A commentary on the case of “Asmati Bi v Tesco Underwriting Limited”: Was the case rightly or wrongly decided?

On 1^st October 2023, a new regime of fixed recoverable costs entered the legal profession in terms of the specific circumstances in non-personal injury and industrial disease matters that would trigger entitlement to fixed costs.  

Most notably, the recent reported case of Bi v Tesco Tesco Underwriting Ltd, specifically dealt with this issue and unfortunately found in favour of the Defendant. 

Whilst it has to date been argued by the Claimants as non-binding as precedent case law, it has nevertheless been regarded as persuasive by most Defendants. 

Luckily, for Claimants, the Court has sided with the Claimant on a few provisional Detailed Assessments for recovery of cots. However, as yet, the case has yet to be appealed and it is the opinion of quite a few costs specialists that it is not as yet the best case to appeal with. By way of background, this is the third reported case to date in the costs industry/legal profession regarding the application of Fixed Recoverable Costs regime for post October 2023 non-PI/disease matters. 

On the side of the Claimant, it is the general consensus that this case was wrongly decided and as such there are wider implications of the decision to allow not only fixed recoverable costs in this matter but costs at NIL. However, before going into the wider implications of the case, let us start with a detailed chronology of the matter as follows: – 

Date
19/08/2022	Road Traffic Accident occurred (no injury, but claim for hire, storage & recovery elements) [12 months before 01/10/23]
06/09/2022	Letter of Claim forwarded to Defendant for vehicle damage, hire, storage & recovery
05/04/2023	Defendant put forward Part 36 settlement offer of £3,555.36 [net of liability] inclusive of hire, storage and recovery elements[Part 36 offer made pursuant to Rule 36.13 or 36.20 of the CPR]Part 36.13 – costs applicable on the standard basis (hourly rate x time spentPart 36.20 – FRC (Fixed Recoverable Costs)
11/04/2023	Claimant accepts the Defendant’s Part 36 settlement offerSettled April 23 – Pre Oct 23 regime: framework/rules applied were the rules as they stood as at April 2023!
10/10/2023	Claimant ‘informally’ served formal bill of costs for ‘conventional’ costs (hourly rate x time spent)[Note: Detailed Assessment proceedings could NOT be commenced as no proceedings issued. Matter settled ‘pre-issue’ with no resolution as to costs.]
27/11/2023	Claimant issued Part 8 costs only proceedings[Claimant needed Court Order as ‘authority’ for detailed assessment in order to commence DA proceedings][Post 01/10/23 timeframe is NOT an assumption of ‘application’ of post-October 23 regime]
23/12/2023	District Judge made an Order for Detailed Assessment of the Claimant’s costs on a standard basis subject to Detailed Assessment if not agreed.
Post-Jan 2024 onwards	Defendant applied to District Judge to set aside order and for….to determine incidence of costs. [Note: It was common ground that the substantive claim, had it been issued upon would have been allocated to the Fast Track]

At the time of settlement (April 23), the small claims track was limited to £10k. However, at the time the LOC (letter of claim) was sent the matter was valued or pleaded at more than £10k. It then subsequently settled for around £3.5k. It is worth noting as well that the Claimant issued Part 8 proceedings for costs only not Part 7 proceedings for substantive damages. 

CPR (amendment No.2) 2023 – transitional process – 2  (1) in so far as any- amendment by these rules applies – 

1. …

(d) Costs, these amendments only apply to a claim where proceedings are issued on or after 01/10/23. [Proceedings of the main action, not proceedings of the resultant costs]

So, in order to discuss the wider implications of the case, let us first look at both the sides of the Claimant and the Defendant in this matter and the Judgment of the sitting Judge (HHJ Sephton KC) as follows: – 

The Claimant’s case

• The Defendant should pay hourly rate/time spent costs, as the matter settled prior to the installation of the new regime. Hence, conventional costs were agreed as to the legal framework/rules in place at the time of settlement. The matter settled in April 2023 by way of a Part 36 acceptance. 

• The substantive claim was settled and a deemed order for cost was made, prior to the implementation of the now Fixed Costs Regime (i.e. 01/10/23) where the agreement was in accordance with the pre-01/10/23 CPR Rule 36. Hence, the regime under the circumstances (Pre 01/10/23 CPR 36) should not have a retrospective effect as to costs of the substantive claim when the claim settled and the liability for costs crystalised prior to 01/10/23. 

• Alternatively, if the regime is to have retrospective effect, the FRC’s should apply to the claim that was the subject of the proceedings (i.e. the claim for costs not the substantive claim for vehicle damage, hire charges and recovery elements which had settled pre-1^st October 2023. 

Note that there is a need to understand what the claim is prior to October 2023, whether it be for substantive damages or resultant legal costs. The proceedings were for costs only. Hence, fixed costs apply to the costs of the ‘costs proceedings’ not the substantive claim for damages.

The Defendant’s case

• The Claimant’s claim for costs should fall under Post 01/10/23 FRC regime and, therefore, should be assessed as NIL or as a Fast Track claim with damages under £5k under the Post 01/10/23 FRC regime that attracts fixed costs in the amount of NIL. 

• It is very clear under CPR (Amendment No.2) Rule 2023 (paragraph d), that costs only apply to a claim where proceedings are issued on or after 1^st October 2023. 

• Issuing under Part 7(1) where damages are not more than £5k. 

• The claim for damages and costs formed the ‘whole’ of the claim and so when costs only proceedings were issued, they were being issued for a part of the whole of the claim. The new regime applied – “… to a claim where proceedings are issued on or after 1^st October 2023” – and proceedings were issued on or after 01^st October 2023. The Claimant cannot separate a claim for costs and a claim for damages. Hence, the ‘totality’ of a claim was still unresolved and so the new regime triggered. 

The decision of HHJ Sephton KC

• Whilst the damages claim settled before 1^st October 2023, the Part 36 offer and acceptance did NOT create a promise to pay costs on any particular basis. [No agreement or commitment by the Defendant as to the type costs or the regime that applied. What was agreed was the very broad principle of costs in general being paid by the Defendant.] 

• So accordingly, the ‘type’ and ‘amount’ costs was a live issue and nothing could be gleaned from the agreement to determine the ‘type’ and amount. [It was always open to the Claimant to issue proceedings before October 2023, but by not doing so was effectively fatal! There was a six-month gap between April 2023 Part 36 settlement and issue of Part 8 cost only proceedings in November 2023]

• Given the settlement of the substantial claim took place in April 2023, it was open to the Claimant to issue costs only proceedings at any time after that. 

• Had the Claimant done so prior to 1^st October 2023, the costs would not have been caught by the ‘new’ FRC (Fixed Recoverable Costs) regime. So accordingly: –

1. This was a claim where proceedings were issued after 1^st October 2023. 
2. The Claimant’s costs could only be determined by reference to the applicable rules as they are post 01/10/2023. 
3. The rules by which the Defendant’s liability for costs were to be assessed were …… by the amended rules. 

Note that the Judge accepted the transitional provisions in that the proceedings were issued, the rules do not differentiate as to the type of costs that would be payable or the regime that would apply. So, the nature of the offer and acceptance back in April 2023 did NOT commit the Defendant to saying that the old erroneous regime applied or hourly rate/time spent or fixed costs applied. 

It just agreed the very broad principle that if costs are payable at all that they would be payable (in general) but whether or not they were payable or not was still effectively up for grabs to be determined by the Court. 

Now that we have examined both the cases of the Claimant and Defendant and the ultimate decision of the sitting Judge, let us now look at the implications of the final decision and why we believe it was decided wrongly as follows: –

• The decision is wrong on the principles – But this was not a great case to run the argument of ‘principality’ because, notwithstanding that both sides agreed it would have been a fast track case at it was essentially a ‘Small Claims Track’ case (non-personal injury claim with a value of under £10k). 

• The transitional provisions only apply to a claim where proceedings are issued on or after the 1^st October 2023. 

• The applicable costs can only, therefore, relate to the costs of the claim. 

• The ‘claim’ here is NOT the substantive damages claim but the claim for costs. So, if the ‘claim’ is the claim for costs, it follows that the costs of the claim must be the costs of the costs-only proceedings. 

We are starting to see the Courts address this problem more and more, notwithstanding that in ‘Bi v Tesco’ the courts are starting to reach a different decision. (In reality, this was a small track claims case with a non-PI settlement under the amount of £10k. The Court, therefore may, in essence, find an extreme that reflects the fact that it was a Small Track Claims case. However, this was no expressed in the Judgment. Unfortunately, the case was not appealed but does present the underlying thought process of both the Defendant and the Courts that favour the Defendant.) 

We when we say ‘claim’, what are in effect talking about? The substantial claim for damages had settled (upon any analysis). A presentation of a claim for vehicle damage, hire, storage and recovery and so an offer was made in respect of that and had been accepted. When proceedings were issued – the claim that was the subject of those proceedings was the claim for resultant costs arising out of the claim for sub substantial claim for damages.  

When one is talking about costs, one is talking about the costs of the claim (this appears in Court Orders). The costs incurred in the ‘pursuit’ of the claim. (Hence, fixed costs should apply to the Part 8 costs only proceedings when relating to a claim for costs.) The costs of the proceedings did not relate to the substantial claim as this had already been resolved as per the April 2023 Part 36 settlement. 

The judgment did not give any prior indication nor did an analysis take place of what constituted the ‘claim’ for the purposes of the transitional provisions. Essentially, matters all became very muddy and murky in the sense of the parties stating, “well of course, we are talking about the damages claim”. However, the undeniable fact is that the damages claim was not the subject of the proceedings it was in fact the claim for (resultant) costs arising out of the substantive claim for damages. 

Hence, the claim here is not the substantive claim but the claim for costs. So, if the claim is for (resultant) costs, then the costs of the claim must be the costs of the ‘costs only’ proceedings. But even if this is wrong, the ‘new’ FRC regime only applies to claims that are (or would have been) allocated to the Fast Track or the Intermediate Track. There is no fixed costs regime for ‘Multi-track Claims. 

CPR Rule 8.9 states: ‘Where the Part 8 proceedings is followed in (c) the claim shall be treated as allocated to the multi-track and therefore Part 26 does not apply.’

So, even if the costs-only proceedings are ‘proceedings’ for the purpose of the transitional provisions, fixed recoverable costs would NOT apply in any event, as the claim is in effect a multi-track claim where no fixed recoverable costs apply.  

Conclusion

At the moment, although this case is not binding, it has not been appealed either and so uncertainty remains. However, the decision has been defeated albeit at various provisional Detailed Assessments. But there is still no written judgment either way as yet. 

Could this be regarded as a botched retrospective application of the new regime? 

The fact that most provisional Detailed Assessments are finding in favour of the Claimant is perhaps indicative that a binding decision could be made with a different case later down the line. It just requires the receiving party to make sure that they are arguing a case in a way that suggests that arguments should have been made previously in ‘Bi v Tesco’ that ultimately weren’t. 

Finally, we can ‘take-away’ two very saliant points in that: – 

1. The Court is being asked to consider what the claim is for the purposes of the transitional provisions. 

2. If Part 8 costs only proceedings matter, it is to be treated as a ‘Multi-Track’ case where no fixed recoverable costs apply. 

There is already an early indication of the ambiguities that arise from the wording of the rules and the intended meaning and how they are being currently applied plus the diversity of views that exist currently on both sides of the litigation fence. 

Definitions of (legal) costs: 

Party & Party Costs (Inter Partes) – Awarded and/or agreed monies payable to a successful receiving party (Claimant or Defendant) by an unsuccessful paying party (Claimant or Defendant). Note that it is a successful outcome/award and/or agreement that triggers entitlement to ‘party & party [inter partes] costs. 

Solicitor & Own Client Costs – Costs incurred by the solicitor to be paid by the client. 

Solicitor & Client Costs – Party & party (inter partes) costs and other client costs (usually relating to funding/administration)

Cost (meaning) – An amount that has to be paid or spent to buy or obtain something. 

Fees (meaning) – A fee is an amount of money paid for a particular piece of work or for a particular right or service. (of an object or action) requires the payment of (a specified sum of money) before it can be acquired or done. 

Legal Costs (meaning) – Legal Costs refer to the money that helps pay for the lawyers/solicitors/legal representatives and the Court in a legal case. They are usually paid by the person or organisation that has lost the case. Legal costs awarded are those that the successful party incurred for the duration of the case, but do not include legal costs before the matter was brought to Court. A costs award is meant to compensate a successful party for the legal costs which it is forced to incur in having to initiate and/or defend legal proceedings.   

If you have any questions, feel free to contact us.