Costs News

30 May 2019
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Court has power to award only portion of part 36 ‘additional amount’, rules Friston

Costs guru Mark Friston has ruled that the court has the power to allow only a portion of the 'additional amount' a party receives by beating a part 36 offer in detailed assessment proceedings, but that it may not do so simply because it regards the full sum to be excessive.

He also refused to award the claimants in White and Anor v Wincott Galliford Ltd [2019] EWHC B6 (Costs) the uplift after beating a part 36 offer restricted just to the hourly rates that were claimed.

The case concerned the costs of a provisional assessment of a successful mesothelioma claim. Sitting as a deputy master in the Senior Courts Costs Office, the author of the renowned Friston on Costs textbook allowed the rate specified in the offer.

As a result, the claimants sought the 10% 'additional amount' on the whole of the profit costs, but none of the other consequences of beating a part 36 offer. There was also the question of whether to penalise the claimants for having not given voluntary disclosure of the conditional fee agreement.

The judge found that it was a valid part 36 offer in respect of an 'issue that arises' (within the meaning of rule 36.5(1)(d)), as opposed to an offer to settle the whole case. Given the nature of the offer and against the background of the injustice test in rule 36.17(4), he went on to consider whether he would be able, if appropriate, to order only a portion of the additional amount.

“I have to confess that I have found this to be a difficult point,” said Deputy Master Friston, finding that he was bound by the ruling of Lady Justice Macur in Thinc Group Ltd v Jeremy Kingdom [2013] EWCA Civ 1306 and had to read the phrase 'unless it considers it unjust to do so' as bearing the interpretation of 'unless and to the extent of'.

He continued: “I conclude that the court does have the power to allow only a part of the 'additional amount', but that it may not do so simply because it regards the prescribed amount to be excessive. One only has to state that conclusion to realise that, in practice, the latter principle will tend to diminish (if not negate) the former.

“There may be circumstances, however, where the nature of the offer itself or the circumstances in which it was made would make it unjust to award the full amount; where this is so, it would (in theory at least) be open to the court to make a partial award.

“That may be so, but I very much bear in mind the policy referred to by Slade J in Cashman. If I am correct in saying that the court has the power to allow partial awards, I take the view that that power should be exercised in a way that enhances rather than detracts from the effectiveness of the offer in question.

“Put another way, if – by reason of the nature of the offer or the circumstances in which it was made or considered – the court believes it would be unjust to award the 'additional amount' in full, it would be open to the court to consider making a lesser award. It would not, however, be appropriate to reduce the 'additional amount' simply because it appears to be overly generous to the receiving party.”

That meant that, if he concluded the injustice test has been met, he ought to consider whether to allow a lesser amount.

Deputy Master Friston went on to find that the test was indeed met. While acknowledging that part 36 was intended to be used tactically, “the court must guard against it being used for the purposes of mere gamesmanship”, he said.

“An offer in respect of 'an issue that arises' may well allow an offeror to obtain certain benefits (such as an award of costs in respect on that issue on the indemnity basis), but those benefits could not, in my view, be allowed to propagate so as to extend well beyond the issue that is the subject of the offer.

“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.”

Deputy Master Friston continued that offers of this type would not genuinely encourage settlements and instead complicated detailed assessments and provisional assessments in particular. Further, he noted, had the offer been accepted, it would have had “almost no bearing” on the way in which the parties dealt with the matter.

“Given the fact that the offer was made after points of dispute and replies had been drafted, the only effect that acceptance would have had would have been to cause the court to record the agreed hourly rates rather than to adjudicate upon them.

“In the context of a provisional assessment, this would have saved almost no court time at all, nor would it have prevented the parties from incurring costs of any significant amount.”

For the same reasons, he also decided not to award a partial ‘additional amount’, just allowing costs of £1,500 for the provisional assessment, plus VAT and the court fee.

Joel Douglas (instructed by Irwin Mitchell) for the claimants, and William Heritage (instructed by DAC Beachcroft) for the defendant.

 

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