QADER V ESURE: A PRACTICAL GUIDE TO THE APPLICATION OF FIXED COSTS AND ASSOCIATED ARGUMENTS
MATTHEW HOE >
Director of Dispute ResolutionSat 19 November 2016
There has already been much commentary on Qader v Esure  EWCA Civ 1109. The judgment is remarkable for re-writing an unambiguous rule. The results it generates are inconsistent. This note does not analyse those features, but is instead a purely practical guide.
Quick reference table
Applies to claims that start under RTA or EL/PL Protocol and exit before conclusion:
|Value of damages:|
|Settlement Stage:||£25,000 or less||More than £25,000|
|Before Part 7 issued||Fixed costs||Assessed costs|
|After Part 7 issued, before allocation||Fixed costs||Fixed costs|
|Allocated to fast track||Fixed costs||Fixed costs|
|Allocated to multi-track||Assessed costs||Assessed costs|
The nub of the judgment is that allocation to the multi-track dis-applies the fixed recoverable costs under CPR 45 Section IIIA. Proposed allocation is not enough and nor is the normal track being the multi-track. Paragraph 55 of the judgment is key on that point; and see also the section on ‘value’ below.
The judgment turns allocation into a very valuable opportunity. The parties’ directions questionnaires will now more often disagree on fast track or multi-track allocation, and there will be more allocation hearings.
Defendants should try even harder to make their final prospective Part 36 offer before allocation. Claimants should remember that multi-track allocation may backfire. Failing to beat a defendant’s Part 36 offer will mean the defendant gets costs after the expiry of the relevant period capped no longer by Section IIIA (CPR 36.20(12)) and capped only by the amount of damages (CPR 44.14(1) in QOCS cases).
Defendants should make more use of the tools to get allocation to the fast track. Remember, allocation per CPR 26.8(2) is concerned with the value of the claim at the time of allocation, not the value on the claim form. Defendants should make admissions for amounts not in dispute. Where the claim form includes heads of claim that were agreed and/or paid pre-issue, defendants should object to them in the defence. Where heads of claim have been agreed in principle but the amount is disputed and the payment made is for a lesser sum, defendants should cite the principle in Akhtar v Boland  1 All ER 644 to reduce the amount in dispute.
Of course, value is not the only feature considered for allocation. Claims above the multi- track threshold may still be suitable for the fast track, particularly if it can be shown that the trial can be done in a day.
Qader is concerned only with allocation, not with value. A claim with a value less than £25,000 which is allocated to the multi-track is still not subject to fixed costs.
This is a summary of the relevance of the value of damages.
The RTA Protocol and EL/PL Protocol have an upper limit of £25,000. Where the claimant has a reasonable belief the claim exceeds the upper limit, the claim should not be started in the Protocol. If the claim never starts under the Protocol, Section IIIA can never apply. See the section on ‘CPR 45.24’ below for the risks of not starting a claim under the Protocol. Where a Protocol claim turns out to be worth more than £25,000 and is taken out of the Protocol, Section IIIA may still apply. There is nothing in the rules that provides Section IIIA does not apply because a claim was wrongly started under the Protocol.
Claims worth more than £25,000 can be properly started in the RTA Protocol, because ‘vehicle related damages’ as defined in the Protocol are in addition to the upper limit.
Claims which are obviously worth more than £25,000 can also be started, wrongly, in the Protocol. There is no automatic value filter. There is speculation that some claimants do that to try and get a swift liability admission. Such practices, if indeed happening, should cease now the risk of fixed costs has been publicised by the judgment.
Where a claim exits the Protocol and settles before proceedings are started, fixed costs in Section IIIA currently apply only if damages do not exceed £25,000. That upper limit is stated in Part A of each of the fixed costs tables in Section IIIA. It applies only to pre-Issue settlements. Qader describes this as an anomaly and recommends that the Rules Committee removes the cap. That makes sense if claims worth more than £25,000 (the vehicle related damages ones) can start in the Protocol.
Once Part 7 proceedings are started, Part B in the tables applies and there is no reference to a damages cap there. Similarly there is no value cap on the trial advocacy fees in Part D of the tables.
The core territory of Qader is allocation:
• If a claim settles before allocation, fixed costs apply whatever the value of damages.
• If a claim settles after allocation to the fast track, fixed costs apply, whatever the value.
• If a claim settles after allocation to the multi-track, fixed costs do not apply, whatever the value.
Small claims track
If a claim settles after allocation to the small claims track, fixed commencement costs under CPR 45 Section I apply. The position is more complicated if claims settle before allocation where the small claims track would be the normal track. If the court orders assessment of costs, then the power in CPR 46.13(3) can be invoked to limit costs to small claims costs. If the court orders fixed costs or the claim concludes by Part 36 acceptance, then Section IIIA fixed costs may well prevail as there would be no procedural path to small claims costs. This should be considered on a case by case basis.
The case of Khan heard and decided with Qader confirms that the exceptional circumstances test in CPR 45.29J can be invoked only at the conclusion of the claim. That test has been blithely cited as an escape route from fixed costs where damages exceed £25,000. That is unlikely to work. Value alone is unlikely to be an exceptional circumstance. That circumstance will arise in many cases, so is hardly exceptional. Also, the applicability of fixed costs will have arisen because the claimant started his claim in the Protocol. In Costin v Merron  3 Costs LR 391, Leveson LJ observed that circumstances caused by the claimant’s own failure to take an appropriate step would not engage exceptional circumstances. The Rule requires that the circumstances have to make it appropriate to allow greater costs; not all exceptional circumstances will.
Should a budget be done or not? The trigger for filing a budget is likely to come in the notice of proposed allocation before actual allocation to the multi-track. At that point, if a claim started under the Protocol, fixed costs still apply and thus CPR 3.12(1)(d) excludes budgeting.
Parties must make pragmatic decisions. If the claim is likely to proceed and be allocated to the multi-track, budgets should be done. If it is likely to settle before allocation, or be allocated to the fast track, parties should save the time and costs of preparing budgets. If it ends up that fixed costs applies, no extra costs will be recoverable for the unnecessary budget. Preparing a budget in itself cannot dis-apply fixed costs, nor does it imply some agreement that fixed costs do not apply any more than any other routine procedural step would. The costs of budgets will be recoverable only if the claim is allocated to the multi-track.
There will be great temptation for claimants to avoid fixed costs by not even starting claims under the Protocols. Where that is obvious avoidance behaviour in a low value claim, the defendant should insist on a CNF.
In cases where the avoidance only becomes clear to the defendant once they have more information about the claim, then CPR 45.24 arguments may be raised to limit the claimant to Protocol costs. The defendant only needs to show that the Protocol applied and the claimant did not follow it. There is no test of reasonableness under that provision in the Rule. Claimants could end up with a significant costs recovery shortfall.
Matthew Hoe is the author of a Practical Guide to Costs in Personal Injury Cases, which is available now from Law Brief Publishing and which addresses several of these topics in more detail.
TAKE A LOOK AT