Water cooler and triangular chairs

Quid game – fixed costs; pick your battles

30 January 2024. Published by Thom Lumley, Partner and Chris Gower, Associate and Sally Lord, Knowledge Lawyer

Ordinarily, the claims that make the headlines are those that have the highest value or the most significant impact on the public. With the costs landscape ever-changing in civil claims, without careful planning and strategy, even modest claims can end up biting defendants in the longer-term.

The recent claim of Drury v Yorkshire Aggregates is one such matter. In Drury, a letter of claim was sent following an accident at work. The injury was to a finger, which required an operation and resulted in the claimant losing part of the bone as well as impaired sensation and pain when it is cold. The letter of claim valued the claim in excess of £25,000 and therefore was not sent under the Pre-Action Protocol for Low Value Claims.  

The claimant ultimately settled his claim by accepting a Part 36 offer (albeit out of time) for £11,000 and the claimant's reasonable costs were to be paid on a standard basis if not agreed. The claimant's solicitors submitted a bill of costs for £18,590.04.

The defendant contended the claim was not worth more than £25,000 and should have been resolved under the Pre-Action Protocol for Low Value Claims; therefore, the claimant was only entitled to fixed costs under CPR 45. The District Judge disagreed with the defendant and so the defendant appealed. 

The question before the Court was an objective one: "was the valuation in excess of £25,000 objectively reasonable at the time of the assessment, namely the date of the letter of claim on 27 June 2018, based on the evidence available at that time".

As it was an appeal, the Judge's role was not to analyse the evidence that had already been presented to the District Judge but to look at how the District Judge reached the decision. That was held to be an assessment of the claimant's valuation based on the information known to them at the time.  It did not matter that the expert evidence had not been obtained at that point. In accordance with the JC guidelines at the time, the claimant's injury fell under bracket 7(k) - £10,670 to £16,470. There was no real claim for special damages, so the main issue was therefore in respect of the claimant's claim for disadvantage at open labour market. Although the expert report later described the claimant's disadvantage as "modest", the claimant's solicitor valued this in the claimant's schedule of loss as £50,000 (based on two years' net income of £25,000).

The District Judge drew on the fact that the claimant's detailed work history had been obtained and it had been noted that the claimant may not be able to carry out his previous job roles (should he need to change his current employment) to the same ability as he could have before the accident. The District Judge found it was therefore reasonable for the claimant to believe, at that time, that his claim would be worth more than £25,000.  This was on the basis that it was reasonable to apply bracket 7(k) and, whilst there was likely to be no loss of earnings claim, it was reasonable to anticipate a claim for disadvantage on the open labour market. 

In the appeal, the defendant argued that the onus was on the claimant to explain why the claim could reasonably have been valued at more than £25,000 in light of the £11,000 settlement and that it was crucial to take into account that the claimant's solicitor had not identified bracket 7(k) as applying, or quantified the claim for labour market disadvantage at the time that the letter of claim was written.  However:

  • The Judge disagreed that the burden of proof rested on the claimant to prove that its valuation was reasonable: the relevant question for the judge to answer was whether the claimant's valuation was objectively reasonable. The District Judge had correctly taken into account that, since the costs assessment was to be undertaken on the standard basis, the paying party had the benefit of the doubt in accordance with CPR  44.3(2)(b).  
  • In relation to the fact that the claimant's solicitor had not documented their reliance on bracket 7(k) or quantified the labour market disadvantage when the letter of claim was sent, these issues did not tip the balance in the defendant's favour.  This was not a case where the appeal court could conclude that there was no evidence supporting the District Judge's findings and therefore the appeal failed. 

Despite the ruling in the claimant's favour, the court clarified that CPR 44. (3) (the provision entitling the court to take into account the claimant's conduct) does empower the court to allow only fixed costs if the claimant's valuation of the claim was unreasonable – something that will no doubt be the topic of many judgments as the extended fixed recoverable costs reforms bed in.

Key Takeaways

  • Pick your costs battles wisely – or reap costs for costs sake!
  • Challenge quantum early to understand the basis of any valuation; both good approach for quantum analysis and reserving as well as future costs assessment. 
  • Give extra-thought to the information available to the claimant at the time of writing letter of claim; especially, information that was available but that the claimant might not have considered: medical, social media accounts and DWP records. The court may take this into account when assessing the objective reasonableness of the valuation. 
  • As the appeal court noted, the threshold that the defendant has to meet is proving that the claimant's valuation was unreasonable

For further information on any of the issues raised in this article, please contact Thom Lumley or Chris Gower.