thing is to identify the party who has to pay money to the other by deciding who has to write the cheque’ (at para )
- defendants should seek to protect themselves from costs liability by making appropriately pitched CPR 36 offers. In this case, the defendants had failed to make a sufficient offer
Practitioners will be familiar with cases where costs are assessed according to the principles applicable in different tracks. In such circumstances, Khan v Aviva is of practical assistance by reaffirming the court’s general discretion to award issue-based costs, despite the presence of more restrictive costs regimes. The case therefore provides a helpful route to resisting adverse costs orders. In addition, the route provided is well signposted, as the judgment provides useful guidance on when the normal rules will be displaced:
- the fact that the fixed costs regime is applicable suggests that the power to make alternative orders under CPR 44.2 should be exercised with caution
- if, after allocation and success at trial, a claimant nonetheless fails to win damages above the level initially required for allocation to the trial track, that is not automatically a sufficient reason to depart from the normal costs rules
- under CPR 44.2(4), when deciding any order on costs, the court must have regard to the parties’ conduct, successes at trial (even if partial), and offers to settle. ‘Conduct’ per CPR 44.2(5) includes before proceedings, the reasonability of raising, pursuing or contesting allegations or issues, the manner in which that is done, and any questions of exaggeration of claims. CPR 44.2(6)(f) (issue-based costs orders) can only be considered after the court has contemplated the orders at CPR 44.2(6)(a-c)—ie paying a proportion of another party’s costs, a stated amount in respect of another party’s costs, or costs from/until a certain date
- the case provides a useful judicial interpretation of cases cited by the defence:
◦ Green v Arriva North West Wales Ltd  QBD 25 (not reported by LexisNexis®) does not stand for a general proposition that if awarded damages do not exceed the small claims limit, then costs should be limited to those permissible on the small claims track. It simply underlines the court’s wide discretion as to costs, when taking into account the matters at CPR 44.3(4)
◦ Painting v University of Oxford  EWCA Civ 161,  All ER (D) 45 (Feb) was a case where the judge erred in exercising his discretion as to costs. He had found the claim to be exaggerated and therefore found wholly in the defendant’s favour. The case does not address the propriety of issue-based costs assessments in fixed costs but demonstrates the judge’s discretion. Kay LJ noted that the defendant’s protection lies in making appropriate CPR 36 offers
What was the background?
This was a claim in damages for modest personal injury and special damages including for credit hire and vehicle repairs, arising out of a minor road traffic accident. Although damages were valued in the claim as between £5,000 and under £10,000, no specific value was ascribed to the personal injury.
Liability was accepted—both parties made (ultimately unsuccessful) CPR 36 offers.
The trial was allocated to the fast track, the defendant arguing this was a low velocity impact claim and alleging fundamental dishonesty, relying on the decision in Molodi v Cambridge Vibration Maintenance Service and another  EWHC 1288 (QB),  All ER (D) 136 (May).
The judge at trial determined that the claimant failed to prove his claim for personal injury, but both that the vehicle had sustained damage and that the claimant was impecunious, allowing the credit hire claim in full. The judge declined to make a finding of fundamental dishonesty.
The parties failed to agree the costs order that should follow from the decision.
The claimant submitted that costs should follow the event, in accordance with CPR 44.2(2)(a) and the fixed costs regime in CPR 45.29B.
The defendant submitted that the claim had only been allocated to the fast track due to the failed personal injuries claim. It followed that:
- the claimant should therefore pay the defendant’s fixed recoverable costs under CPR 45.29F as regards the personal injury
- the defendant should pay the claimant’s small claims costs as regards the credit hire claim and the two sums ought to be set-off against one other
- the defendant relied, in part, on conduct issues
Alternatively, the defendant submitted it should pay the claimant’s costs, limited to those that would be recoverable on the small claims track.
What did the court decide?
The judge accepted that the personal injury aspect of the claim had resulted in the case being allocated to the fast track, but he accepted the proposition that different parts of the claim cannot be allocated to different tracks. The judge held that the claimant was ‘the successful party’ and declined to depart from the fast track fixed costs regime, or ‘the normal rule’ that costs follow the event.
He accepted there was a tension between the court’s general discretion as to costs (CPR 44.2(6)) and the apparent restriction of the court under a fixed costs regime to make an issue-based costs order, or award costs less than the fixed costs sum.
The judge determined that the fixed costs provisions did not oust the general discretion of the court in assessing costs, nor did it prevent the court assessing costs by an issue-based order if considered appropriate. However, against the background of the applicable fixed costs regime, the court’s discretion to do so should only be exercised with caution.
The fact that the sum awarded fell below the threshold of a particular track is not an automatic reason to depart from the normal rule concerning costs. The claimant was therefore awarded costs to be assessed on the normal fixed costs basis under CPR 45.29B.
Thanks to Rob Hammond for his contribution.
This article was first published on Lexis®PSL Personal Injury on 18 October 2019
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