The High Court has recently considered the effect of a Part 36 offer which was made solely in respect of the hourly rates to be applied in the assessment of costs. The Claimants secured a result which was at least as advantageous to them as the Part 36 offer.
As they had 'beaten' the Part 36 offer, the Claimants claimed they were entitled to an 'additional amount', calculated as a 10% uplift on the entirety of their profit costs.
The Court disagreed, highlighting the inherent injustice to the defendant in such a suggestion, noting "the court must guard against [Part 36] being used for the purposes of mere gamesmanship."
The Claimants' representatives brought a claim for damages following the death of the Claimants' relative from mesothelioma. The Claimants were successful and were entitled to costs.
The Claimants commenced assessment proceedings and the Parties prepared and filed Points of Dispute and Replies. Within the Replies, the Claimants made an offer in respect of their hourly rate(s). This was a somewhat "novel type of Part 36 offer" solely on the issue of the hourly rate. The assessment proceeded by way by of a provisional assessment whereby Deputy Master Friston, in making a determination on paper as to the hourly rates allowed the Claimants the counter-proposed rates as offered in Points of Reply. Within the provisional assessment, the Claimants secured a result which was at least as advantageous to them as the Part 36 offer; Deputy Master Friston noted that the rates secured were "also the same as those that the Claimants had proposed in the offer."
Following the provisional assessment, the Parties were unable to agree the liability for and consequence of the costs of assessment, and the effect of the Part 36 offer.
As the matter did not go beyond the provisional assessment the maximum amount of costs the Court could have awarded to the Claimants' was £1,500 plus VAT and Court fee in light of CPR 47.15(5).
The case of Lowin confirmed that this limit would apply even where a receiving party has beaten their own Part 36 offer, albeit Lowin did not address whether a receiving party, who has beaten a Part 36 offer is entitled to an 'additional amount' in line with CPR, r 36.17(4)(d).
Deputy Master Friston was invited by the Parties to determine, on paper, whether the Claimants were entitled to claim a 10% 'additional amount' on the whole of their profit costs given that they had beaten their earlier offer
In a detailed analysis of what amounts to 'injustice' in the context of whether to award the Part 36 'benefits' the Court rejected the Claimants' submissions and declined to award an additional amount. Whist the Court accepted that the offer was a valid Part 36 proposal, that had been beaten, the Court was satisfied that the Defendant had "shifted the 'formidable obstacle' of proving injustice in this case".
Deputy Master Friston found the “suggestion that a paying party ought to pay an ‘additional amount’ on the whole of a receiving party’s profit costs merely because he or she did not accept an offer in respect of only one component of those costs (namely, the hourly rates) is, in my view, unreal. It would be unjust to do what the claimants ask.”
What can we learn?
- Both claimants and defendants will seek to obtain any tactical advantage available to them within the confines of the Part 36 process, and therefore, any judicial guidance in this area should be welcomed.
- The Deputy Master took time to emphasise that the Court is of limited and stretched resources and parties ought to recognise this and cooperate with each other. "Detailed assessments (and provisional assessments in particular) would become unwieldy if the court were routinely to allow parties to rely on offers such as [this]." The burden on the justice system appeared to be a key component in the Judgment.
- The decision by Deputy Master Friston provides clarity to Parties making and/or considering these types of Part 36 offer. His rationale was directed at the 'gamesmanship' which might arise if a receiving party were entitled to an additional amount if they 'beat' their own Part 36 offer on a component part of the overall claim for costs.
- Offers such as this are likely to disincentivise settlements and potentially cause further strain on a Court system asked to deal with "time-consuming disputes".
A full transcript of the Judgment can be found here.
This article was authored by Emma Hughes, Senior Associate.