Part 36 and the additional amount in detailed assessment case

Part 36 and the additional amount in detailed assessment case

36Part 36 offers in detailed assessment proceedings are not to be treated differently to such offers made in damages claims when it comes to determining whether the court should award an additional amount where the receiving party betters its own Part 36 offer, so held Slade J allowing an appeal against the decision of Senior Costs Judge Master Gordon-Saker.

(Cashman v Mid Essex Hospital Services NHS Trust [2015] EWHC 1312 (QB))

The applicable Part 36 provisions

Although this decision was considered under the Part 36 in force prior to 6 April 2015, the provisions under consideration (old Rule 36.14(3); current CPR 36.17(4)) have not changed; such that the authority in this judgment should apply in considering CPR 36.17(4) in similar situations in future. Thus all references in this blog to Rule 36.14(3) can be considered to apply equally to CPR 36.17(4).

Practical implications

This judgment confirms that:

  • the award of an additional amount under Rule 36.14(3)(d) where the claimant betters its own Part 36 offer applies equally in detailed assessment cases as it does to claims in damages
  • the award of an additional amount is intended to reward the claimant and penalise the defendant
  • the relevant provisions apply equally to CFA cases both pre and post changes in the CFA regime, regardless of the fact that those with cases pre CFA change will be better rewarded than those operating in the post CFA change arena
  • all of the factors to be considered (under Rule 36.14(4)) in determining whether or not the Part 36 penalties under Rule 36.14(3) are 'unjust' are required to be considered, not just some of them and they are to be considered in respect of each of the payments that may be awarded under Rule 36.14(3) not just to some
  • where the only issue is that the initial level of costs in the Bill of Costs is high this alone, without any other factors pointing to unfairness, is not a reason to render award of the additional amount unjust per se

Where did the Senior Costs Judge err in not ordering the additional amount?

In essence, the Senior Costs Judge had found that ordering an additional amount would be unjust because he was concerned by the low level of the Part 36 offer (£152,500) as contrasted with the high level of costs in the Bill of Costs (£262,000) and the costs as actually assessed (£173,600).

He did not hold back from stating that, were he able to under the rules, then he would have been willing to award an additional amount by applying the prescribed percentage (10%) to the difference between the Part 36 offer and the assessed costs. This would have resulted in an additional amount of about £2,000. However, Rule 36.14(3)(d) does not permit this and, instead, the amount would have had to have been calculated by applying the prescribed percentage to the assessed costs, which would have resulted in an award of about £17,000. This, the Senior Costs Judge thought, was unfair.

However, Mrs Justice Slade rejected this approach, noting, at para 22, that:

'In my judgment the Master erred in relying on the degree of reduction made on assessment to the costs claimed as rendering it unjust to make such an award in circumstances in which the Part 36 offer was lower than the sum at which the costs were assessed.'

She considered that in so doing the Senior Costs Judge had fallen into the temptation identified in Downing, of making an exception by not making an award under Rule 36.14(3)(d) not because he considered the making of such an award unjust, but because he thought it unjust to make an award of the required amount, 10% of the assessed costs. The result was that he had ended up punishing the receiving party for having made what turned out to be a sensible offer, rather than penalising the paying party for not having accepted the offer – this was not the intention behind Rule 36.14(3)(d).

(Downing v Peterborough & Stanford Hospitals NHS Foundation Trust [2014] EWHC 4216 (QB), [2014] All ER (D) 239 (Dec))

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About the author:
Ruth specialises in general corporate and commercial dispute resolution with particular experience in shareholder disputes, fraud and warranty claims. Ruth trained and qualified at Berwin Leighton Paisner LLP (now Bryan Cave Leighton Paisner LLP) where she remained in practice for ten years. Her work has involved project managing large-scale cases to trial in the chancery and commercial courts. Ruth was actively involved in in-house training with a particular focus on all aspects of evidence gathering and production, including authoring a user-manual on E-disclosure. She is also a contributor to the New Law Journal.