Bird v Acorn Group Limited (2016) – Court of Appeal makes long awaited costs decision

21 Nov 2016

On Friday 11 November, the Court of Appeal handed down their unanimous judgment on this longstanding appeal [1].  The appellant, Acorn Group, were appealing a decision made in Birkenhead County Court in February 2015 on a question of costs.

Under the fixed costs regime within CPR 45 section IIIA, the amount of costs recoverable at certain stages within proceedings are outlined. This section applies to cases which originally commenced within the RTA or EL/PL pre-action protocols. Mr Bird’s case was commenced under the EL/PL protocol. Within the rules, different levels of costs apply dependant on the type and stage of the case.

There are essentially three stages of costs once court proceedings are issued, with additional costs to be allowed for court representation should the case proceed to a hearing. Each of these stages represents a jump in the amount of costs that a defendant is liable to pay the claimant. For example, in an RTA claim, if a claim settles after issue but before allocation to a court track the claimant is entitled to £1,160 plus 20% of the agreed damages but, if the matter is listed for trial, or disposed of at trial, the claimant is entitled to £2,655 plus 20% of agreed damages [2].

The question before the Court of Appeal was what level of costs should apply where a case is listed for a disposal hearing. Typically when judgment is entered against the defendant the court will list the matter for a disposal hearing. The disposal hearing is generally used to assess the level of damages that will be paid to the claimant, although it can also be used to set directions [3].

If we take the example where a defendant admits liability in his or her defence, the court will enter judgement against the defendant and typically list the matter for a disposal in the same order. In cases where a liability disputed defence is entered the matter will not be listed straight away for a trial;  it would go through the process of allocation, directions and listing (the court will often provide directions and list the matter for a trial in the same order however).  If  the claimant and defendant come to settlement after a liability disputed defence has been entered it is clear what level of costs would apply as the court will follow a process which allows each party to know what the cost liability will be at any given point during the case.  It was not so clear what the costs liability would be where judgement was entered and a disposal listed.

The respondent argued that as the matter was listed for a disposal they were entitled to their costs as if the matter had been listed for, or proceeded to, trial. They argued that under the rules, a disposal fell within the meaning of trial under the Civil Procedure Rules, in that it was a ‘final contested hearing’ [4].

The appellant stated that, firstly, as the disposal could be used to allow for further directions it did not fall within the trial definition within the rules [5]. Secondly, the appellant stated that if the disposal was used for directions and allocated to a court track but, settled before a final hearing was listed, the claimant would be entitled to only second stage costs within CPR45 IIIA, which would be less than the costs if the court found that a disposal was a final hearing. Essentially the appellant was arguing that if a disposal was a final hearing but it was used for directions, the claimant would be going backwards within the stages of costs, which was a nonsense [6]. Thirdly, the appellant stated that the purpose of implementing the staged costs process was that the stages were meant to be sequential and should proceed in order [7].

The Court of Appeal dismissed the appellant’s arguments and concluded that a disposal hearing fits within the definition of a trial. As such, the claimant would be entitled to £2,655 plus 20% of damages in all cases where a disposal was listed. The court went as far as to state that if a disposal was used for directions and settled before a further hearing was listed, the £2,655 would still apply, the claimant could not go back a step in terms of costs [8].

In practicality this is a big win for claimants as listing a matter for disposal means a big jump in terms of costs. For the defendant who admits liability at the defence stage it will mean that settlement of damages will need to be reached quickly before a disposal is listed in order to save on costs. Should a defendant be successful in settling a matter before the disposal is listed then they could save their client a substantial amount. Given the jump in costs between the stages we may see claimants delay settlement after an admission of liability in order to recover higher costs. Whilst early investigations into liability are still beneficial, unless the defendant has admitted liability pre-issue, there is arguably going to be more benefit for a defendant to keep liability open in their defence and potentially look to settle on a without prejudice to liability basis before a hearing is listed in order to save on costs liability.

[1] Mr Terrance Bird v Acorn Group Limited [2016] EWCA Civ 1096

[2] CPR 45 section IIIA Table 6B

[3] CPR 26 PD 12.4

[4] CPR 45.29E(4)(c)

[5] Mr Terrance Bird v Acorn Group Limited [2016] EWCA Civ 1096 para 11i

[6] Mr Terrance Bird v Acorn Group Limited [2016] EWCA Civ 1096 para 11ii

[7] Mr Terrance Bird v Acorn Group Limited [2016] EWCA Civ 1096 para 11iv

[8] Mr Terrance Bird v Acorn Group Limited [2016] EWCA Civ 1096 para 21

Author

Andrew Boba

Paralegal

Insurance and Regulatory

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