Neutral Citation Number: [2012] EWHC 875 (QB)
Appeal Ref: QB/2011/0361
SCCO Ref: CL1006O87
Claim No: OBN00057
IN THE HIGH COURT OF JUSTICE
SENIOR COURTS COSTS OFFICE
ON APPEAL FROM MASTER LEONARD, COSTS JUDGE
Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 03/04/2012

Before:

THE HONOURABLE MR JUSTICE MACKAY
SENIOR COSTS JUDGE HURST
MR COLIN B.E. JAQUE
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Between:

	Debbie Letts	Respondent/
Claimant	
	- and -		
	Royal Sun Alliance PLC	Appellant/
Defendant	

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Mr Joshua Munro (instructed by Prolegal) for the Respondent/Claimant
Mr Robert Marven (instructed by RSA Legal) for the Appellant/Defendant

Hearing dates: 16 March 2012
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Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.

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THE HONOURABLE MR JUSTICE MACKAY

Mr Justice Mackay: 

1.	This an appeal against the decision of Master Leonard dated 8 June 2011 dismissing an appeal, which was by way of re-hearing under CPR Part 47 Rule 23, from the decision of Costs Officer Martin on 10 February 2011.  The Costs Officer had reduced the claimant’s costs from her claim of £5672.51 to the assessed sum of £2973.90.
2.	The underlying claim was a damages claim by the claimant/respondent following a road traffic accident on 4 September 2009 between her car and that of a policy holder of the defendant.  This is the first appeal in this matter, the previous exercise having been a re-hearing, and it is accepted therefore that this appeal proceeds by way of review.  There are two main issues raised by this appeal.
i)	Did the claimant issue her claim prematurely and unreasonably?
ii)	If she did, on what basis should her costs have been assessed?
3.	It is necessary to set out the facts in some detail since they influence the issues in this appeal.  
4.	On 5 October 2009 the claimant’s solicitors indicated the intention of the claimant to seek damages from the accident and they wrote both to the insured and to the appellant.  They alleged a rear end collision as a result of which she had suffered whiplash injuries.  On 13 October the appellant responded stating they had ongoing enquiries and would revert within the protocol period.  They asked for further details of any and all alleged special damage and documentary evidence.  There was no reply to that letter.
5.	On 24 November the appellant wrote in these terms
“Please note that liability is not in dispute but causation remains a live issue.  The circumstances suggests that this was a low velocity inpact; however we are investigating the same at present and will revert to you within the Protocol Period (which we calculate to be 13 January 2010)”
They then indicated that their information was that the impact was “a gentle tap at most” with no visible damage to the vehicles involved, and that the claimants vehicle repair costs amounted to some £480 only (these were settled separately).  They therefore contended that all that suggested that little or no injury would have occurred but the letter concluded:-
“However, in an effort to resolve this matter amicably please take instructions on our immediate without prejudice damages offer of £500 made in full and final satisfaction of all causes of action which have or will arise as a result of the above incident.  It this offer is accepted within 21 days then we will in addition pay the Predictable Fee Costs”
The offer was made without prejudice to causation.  Despite Mr Marven’s argument the only reasonable construction of this letter, in my opinion, is that the £500 offer was an inclusive offer covering all aspects the claim, as it says.  It therefore was allowing a token sum by way of general damages.  The claimant did not respond to this letter, perhaps for that reason.
6.	The claimant sent a medical report on 2 December supporting the proposition that she had suffered a whiplash injury resulting in about eight months of the usual symptoms.  On 16 December a further offer was made by the defendant who had reviewed this report to “settle your clients claim for general damages in the sum of £1300”.  It is said by the claimant that this offer did not include anything for special damage (in an earlier letter the solicitors had been looking for £40 under that head) and perhaps more importantly it said nothing about costs.
7.	The claimant made no reply to that letter but on 11 January sent a notice under Section 152 of the Road Traffic Act 1988 of her intention to issue proceedings.  On that same day she asked the court to issue the proceedings and they were issued on 13 January, the day on which the Protocol Period expired.
8.	Pausing at this stage of the narrative, the Costs Judge said that “the proceedings appear to have been both prepared slightly prematurely and issued on the very expiry of the Protocol Period” but he said he saw no reason to draw the conclusion that if the solicitors had waited for another two days there would have been any different outcome.  By that time the appellant would also have been non compliant with its own promise to comply with the timetable recommended by the Court of Appeal by its guidance in Casey v Cartwright [2006] EWCA Civ 1280; [2007] 2 All ER 78 namely to write a letter intimating that the defendant was proposing to argue that it considered this to be “a low velocity impact” claim (LVI), of which intention it should give notice within the period of three months from first intimation of the claim. 
9.	The costs judge discounted the first £500 offer as one which he would have thought would not have been acceptable in any circumstances, a judgment with which I agree.  He considered that the only serious offer was that of 16 December, which was itself open to criticism in the respects that I have noted by virtue of what it did not say, and he concluded :-
“It seems to me that in those circumstances at the time of issue the claimant was left not knowing, notwithstanding the promise made by the defendant, what the actual litigation risk was, in particular whether the claimant faced a potentially costly and embarrassing consequences of a “low velocity impact” defence.  Although there is a duty for both parties to explore settlement I do accept that there might have been a degree of hesitation on the part of the claimant’s solicitors to effectively invite the defendant to raise the “low velocity impact” defence when it had not given an indication that it had intended to do so”
10.	Mr Marven criticises the logic of this finding.  He says that the issuing of proceedings is likely to wake the sleeping dog and trigger such a defence.  While accepting the logic of his argument the way the Costs Judge expressed himself indicates that it may have appeared to the claimant’s solicitors to be a risky step to “flush out” such a proposed defence until what might be called the Casey period had expired.
11.	The appellant up to that point had put in a first offer which was derisory, as the Costs Judge thought, and a second which was not coherent, as he described it, because it was defective.  It is true that the claimant herself had not responded to the second offer or put her own proposal forward and the Master had in mind that litigation is a last resort when settlement is actively being explored.
12.	He concluded that another two days’ wait would have made no difference to the position and that it was not open to the appellant to say that the claimant’s solicitor should have waited for them to make a clear statement in relation to LVI in conjunction with an offer which was a complete and comprehensible one.  He therefore felt that it would be wrong to conclude that the issue of proceedings was premature to any material degree or that the costs recoverable should on assessment be limited by reference to the predictive cost regime under CPR 45 Section II.
13.	The test that I have to apply is not whether I would have reached the same conclusion on these facts but rather whether within an ambit of generous appreciation accorded to a specialist judge exercising this function it can be said that his decision was wrong.  I conclude that I am unable to reach that conclusion.
14.	The second question therefore does not strictly need to be determined to dispose of this appeal.  However as it has been well argued by Mr Marven I should deal with it.  It is necessary to resume the narrative to see how the case developed after issuing proceedings on 13 January.
15.	On 26 January the claimant put forward a Part 36 offer to settle for £1,820 which included “compensation for the injury sustained as well as the losses identified” they also required payment of the claimants costs and disbursements to be assessed if not agreed.
16.	On 5 February the appellant wrote without prejudice save as to costs.  It gave a Casey compliant notice that this was viewed by the defendant as an LVI  in which it was highly likely that the claimant suffered no significant injury and that “if the matter proceeds we will be raising causation as an issue.”  The letter continued that on a purely economical basis the appellant offered to settle the claim in the sum of £1,560 “in full and final settlement” and offered to meet her “predictive costs and reasonably incurred disbursements”.
17.	The claimant’s solicitors then made it plain to the defendants that they wanted this as a Part 36 offer, and the appellant replied on 12 February reiterating the terms of the offer of 5 February save that the offer was then stated to be made under Part 36 of the CPR.  It did, however, still include an offer to meet predictive costs only, which therefore technically made it an incompetent Part 36 offer.  CPR 36.10(1) states that if a claimant accepts such an offer within the relevant period she will be entitled to her costs up to the date of acceptance and by sub rule (3) those will be assessed on the standard basis of not agreed.
18.	That was it seems pointed out by telephone as a problem by the claimants solicitors, and the offer was amended in its relevant parts to read as follows:-
“In addition, we offer to meet your reasonable costs to be assessed if not agreed and reasonably incurred disbursements.  For the purpose of clarity, we are seeking to pay predictive costs only due to premature issue and the claimant’s solicitors are seeking standard costs”
The acceptance of that offer by the claimant meant that by virtue of r 44.12 (1) (b) a costs order was deemed to have been made on the standard basis. The procedure for assessment under part 45 Section II is itself only available for a “costs only” claim.
19.	Therefore the question of assessment in the two hearings below was governed by CPR 44.4 (1) and (2) the effect of these is that the court was not to allow the costs which had been “unreasonably incurred” or were unreasonable in amount, and when assessing on the standard basis it should only allow “costs which are proportionate to the matters in issue”, resolving any doubts in favour of the paying party.
20.	By 44.5(1) the court is to have regard to all the circumstances in deciding whether costs were “proportionately and reasonably” incurred.      44.5 states the court must also have regard to –
a)	the conduct of all the parties, including in particular –
i)	conduct before as well as during the proceedings and 
ii)	the efforts made, if any, before and during the proceedings in order to try to resolve the dispute.
21.	The issue raised by the appellant can be expressed in this way.  In a standard assessment when deciding whether costs claimed are reasonable and proportionate and should be ordered to be paid should the assessor have in mind what would have been recovered had the assessment been proceeding under Part 45 and should he limit his assessment to what would have been recoverable under that part.
22.	It is interesting to note that the Costs Officer appears to have been critical of the premature issuing of proceedings, as he saw it,  and  disallowed post issue costs “but not predictive costs”, meaning as I read it that he was rejecting the invitation to assess the cost under Part 45.  It then appears that the parties were urged to and did negotiate the issues that remained between them.
23.	So far as case law is concerned Lahey v Pirelli Tyres Ltd [2007] 1WLR 998 is authority for the proposition that a Costs Judge has power to disallow sections of a Bill of Costs if he considers that a party was unreasonable to raise and pursue an issue on the grounds that that meant that the costs were unreasonably incurred.  In Drew v Whitbread PLC [2010] 1WLR 1725 the paying party had not asked the trial judge to limit costs recoverable on a multi track case to the fast track basis but that did not prevent the paying party under the rubric of “all the circumstances of the case” raising the question on assessment of whether the case was in reality a fast track case.  Waller LJ said at 41:-
“… the costs judge was not entitled simply to rule that she was going to assess the costs of the trial as if the case were on the fast track.  So to rule does seem to me to rescind the Recorder’s order.  I cannot accept that in ruling as she did it can be said that she was simply “assessing costs on a standard basis taking into account that the case should have been allocated to the fast track” which in my view is a permissible approach”.
He went on however to say that it may in some cases be a distinction without a difference. I do not consider that the present case is one of them.
24.	In the linked case of O’Beirne v Hudson  [2010] 1 WLR 1717 the same constitution of the Court of Appeal, in the context of a claim which had not been allocated to any track, though if allocated it would have been treated as a small claim, and where there was a consent order for assessment of costs on the standard basis Waller LJ at 16 said:-
“It certainly follows from that [the fact that the consent order provided for assessment on a standard basis] that the Costs Judge was free to rule that the costs would be assessed on the small claims track basis… But, and this is the critical point, in making an assessment the Cost Judge is entitled to take into account all circumstances (see CPR rule 44.5(1), including the fact that the case would almost certainly have been allocated to a small claims track if it had been allocated.  In so doing she would have regard to what could or could not be recovered if the case had been so allocated”.
25.	At 17 he continued:-
“The Costs Judge would not be bound …only to allow the costs as per a case on the small claims track but it would be a highly material circumstance in considering what by way of assessment should be payable”.
26.	Mr Marven skilfully takes that argument and raises it a step higher.  He re-phrases the relevant question in this way - “Should a Costs Judge in the course of his assessment under r 44 ask himself if it is reasonable for the paying party to pay more on that assessment than would have been recoverable under Part 45?” If that is the right test, I can see no way the assessor could proceed without conducting a Part 45 assessment, something which the Court of Appeal has clearly said is impermissible in these circumstances. 
27.	In my judgement Mr Marven overstates the position significantly.  Waller LJ was saying that the Costs Judge is entitled to, and perhaps ought to have regard to what could or could not have been recovered under such a different process and that that was a highly material circumstance.  Nothing about the conduct of this assessment suggests that the Costs Officer who made the assessment did anything other than that. But if as I believe was the case when he said the  words “but not predictive costs” he was declining an invitation to conduct the assessment in accordance with Part 45, and if that is right he was acting entirely in accordance with what the Court of Appeal has said more than once in the decided cases.  It is plain that in the actions he took he did have regard to what would have been the position had the matter proceeded under the Predictive Costs regime. But he also avoided the heresy, which Mr Marven’s question invites me to adopt, that the predictive costs should be in effect a cap on what was properly recoverable under a Part 44 assessment, and that therefore an assessment under Part 45 had to be performed in order to determine what the upper limit of the “costs proportionate to the matters in issue” were.
28.	Therefore if the second question fell for consideration the appeal would in my judgment have been doomed to fail.
29.	For the reasons stated above this appeal must be dismissed.