Did the Defendant take steps to gain protection afforded by Part 36?
If you specialise in litigation and regularly encounter low offers made by your opponent and are interested in maximising your costs recovery, you must read this article.
This involves the recent case of Mullaraj v Secretary of State for the Home Department heard in the SCCO when judgment was handed down by Deputy Costs Judge Campbell on 22 April 2021 and is available on BAILII.
Background to the case
The Claimant, an Albanian national, was due to be removed from England and Wales on 5 March 2015. She had entered this country by lorry on 5 December 2014 and been detained by Thames Valley Police. She claimed asylum but was refused. On the day before her planned removal, Duncan Lewis Solicitors obtained state funded legal assistance which in due course was extended for the issue of proceedings against the SSHD for unlawful detention. As a result, the removal was stayed.
The proceedings then took their course in the Central London County Court, until, on 4 October 2019, a settlement was reached under which the SSHD agreed to pay damages of £12,500.00 plus costs on the standard basis, to be assessed if not agreed.
On 28 April 2020, the Claimant served her bill. It sought profit costs of £54,290.00, £18,633.16 for disbursements (of which £14,000.00 was for counsel) making a total of £74,060.46 as between the parties. Since the bill did not exceed £75,000.00, it was referred for provisional assessment under CPR 47.15, and an assessment was carried out on 27 November 2020.
Following provisional assessment, the bill was allowed in the sum of £41,436.66 inclusive of disbursements.
In addition, there was interest payable to 5 January 2021 in the sum of £2,924.41, together with the costs of provisional assessment of £1,500.00 and the Court fee of £1,106.00. No request was made for an oral hearing to review the provisional assessment under CPR 47.15(7).
Thereafter, the SSHD made an application that the Court should make a different order for the assessment costs as the Bill of Costs was reduced significantly to a sum not too distant from their offer of £40,000.00.
This judgment of Deputy Costs Judge Campbell addresses the application of the Defendant (“SSHD”) for an order which replaces the order for the costs of the provisional assessment carried out on 27 November 2020 (namely the Claimant’s costs, assessed in the sum of £1,500.00 plus the Court fee under CPR 47.20).
Whilst it is the SSHD’s case that there should be a “different” order, it has not been explained in the written materials which have been submitted what that order should be, the application having been undertaken on the papers without oral submissions. That said, it was, (somewhat fortuitously, for the Defendant…) inferred that the replacement order should be “no order as to costs” or that the Claimant should pay the SSHD’s costs of the provisional assessment to be summarily assessed.
It is common knowledge that the receiving party is entitled to costs of the detailed assessment proceedings pursuant to CPR 47.20, subject to a number of exceptions, and of importance here is the sub paragraph:
“(3) In deciding whether to make some other order, the court must have regard to all the circumstances, including –
(a) the conduct of all the parties;
(b) the amount, if any, by which the bill of costs has been reduced…”
Also relevant is CPR 47.9 rule relating to Points of Dispute and the Practice Direction to CPR 47.9 which states:
“Points of dispute and consequences of not serving: rule 47.9”
8.3 The paying party must state in an open letter accompanying the points of dispute what sum, if any, that party offers to pay in settlement of the total costs claimed. The paying party may also make an offer under Part 36”
Also relevant are the provisions of CPR Part 36, especially:
“Costs consequences following judgment
(1) Subject to rule 36.21, this rule applies where upon judgment being entered —
a claimant fails to obtain a judgment more advantageous than a defendant’s Part 36 offer; or
- judgment against the defendant is at least as advantageous to the claimant as the proposals contained in a claimant’s Part 36 offer.
(Rule 36.21 makes provision for the costs consequences following judgment in certain personal injury claims where the claim no longer proceeds under the RTA or EL/PL Protocol.)
(2) For the purposes of paragraph (1), in relation to any money claim or money element of a claim, “more advantageous” means better in money terms by any amount, however small, and “at least as advantageous” shall be construed accordingly.”
The Defendant raised a number of submissions, the first being that the Claimants conduct was unreasonable and relied on the fact that on 30 July 2020, the Defendant offered to settle the Claimants costs in the sum of £40,000.00 and despite sending a number of chasing letters (x3) only received a rejection from the Claimant on 1 September 2020, with no counter-offer. The following day, and again on 2 further occasions the Defendant requested a counter-offer but no response had been received. In fact, the Claimant never made any counter-offer. This, they say amounted to unreasonable conduct which warranted a penalty.
In addition, the Defendants relied on the significant reduction to the costs claimed. The sum of £32,623.80 had been deducted which was a 44.05% disallowance.
Finally, the Court was to consider the point about whether the Defendant could, and should, have protected itself with a better Part 36 offer. Should the consequence of a paying party’s failure to beat a Part 36 offer always be that the receiving party automatically recover the costs of assessment, regardless of any other circumstances, especially when the costs had been reduced by more than 40% and there being no counter-offer?
The Claimant accepts that the Defendant made an offer of £40,000.00, however, this was fully inclusive of interest and costs. Whilst they concede the bill had been substantially reduced, when taking into account the fully inclusive element, the Defendant had not obtained a more advantageous judgement on provisional assessment, quite the contrary.
Whilst the result of the provisional assessment meant the Claimant’s costs as claimed within the Bill of Costs had bettered the offer by £1,436.66, this was not a true reflection of the actual amount by which the Defendants offer had in fact been beaten as interest of £2,924.41, costs of provisional assessment of £1,500.00 and the Court fee of £1,106.00, needed to be added, making a total figure of £7,267.00. this equates to 17% of the amount offered by the Defendant.
It therefore followed, in the Claimants submission, that there should be no departure from the original order.
Deputy Costs Judge Campbell recognised that the bill had been reduced by a large amount yet rejected the Defendants submission that the Claimant should be penalised in costs by making a ‘different order’.
The reasons behind this decision rest clearly in the starting point, being CPR 47.20, whereby, the Claimant is entitled to costs of the assessment unless the Court makes some other order, having regard to all the circumstances.
The first circumstance, is significant – did the Defendant take steps to gain protection afforded by Part 36? The case of Global Energy Horizons Corporation v Gray (2021) was cited whereby it was accepted that Part 36 is a clear process to deploy in such circumstances.
The offer made by the Defendant was not a Part 36 offer as it did not comply with CPR 36.5. Therefore, it follows that the Defendant did not put itself in a ‘stronger position’ as referred to in the aforementioned case.
The next circumstance is the fact that the bill was reduced by 44.05%. It is right that this is a factor under CPR 47.0 (3)(b) to take into account in deciding whether to make a different order as to costs. The Defendant advanced the rhetorical argument that if the consequence of a paying party’s failure to beat a Part 36 offer were always to be that the receiving party recovered costs of assessment regardless, then there would be no point in having rule 47.20 1) (b) the court makes some other order in relation to all or part of the costs of the detailed assessment proceedings…
This was rejected as Deputy Costs Judge Campbell did not find it persuasive that paying party who makes no offer at all, should be in a better position than one that did make an offer but one that fell just short.
There were sound explanations for reducing the bill, none, however, would justify any adjustment under which the Defendant should benefit from a different costs order.
Deputy Costs Judge Campbell went on to say that there is no obligation under the rules which mandates that there must be a counter-offer and whilst it took the Claimant 32 days to reply to the offer, this was not a Part 36 offer and as such the Claimant should not be criticised for taking an extra week to give her opinion on it.
Summary – What this means
There are a number of interesting factors arising from this judgment and litigators would do well to download a copy and read for themselves.
The most interesting aspect is the importance of CPR Part 36 provisions.
The offer made by the Defendant was not a Part 36 offer yet had they have encompassed the spirit of CPR and especially the rules contained within Part 36 and offered a further Part 36 offer of just £42,000.00 they would have succeeded.
Indeed, had the Claimant made a similar Part 36 offer, she too would have succeeded in the added bonus by way of the special benefits afforded by the provisions of CPR 36.17 (4). (On these figures an additional £4,136.66 would have been payable)
Part 36 is not in any way a reflection of the true value of the case – it is a bargaining tool, a tempting offer to settle. For Claimants, they are expected to make an offer LESS than the case is worth and for Defendants, they should make an offer for MORE than they think it is worth – it’s a 2-way street.
How can PIC help
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