In a recent decision of JLE v Warrington & Halton Hospitals NHS Foundation Trust EWHC B18 (Costs), the question was posed as to whether the consequences of failing to beat a Part 36 offer under CPR 36.17(4) were severable.
CPR 36.17 applies to Part 36 offers either where the Claimant matches or beats a Part 36 offer made by either the Claimant or Defendant.
Under CPR 36.17(4), the court must, unless it finds it unjust to do so, order the Claimant be entitled to:
Following conclusion of a successful claim, the Claimants solicitors submitted a Bill of Costs totalling £615,000. The Claimant made a Part 36 offer of £425,000 which expired on the 13th July 2018. A detailed assessment hearing was commenced on the 16th July, where Master McCloud assessed the Bill of Costs at £421,089.16 plus interest of £10,723.89 (total £431,813.05). Including interest, the Claimant beat their Part 36 offer.
The Defendant argued that the court had discretion and should only allow some of the consequences set out in CPR 36.17(4), as it was unjust to award an additional 10% when the Claimant only beat their offer by £7,000 and the additional 10% would total £43,000.
The Claimant contended that the court did not have authority to award some, but not all consequences; the Part 36 rules were meant to encourage settlement, not compensate.
Master McCloud stated that the authorities relied upon indicated that the rules were severable, and that each limb should be considered against what would be unjust.
In considering whether it is unjust, the court must have regard to the circumstances of the case (CPR 36.17(5)) including:
In considering whether the consequences are individually unjust, Master McCloud said that:
“In most cases, the extent to which an offer has been beaten is a very material factor’ but … ‘given that the court is empowered to apply the injustice test based on each consequence then…the proportionality of the costs penalty must be applied separately for each of the sub-rules in 36.17(4)
“It is only where the costs penalty created by the 10% rule would be clearly disproportionate that one would incline to exercise the discretion to waive it; but, that said, if the court was unduly unwilling to exercise its discretion – for example, requiring something akin to ‘exceptional circumstances’ – then a party in the position of the Defendant might be discouraged from taking the risk…despite having various meritorious objections to the bill as drawn and which have (in this case) been shown in many instances to be correct.”
Master McCloud considered the 3 ‘most significant factors’ to be:
It was concluded that the bonus 10% was clearly disproportionate and unjust to award.
This judgement serves to raise more questions regarding how close the Claimant has to be to beat a Part 36 offer for the rules to apply as intended and to what extent the amount of additional costs would be proportionate. Due to the amount in issue, this may be one for appeal.
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