Part 36 Benefits Must Stand Even if Coming From the 'Public Purse'
Posted on 27th October 2021 at 10:22
By Sean Linley, Costs Draftsman
Judge Walker once described Part 36 as 'one of Woolf's greatest inventions' and even now over 20 years since its creation it remains one of the most important tactical tools available to a litigator.
The story in TT, R (On the Application Of) v Secretary of State for the Home Department [2021] EWHC B21 (Costs) is that pitching a Part 36 offer at the right level will reap awards and that those acting on behalf of the 'public purse' will get no special benefits or exemptions.
In this case at Detailed Assessment, the Claimant beat its Part 36 offer by £1,928.00 which engaged the benefits afforded under CPR r36.17 of an additional payment, enhanced interest and indemnity costs on the costs of assessment (from expiry of the relevant period). Master Campbell made some scathing comments about the Defendant's conduct which many litigators will likely recognise in their own case load.
Background
The case concerned a detailed assessment of costs arising from a claim for unlawful detainment brought against the Secretary of State for the Home Department.
The proceedings concluded on 12 March 2014, owing to the Claimant solicitors entering into liqudiation there was a delay in commencing Detailed Assessment proceedings (which ordinarily should be commenced within 3 months as per CPR r47.7). The Bill of Costs was served informally on 22 November 2016 but was not served formally until 17 July 2020. Given the delay, the Claimant did not seek interest for the entire period with the parties agreeing that interest at 8% would run from 12 March 2014 until 11 June 2014 and thereafter from the date of service of the Bill of Costs, giving credit for the interim payment of £49,867.00 made on 1 December 2020.
The Claimant made a Part 36 offer, inclusive of interest up to the expiry of the relevant period on 1 March 2021 of £72,750.00. At assessment the Bill of Costs was reduced to £70,807.71, this figure with the agreed interest of £3,870.31 meant that the Claimant had beaten its own offer by £1,928.00 and thus engaged the benefits under CPR r36.17.
The Arguments
The Defendant protested that it would be unjust for the Claimant to receive the additional sums under CPR r36.17 on the following basises:
"i) It is only the addition of the interest which has enabled the Claimant to beat his own Part 36 offer. Take out that interest and the offer is short of the sum required to engage CPR 47.17(4)(d).
ii) It is unjust to take into account the interest because that element has arisen only due to the Claimant’s delay in bringing the proceedings for detailed assessment.
iii) The interest agreed from 17 July 2020 amounts to £2,202.42 up to 6 December 2020 when the Defendant paid £49,867 on account, with a further £948 from that date until the date of assessment making a total figure of £3,150.42. Interest at that level would not have arisen but for the Claimant’s delay.
iv) The additional sum should not be visited on the Defendant bearing in mind that it is a public body and the funds will come out of the public purse."
The Claimant argued that interest was a legitmate and important part of the costs claim and that the Defendant could have prevented the accrual of interest by making an interim payment on account of costs.
On the issue of the 'public purse' the Claimant averred that if the Defendant wished to save costs then it could have accepted the Part 36 offer avoiding the need for a costly detailed assessment.
The Decision
Master Campbell stated that the Defendant could have made an earlier interim payment and when it did so could have done so at a higher level. He concluded that:
"For that reason, there is no injustice in the Claimant being able to recover the additional 10% when the Defendant could have mitigated its liability by paying earlier. In that respect, the consent order had provided for a payment on account to be made within 28 days of receipt of the Claimant’s bill, that is to say by 14 August 2020, but it had not done so. In any event, it is permissible in principle to take interest into account when working out whether a Claimant’s Part 36 offer is at least as advantageous as the figure for the costs assessed - see JLE (a child by her Mother and Litigation Friend, EH) v Warrington & Halton Hospitals NHS Foundation Trust [2019] Costs LR 829 in which the Claimant’s Part 36 offer had been less than the assessed costs, but when interest had been added, it meant that she had bettered her own offer, thereby entitling her to the additional 10%."
On the 'public purse' point, Master Campbell was clear in his displeasure. He concluded that he preferred the Claimant's arguments because a) there was no authority to say that the additional sum should be restricted where the public purse is paying, b) the Defendant could and should have mitigated its liability to pay interest by making a payment on account and c) it was correct to take interest into account as per JLE and there was no injustice.
Master Campbell stated that:
"the Defendant could and should have mitigated its liability to pay interest by making a payment on account. Whilst it is right that there was no obligation to do so until 28 days after service of the bill, paragraph 7 of the consent order took effect on 14 August 2020 but no payment was made until 1 December 2020. Had the payment been made on time, the interest saved would have been about £1,160. Omitting to do so and failing to comply with an order to which the Defendant had itself given its consent, is not a promising start when it comes to seeking a discretionary remedy, as here. Nor is the fact that the Defendant made no attempt to mitigate its liability for interest by making a payment earlier than the date it did, albeit that there is no obligation to do so: it just makes commercial sense that it should be done, irrespective of any delay by a receiving party in serving their bill."
Concerning the 'public purse' argument Master Campbell's comments will no doubt resonate with many Claimant practitioners:
"Having carried out numerous provisional and detailed assessments involving paying parties where payment of the costs is coming out of public funds, and which have concerned predominantly, claims for judicial review such as the case here and clinical negligence involving NHS Trusts, it is dispiriting how much public money is expended unnecessarily in arguing about those costs at assessment. Many such matters will have been capable of settlement much earlier, either through effective Part 36 offers being made at an early stage or through a costs mediation before the fee for the assessment has been incurred.
19. Of course, there are occasions when that is not possible such as where there are points of principle involved in a group action, but in the present case, the public purse was put to unnecessary expense by the Defendant’s failure to make a Part 36 offer at a level sufficient to give it costs protection had it been rejected, and in a sufficient sum so as to be attractive to the Claimant and thus to make it acceptable. Not only that, but here, the Defendant’s shortcomings were compounded by the fact that a realistic Part 36 offer was turned down, comprising, as it did, interest to date, as well as the amount which the Claimant was willing to accept for his costs - see CPR 36.5(5). Had it not been for Mr Herhily’s realistic approach at the detailed assessment to see an end to the matter once and for all (and I should add that it was not he who had drafted the points of dispute, having come into the case late), still more expenses would have been incurred.
20. It is a pity , therefore, in this case in advancing its “public purse” argument, that the Defendant appears to have overlooked the guidance given by Peter Smith J in Wills v Crown Estate Commissioners [2003] 4 Costs LR 581 at [33] when considering the position where one party is liable to pay the other party’s costs of assessment, (the reference to CPR 47.19, now being embodied in CPR 47.20. which provides for Part 36 to apply in detailed assessment proceedings):
“This appeal emphasises the need for paying parties who wish to protect themselves against the costs consequences of CPR 47.19 to make realistic settlement offers at the beginning of the detailed assessment proceedings and not at the end. The court is bedevilled with late settlements. The procedures in CPR 47.19 are designed to promote early reasonable offers and parties should bear this in mind in the future”."
As a consequence the Defendant was ordered to pay an additional £7,080.77 to the Claimant.
Consequences and strategy
The case reminds us of two important points:
2. That interest is an important and critical factor and that Paying Parties should seek to mitigate interest at an early stage in order to protect their own position.
The Court's stance to give the Paying Party short shrift is welcomed and Master Campbell's comments ought to act as an impetus for Paying Parties to engage more willingly with interim payments. Receiving Parties ought to continue to make well-pitched Part 36 offers, as the benefits are plain to see.
Should you wish to discuss the impact of this case or have any burning costs questions our friendly team are always available for a no obligation chat - call 01482 534567 today.
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