DON’T KICK A MAN (TOO HARD) WHEN HE’S DOWN – “CLAIMANT” PART 36 OFFERS AND REFUSALS TO MEDIATE
If the parties to a detailed assessment are fairly close during negotiations, then more often than not some deal will be struck to avoid the need for a hearing. It follows fairly logically therefore that if there is to be a hearing, the distance between the parties is likely to be fairly substantial and at the end of it, of course, the will be a winner and a loser. However, if the paying party gets it so wrong (at least in terms of the view of the particular Judge undertaking the assessment) that it fails to reduce the bill below a receiving party’s Part 36 offer, then it can be an expensive business indeed. When those circumstances are allied to a finding that the paying party has unreasonably refused to engage in mediation about the costs, it could become more painful still.
However, in the case of Reid v Buckinghamshire Healthcare NHS Trust  EWHC B21 (costs), Master O’Hare in the SCCO decided that it would not be proportionate to inflict every potential penalty upon the Defendant. This was a clinical negligence case of some substance and at the start of the 2nd day of a two-day detailed assessment hearing, the costs of the action were agreed at £130,000. The Claimant, no doubt gleefully, produced two Part 36 offers which had been made by the Claimant, the 1st in relation to the totality of the costs and the 2nd specifically in relation to Counsel’s fees. Both offers had been bettered by the outcome. Further, the Claimant pointed to an invitation made to the Defendant to enter into mediation in relation to the costs, such invitation not receiving any response for some 6 weeks and even then in the negative.
The Master found that the refusal to mediate had been unreasonable. Therefore, he had a range of potential sanctions open to him flowing from a finding of unreasonable conduct on the part of the Defendant and from the provisions of CPR 3.17.
His considered view was that the sanctions needed to be proportionate and not duplicative. He awarded the 10% additional amount on the costs as agreed, but left the interest payable on the agreed costs at 8% from the date of the award of costs. He awarded standard basis costs up to the date of service of the invitation to mediate and indemnity basis costs thereafter (such offer having been made a couple of months prior to the Part 36 offers) but again left interest on the 10% additional amount and the costs of assessment at 8% from the date of his judgment (rather than any earlier date).
He found that there was no good reason for him not to award the 10% additional amount. Such reasons as there may have been did not amount to “good reason” and in this regard he specifically noted that at the time that the Part 36 offer was made the Claimant knew more about the bill than the Defendant and at no stage during the assessment did the Claimant serve Replies which might redress that balance. However, the Defendant had, in the Master’s view, sufficient information to properly consider the bill and the offer and there had been no request for a hearing date until several weeks after service of the offer. He also referred to the leading case on the application of the penal provisions in Part 36 (Cashman v Mid-Essex Hospital Services NHS Trust  EWHC 1312 QB) which explored the question of “good reason” and in particular found that it was inappropriate for the award to be refused because of the amount of money involved – the true consideration revolved around the circumstances of the Part 36 offer and not the amount by which the bill had been reduced.
The Master felt that would it would be inappropriate to make more than one award of the 10% additional amount and therefore took no further action in relation to the Part 36 offer made in relation to Counsel’s fees. He felt that the Claimant had already been compensated by the award in relation to the global Part 36 offer and that it would not be right to have multiple 10% awards for separate parts of the bill. He also felt that it was not appropriate for there to be any enhanced interest awarded, because the 10% additional amount was a sufficient reward/penalty already. Interest on the 10% additional amount was to run from the date of the assessment and not any earlier date, because the Defendant could not reasonably have been expected to pay that before that day.
In relation to the refusal to mediate, the Master identified that the sanctions available to him included indemnity basis costs and interest from a date earlier than the date of the assessment, with the date of the assessment being the normal date. He felt that indemnity basis costs from the date of service of the invitation to mediate was the appropriate starting point and that in this regard he did not have the power to amend the interest percentage, but he would not be minded to do so anyway because any further sanction would not be proportionate.
He noted that in hitherto reported cases, the refusal to mediate point had been taken against the successful (receiving) party and had had the consequence of reducing the costs of assessment awarded. In those circumstances, the issues which arose here as to duplication of penalties or disproportionate imposition of them had not really arisen.
We are dealing here with matters which (to a greater or lesser extent) fall within the discretion of the assessing Judge. Therefore, much of what will happen will be case sensitive. However, we have previously stressed the need for any receiving party to strongly consider making a Part 36 offer at a competitive level before moving towards an assessment hearing. The 10% additional amount in this case was worth £13,000 on its own and, as can be seen, the hurdle for the paying party to jump in order to show that there is “good reason” not to make the award is a high one.
For paying parties, it is important that they only proceed to an assessment hearing with their eyes wide open if the receiving party has made a Part 36 offer. The paying party must fully understand the potential adverse consequences and the monetary risks involved. Similarly, whilst it is often the paying party who make some offer to mediate, again such an invitation must not be summarily rebuffed. It may well be that there is good reason not to mediate such matters, but those reasons must be clearly expressed and have some considerable merit if the potential sanctions as outlined in this case are to be avoided.