THE MAGIC OF CPR 36.17

Practitioners will be aware of recent changes to CPR 36 and we have reported earlier on those changes. However, whilst some provisions have found a new home, they are still there and the force of what was CPR 36.14(3) (d) has recently been exemplified by the higher courts.

The relevant provision is that which provides for a 10% additional amount to be paid to a Claimant who achieves a judgment at least as advantageous as his/her own Part 36 offer. This is now enshrined in CPR 36.17 (we urge all practitioners to read the relevant provision in detail). There has been a small, but perhaps significant change in the transfer to its new home. In its previous incarnation, it provided that the Court “will” unless unjust to do so, order the paying party to pay the additional amount. Under CPR 36.17(4) the word “will” has been changed to “must”.

Semantics? Possibly, because there is still the “unjust” provision to potentially soften the blow. An additional test for the “unjust” provision has also been added – whether the offer was a genuine attempt to settle the proceedings (designed to prevent the “we will accept 100% liability” type of offer previously commonly seen.

However, the change remains of some importance – it reinforces what should the normative approach.

The importance of all of this is illustrated in a case reported in Litigation Futures on 11th May 2015. In the case of Cashman v Mid-Essex Hospital NHS Trust [2015] EWHC 1312, the High Court overruled the Senior Costs Judge (no less) on appeal and awarded the Claimant the 10% additional amount. Master Gordon Saker had deprived the Claimant of the bonus on the grounds he felt it was unjust, given the amount by which the bill had been reduced. The High Court felt that he had deprived the Claimant of the payment not because he thought the making of the award was unjust but because he thought the amount (i.e.10%) was unjust. He had wondered about making an award of 10% of the difference between the offer and the amount actually awarded, but could not do so under the rules – the amount is prescribed and so it is either given at 10% or not given at all.

In the case, the bill had claimed £262,000, the Claimant’s Part 36 offer was £152,500 and the bill assessed at £173,000.

The case is a useful one to illustrate several points. Obviously, the High Court’s decision that the Senior Costs Judge had failed to take sufficient account of the overriding purpose of the provision (i.e. to encourage sensible offers from the parties) is the fundamental one.

However, it also demonstrates how difficult it is to pitch offers at appropriate levels in assessment proceedings. Particularly where there is a variable success fee, it can be very difficult to predict the award that may be made on assessment. We all know that on the same bill, but with a different Judge, the outcome on many bills will be very different.

In Cashman it could be said that the Claimant’s Part 36 offer was selling himself short by £20,000 – a not inconsiderable sum. Was that a poorly pitched offer then? No – on another day the outcome may have been very different. Perhaps a tactical view was taken. Was the offer made at such a level that, bearing in mind the Defendant’s offers to that point, there was very little prospect of it ever being accepted? Was it unlikely that the Defendant would ever revert within the “relevant period”? Perhaps then the Claimant could relatively safely make a low offer, or perhaps it was just a figure that the Claimant (or perhaps more pertinently his Solicitors) were prepared to accept as good remuneration for the job in hand – a good return on the “wip figure”?

So there are many lessons to be learned here. What must surely be the top one though is that a Claimant really should make a competitive Part 36 offer before going to assessment. The rewards are magnificent.

So Lord Dyson and Jackson LJ have offered their support for the budgeting regime and in effect said that in a few years time, everyone will wonder what all the fuss was about. One has to admire their “chutzpah” in the face of all the self-evident criticisms. One issue which has been highlighted is the continuing problem that the precedent forms of bill bear no relation at all to the phases upon which the case has been budgeted. How is the Court to determine whether a claim for costs falls within the budget for each phase in the present scheme? It is the amount for each phase which is relevant, not just the overall amount.

Their suggestion? Why not do a bill and an extra document showing all the work done in each phase. Simple. And who is to pay for effectively costing the file twice? Is the work supposed to be completed within the £1500 + VAT cap currently allowed for costs in provisional assessments? Or are bills of £75,000 and under (apparently exclusive of VAT) of such limited relevance to the Judges that they do not consider the implications?

So perhaps the answer is to prepare such an additional document with the bill and claim the costs of its preparation as part of the bill preparation time, thus effectively side-stepping the cap? How will paying parties react to being charged nearly double the time for preparing a bill? Not very well if it demonstrates that the budget has not been exceeded, one would expect.

The system is not fit for purpose and needs to be changed.