Senior Costs Judge overruled by High Court on Part 36 uplift in detailed assessment proceedings
There has been some debate as to whether Part 36 Offers made in respect of costs have the same application as Part 36 offers made within proceedings.
Costs Judges have tended to shy away from awarding, for example, the prescribed percentage uplift referred to at CPR 36.14(3)(d)
(d) an additional amount, which shall not exceed £75,000, calculated by applying the prescribed percentage set out below to an amount which is – (i) where the claim is or includes a money claim, the sum awarded to the claimant by the court; or (ii) where the claim is only a non-monetary claim, the sum awarded to the claimant by the court in respect of costs –
Amount awarded by the court Prescribed percentage
Up to £500,000 10% of the amount awarded
Above £500,000 10% of the first £500,000 and (subject to the
limit of £75,000) 5% of any amount above that figure
CPR 47.20 provides that
- a) ‘claimant’ refers to ‘receiving party’ and ‘defendant’ refers to ‘paying party’;
(b) ‘trial’ refers to ‘detailed assessment hearing’;
(e) a reference to ‘judgment being entered’ is to the completion of the detailed assessment and references to a ‘judgment’ being advantageous or otherwise are to the outcome of the detailed assessment.”
There should be, therefore, no reason why a Receiving Party should not benefit from the making of a Part 36 offer when on assessment the allowance is more favourable than the Part 36 offer made.
Part 36 offers in costs is relatively new, however why should a Party willing to accept less for their costs not receive the “reward” when forced to attend an assessment and being shown to have made a reasonable offer?
CPR 36.14 states that the Court will, unless it is unjust to do so…allow the additional amount set out above in addition to the higher rate of interest on costs and costs of assessment and indemnity costs.
The point of Part 36 offers is surely for the Receiving Party to engage in settlement proposals and receive a “reward” for agreeing to accept a lesser sum to avoid a detailed assessment.
Costs are significant and detailed assessments occupy Costs Judges over many days and in some cases many weeks and months.
Before CPR 36 applied to costs there was little, if any, attraction for the Receiving Party to offer to accept a lower sum. It was for the Paying Party to make an offer that might be attractive however if the offer was beaten on assessment the Claimant recovered costs there was no “reward” for the Receiving Party offering to accept less and recovering more than the offer on assessment.
Nowadays one sees, on a regular basis, costs of and in excess of £1,000,000.00
If the Receiving Party makes a Part 36 offer to accept, say, £850,000.00 and goes on to recover, on assessment, £875,000.00 why should the Receiving Party no recover the additional £67,500.00 as a “reward” for attempting to avoid the additional costs of a lengthy assessment.
On 11 May 2015 The Honourable Mrs Justice Slade DBE sitting with Assessor Master Campbell heard an appeal on this very matter brought by a Claimant who had made, within detailed assessment proceedings, a Part 36 offer to accept costs less than set out in the bill of costs served and on assessment recovered more than the offer.
Whilst the Costs Judge allowed interest at the more favourable rate for the costs allowed and on costs of the assessment and also allowed costs of the assessment on the indemnity basis the Costs Judge was not prepared to reward the Claimant by allowing the additional sum pursuant to CPR 36.14(3)(d).
MICHAEL RICHARD CASHMAN –v- MID ESSEX HOSPITAL SERVICES NHS TRUST –  EWHC 1312 (QB)
The Claimant recovered £90,000.00 damages and costs as a result of Clinical Negligence proceedings brought against the Defendant.
The Claimant served a bill of costs seeking some £262,000.0o; the Defendant provided Points of Dispute.
Approximately seven months prior to the detailed assessment hearing the Claimant made a Part 36 offer to settle costs at £152,500.00.
Absent agreement the matter proceeded to detailed assessment in October 2014 whereat the Claimant recovered £173,693.78. The Claimant therefore submitted that as the recovery was more advantageous than the Part 36 offer, CPR 36.14 (3) applied.
The Costs Judge observed that the application of Part 36 was relatively new in costs proceedings but considered it would be unjust to decline to apply Part 36.14 (3) as requested.
The Costs Judge allowed interest at 10.5% on the bill of costs; costs of the assessment on the indemnity basis and interest on the costs of assessment at 10.5% (CPR 36.14 (a), (b), (c)).
The Costs judge however declined to order the paying party to pay the additional amount under CPR 36.14 (3) (d) (10% of the amount awarded) considering such reward would be “unjust“.
In reaching his decision the Costs Judge had regard to the size of the additional award and the significant reduction made tot the Claimant’s bill of costs on assessment.
Following a thorough review of Part 36 the judge concluded that the Costs Judge had erred in not ordering the additional payment and allowed the appeal.
The Judge considered that the Claimant had been penalised for making “what turned out to be a reasonable Part 36 offer” and that it had not been suggested that there was “any particular feature or consequence of the bill of costs other than its size which would render the making of the order under CPR 36.14 (3) (d) unjust“.