Costs Update – April 2015

Costs Update – April 2015

CategoryArticles Author Caroline Allen Date

This article is taken from 39 Essex Chambers’ Personal Injury Newsletter – April 2015.

Changes to Part 36: The imminent changes to Part 36 are dominating the costs landscape at present as further new version of Part 36 is coming into being on 6 April 2015 and will apply only to offer made on or after 6 April 2015: see the Civil Procedure (Amendment No. 8) Rules 2014. The Rules merit careful consideration as many of the changes are highly technical in nature, but the key changes are as follows:

  • Newr.36.9(4)(b) allows a Part 36 offer tobe withdrawn automatically after expiry of the relevant period in accordance with itsterms, thereby removing the anomaly which exists under the current rules whereby a “time-limited” offer is not capable of being a Part 36 offer and does not carry the costs sanctions associated with Part 36, though a Part 36 offer can be withdrawn, and still considered valid, after expiry of the initial offer period by sending a separate notice (i.e. two letters mustbewritten, rather thanone). However since r.36.17(7) provides thatthe Part 36 costs consequences do not apply to an offer thathas been withdrawn, it is difficult to see any advantage in making a Part 36 offer if it is to be automatically withdrawn in this way.
  • New r.36.16 allowsthetrial judgeto be told of the existence, though notthe terms,of a Part36 offer in circumstances whereany part of, or issuein, the case hasbeendecided,andto betold of boththe existence and terms of a Part 36 offer if it relates to theparts or issues thathavebeen decided. This is designed to address thedifficulties thatexistunder the current rules, whereby the fact that a Part 36 offer hasbeen made cannot be communicated to the trial judge “until the case has been decided” and there is no carve-out for split trials, resultingin situations where, following a trial of preliminary issue(s), the court may have to determine whether tomakeacosts order in respect of the preliminary issue in ignorance of whether or not a Part 36 offer has been made, unless the parties agree to disapplythe provision. This rule will apply where the split trial starts on or after 6 April 2015, even if the Part 36 offer was made before it.
  • The new rules attempt to address the perceived problem of claimants being able to obtain the costs benefits of Part36 where they have made very high offers by adding an additional factor for the court to take into account when deciding whether it would be unjust to orderthePart36 costs consequences: at r.36.17(5)(e), whether the offer was a genuine attempt to settle the proceedings”. Satellite litigation centring on the interpretation of “genuine attempt” seems inevitable.
  • Confusion over the operation of Part 36 in respect of counter claims is addressed atr.36.2(3) which states expressly that a Part36 offer maybe made in respect of a counterclaim or an additional claim. It cross-refers to CPR 20.2and20.3 which provide that counterclaims and other additional claims are treated as claims and that references to a claimant or defendant include a party bringing or defending an additional claim. This should reduce the scope for confusion, and reinforce the ability of defendants/ counterclaimants to take advantage of the more favourable costs consequences of claimants’ Part 36 offer, including an entitlement to costs if the offer is accepted. The court will, however, apply close scrutiny to the reality of the situation, in determining whether an offeror may sensibly be considered the “real” claimant.
  • R.36.4 deals expressly with the application of Part 36toappeals (and is self-explanatory). A Part 36 offer made in the initial proceedings has costs consequences only in those proceedings, and a new Part 36 offer made be made in relation to an appeal.
  • R.36.9(5) provides that where an offeror changes the terms of an offer to make it more advantageous to the offeree it is to be treated as a new offer with time running from the date of service of the new offer, rather than as a withdrawal or a variation of the original offer. Burrett v Mencap Ltd 1 is thereby overturned.
  • Where a Part 36 offer is accepted late, the new r.36.14(5)makes it clearthat thecourtmust make the usual order (that the delaying party pays the costs for the period of delay) unless it would be unjust to do so, thereby codifying the existing position under case law (cf Lumb v Hampsey2).
  • New r.36.23 governs the situation where the offeror’s costs have been limited to court fees (generally where there has been a failure to file a costs budget in time), and provides a strong incentive to defendants to make competitive Part 36 offers in goodtime, when such incentive might otherwise be lacking. In such circumstances, the defaulting party’s recoverable costs for the purposes of Part 36will be50%of the costs that would otherwise be recoverable, but will not be limited to court fees. It should be noted, however, that this provision only applies to costs from expiry of the relevant period onwards, and that where it is the claimant who is in default and the offer is accepted within the relevant period, the new rule does not allow the clamant to avoid the limitation to court fees.

Failure to mediate resounds in costs: Despite successfully defending proceedings, the defendant in (1) Laporte (2) Christian v Commissioner of the Police of the Metropolis3 was awarded only two-thirds of his costs following a finding thathe had failed, without adequate justification, to have engaged in the alternative dispute resolution process. Whilst the court’s finding son inadequate justification inevitably turn on the particular facts of the case, they are worthy of consideration by parties considering refusing an invitation to participate in ADR, as they include issues common to litigated proceedings in general and provide clear guidance as to the approach the courts are looking to adopt.

In summary, the findings were (i) that the case was not one in which the nature of the dispute (a claim for damages for assault, battery, false imprisonment and malicious prosecution) made it unsuitable for mediation, nor would it have delayed the trail of the action; (ii) there were issues of fact to be resolved in respect of which both parties ran the risk of adverse findings;(iii) there was no continuing commercial relationship between the parties and no real risk of any settlement having a potential impact on police powers or policing tactics; (iv) the commissioner never excluded the possibility of making a money offer and the claimants never insisted that such an offer was a precondition to settlement; (v) the commissioner was not entitled to regard the claimants’ approach to ADR as purely tactical as it had been on their agenda from the outset and was pursued with appropriate vigour;(vi)the commissioner had never categorised the case as one which was so self- evidently unfounded that it had to be fought regardless of the risk of incurring disproportionately high costs, nor was the defence perceived to be so strong as to justify a refusal to engage in ADR, as was evidenced by the commissioner’s acceptance that he was prepared to mediate until it became apparent that there was no scope for narrowing the issues; and (vii) that there was a reasonable chance that mediation would have been successful in whole or in part.

This article was written by Caroline Allen.

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1 Unreported,14 May 2014
2[2011] EWHC 2808 (QB)
3 [2015] UKSC 5

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