A successful Part 36 offer will override the cap on costs resolved through provisional assessment, the High Court ruled this week in a further erosion of fixed costs.

In Lowin v W Portsmouth Co, Mrs Justice Elisabeth Laing extended to provisional assessment the principles set out earlier this year in Broadhurst v Tan [2016] EWCA Civ 94.

Under rule 47.15(5), the court will not award any party costs of more than £1,500 plus VAT and court fees if the matter concludes at provisional assessment. But in Lowin, the claimant had made a Part 36 offer in respect of costs, which she beat by £255 on provisional assessment – meaning that she was entitled to indemnity costs under Part 36 rules.

At first instance, the Master Whalan distinguished Broadhurst and ruled that although the claimant was entitled to indemnity costs due to the successful Part 36 offer, these were subject to the £1,500 cap.

But on appeal to the High Court, Mrs Justice Laing ruled that as a conflict arose between the Part 36 rules and the cap under Part 47, the decision in Broadhurst provided the answer. She found that if the Rule Committee had wanted Part 36 to be modified so that the cap remained in place, this would have been stated.

The judge added that dislodging the cap would incentivise parties to accept reasonable costs offers. The appeal was granted, with the matter remitted for Master Whalan to re-assess the costs of the detailed assessment on the indemnity basis.

Gurion Taussig, barrister at 9 Gough Square who successfully acted for the appellant, said: ‘This is an important extension of the Broadhurst principle, and one that potentially affects all cases that proceed to provisional assessment of costs in Part 47 proceedings. 

‘Parties should indeed be incentivised to make reasonable cost offers, but equally they must be aware that a failure to accept a reasonable Part 36 offer is likely to have cost consequences if the offeror achieves a better result on provisional assessment’.

Provisional assessment applies to all detailed assessment hearings commenced in the High Court or County Court from 1 April 2013, where the amount claimed is £75,000 or less.