Page 23 - PIC e-newsletter Spring Issue 8

The Lowin Effect
Caroline Cousins reports on the impact
of the Court of Appeal judgment in
W Portsmouth & Company Limited v Lowin [2017] on costs in commercial cases.
he Court of Appeal judgment in W Portsmouth & Company Limited v Lowin [2017] EWCA Civ 2172; Costs of the paper provisional assessment proceedings are capped at £1, 500 before VAT and court fees, regardless of any Part 36 offers made and bettered.
The Court of Appeal judgment in the Lowin case was handed down on 19th December 2017. The case concerned the application of the cap upon provisional assessment costs, pursuant to CPR 47.15(5), which provides that:
“In proceedings which do not go beyond provisional assessment, the maximum amount the court will award to any party as costs of the assessment (other than the costs of drafting the bill of costs) is £1,500 together with any VAT thereon and any court fees paid by that party.”
The effect of this in cases where the receiving party betters a Part 36 offer upon assessment, with reference to the provisions at CPR 36.17(4)(b) that in such circumstances:
“... the court must, unless it considers it unjust to do so, order that the Claimant is entitled to...
(b) costs (including any recoverable pre-action costs) on the indemnity basis from the date on which the relevant period expired;”
The rst instance judgment had held a Part 36 offer that
is bettered at assessment will not override the cap on costs resolved through provisional assessment. However upon the initial appeal this decision was over-turned by Elisabeth Laing J sitting with Master Leonard, such that where a Part 36 offer was bettered upon assessment, costs following the expiry of the relevant period were payable on the indemnity basis and not subject to the cap with reference to CPR 47.15(5).
The Court of Appeal has now effectively restored Master Whalan’s rst instance decision. It was held that, taking into account the fact that there was no appeal of the decision that capped costs are different from xed costs, there was no conflict between the provisions of CPR 47.15(5) and CPR 36.17(4)(b), such that:
“The cap or limitation on the costs which can be recovered does not prevent costs being assessed on the indemnity basis or affect the quantum of the costs which are being assessed under that rule. It merely inhibits the amount which can be awarded, the assessment of the party’s costs having taken place on the indemnity basis as required by CPR rule 36.17(4) (b). If the party’s costs assessed on the indemnity basis were less than the cap, the full sum would be awarded.”
The effect of the Court of Appeal decision is that:
Both the paying and receiving party’s costs of the paper provisional assessment are capped at £1,500 before VAT and court fees.
The only way to remove the costs cap for the paper assessment proceedings would be for a case to be removed from the provisional assessment
procedure, with reference to CPR 47.15(6). If indemnity costs were to be awarded for any other reason, say unreasonable conduct, then this would
still not remove the costs cap.
What does this mean for cases in which Part 36 offers have been made?
Offers will still be protective in terms of the costs of any later proceedings, say where one party wishes to pursue the matter to an oral hearing, or where the case
is removed from the scope of provisional assessment.
Part 36 offers bettered upon assessment will
still carry the other bene ts under CPR 36.17(4), predominantly the additional 10% upon the sum awarded
up to a maximum of £500,000, and then 5% of the sum awarded above £500,000 - up to a total limit of £75,000.
However, where an offer has previously been made predominantly to look to remove the provisional
assessment cap it will not have the desired effect given this authoritative change in the law.
Unfortunately, in cases which the
provisional assessment costs exceed the costs cap, such additional costs are not going
to be able to be recovered where a case remains within the provisional assessment procedure.
What will be the likely effect of the case for future matters?
More attempt will have to be made to limit paper provisional costs so this is likely to mean less negotiations.
There will be certainty as to the maximum costs of the provisional assessment proceedings, for all parties.
Unfortunately, in cases which the provisional assessment costs exceed the costs cap, such additional costs are not
going to be able to be recovered where a case remains within the provisional assessment procedure. This may mean more
applications for cases to be removed from the process, with reference to CPR 47.15(6).
Please note that the above comments are in relation to cases within the provisional
assessment procedure only and they do not apply to cases that exceed the provisional assessment bracket where
there is no such cap upon the costs recoverable.
Caroline Cousins is a Costs Lawyer at A&M Bacon Limited.
www.pic.legal Spring 2018
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