THE ASSESSMENT OF COSTS: A “NEAR MISS” OFFER IS NOT ENOUGH

June 17, 2021 · by · in Assessment of Costs, Costs, Part 36

In Mullaraj v Secretary of State for the Home Department [2021] EWHC B5 (Costs) Deputy Costs Judge Campbell rejected an argument that a “different order” for costs should be made following an assessment of costs.  The paying party had made an offer but that had been beaten. There were no other factors which meant that the claimant should be deprived of the costs of the assessment process.

“…. having failed to protect itself by making an effective offer under CPR 36 or by a “without prejudice save as to costs” offer, or through its open offer, the SSHD cannot succeed on a “Let’s see by how much the bill has been reduced” argument and then deploy CPR 47.20(1)(b)”

THE CASE

The claimant obtained an order for costs against the defendant.  Costs were provisionally assessed at £41,436.66. The court ordered costs on that basis. Together with interest, the costs of the assessment and the court fee.  No request was made for an oral hearing.

THE DEFENDANT’S APPLICATION

The defendant applied for an order that a “different order” as to the costs of the assessment be made.   There was no particularisation of what the “different order” should be.  The Deputy Master assumed it was there be no order for costs or the claimant pay the defendant’s costs.

THE GROUNDS OF THE DEFENDANT’S APPLICATION

The grounds of the defendant’s application were that the defendant had made an offer to settle the costs for £40,000.  No counter-offer had been made.  The argument was that this failure to respond represented unreasonable conduct.

Further the bill had been reduced substantially (by 44.05%).

 

THE DEPUTY MASTER’S DECISION

The Deputy Master did not accept the defendant’s arguments.

  1. I recognise that the bill has been reduced by a large amount, but I reject the SSHD’s contention that as a consequence, the Claimant should be penalised in costs by making a “different order”.  These are my reasons.
  2. The starting point is CPR 47.20.  The Claimant is entitled to the costs of the assessment unless the court makes some other order, having regard to all the circumstances.
  3. The first such circumstance, in my view, is to ask whether the SSHD took steps to gain the protection afforded by Part 36.  In this respect, guidance is to be found in in Global Energy Horizons Corporation v Gray [2021] EWCA Civ 123 at paragraph 8:-
“Where a defendant is faced with an exorbitant claim which he wishes to defend vigorously but where he is vulnerable to a finding that he is liable for a much smaller amount, there is a clear process provided by CPR Part 36 which he can follow to protect his position.  Mr Levey submitted that there was nothing that Mr Gray could have done to stop the juggernaut of GEHC’s attack on him.  We do not accept that a trial of the complexity of the Enquiry Hearing was inevitable, but in any event, if Mr Gray  had made an early payment into court of a proportion of the management fees and the Klamath Falls settlement monies he would be in a much stronger position now to dispute his liability [Emphasis added] to pay GEHC’s costs.”
  1. Here, it is accepted by the SSHD that it was going to be liable for some of the costs, but on its case, nothing like the figure which was being sought.  In these circumstances, Part 36 provides the process by which such a party can protect itself -see Global above.  However, it is by no means clear to me that the SSHD ever made a Part 36 offer, even though the Claimant may have believed that it did – see submissions at paragraph 12.  The letter of 30 July 2020 is not expressed as such and therefore does not comply with CPR 36.5 so as to confer the automatic consequences of the rule under CPR 36.7 where it is not beaten.  It follows that the SSHD did not put itself in the “stronger position” referred to in Global that would have enhanced its prospects of now successfully disputing its liability to pay the Claimant’s assessment costs.  Moreover, even if the offer had been Part 36 compliant, it is clear that the Claimant gained more through rejecting it.  Accordingly, the Claimant has not failed to obtain a judgment more advantageous to her that the offer, so CPR 36.17(1) and (3) giving SSHD costs after the relevant period had expired, would not have applied in any event.
  2. That said, it is uncontroversial that the offer was an offer to settle which would have resolved the costs had it been accepted and, accordingly, is a matter which the court must take into account when having regard to all the circumstances. Here, the offer was £40,000 “all-in”, whereas the Claimant recovered £41,436.66 before considering interest and the costs of assessment to the date of the offer.  It is trite law that a “near miss” is not good enough – see judgment of Stewart J in JLE v Warrington & Halton NHS Trust Foundation Trust [2019] Costs LR 829 at paragraphs 40-44, and in a Part 36 context at least, it is not open to judges to take into account the amount by which an offer has been beaten.  I see no reason why the position should be different here, where the Claimant has gained a more advantageous result by going to assessment, with the margin of the win not being a matter which the court can take into account.  Put differently, I do not consider that I should give more weight to an offer, which was an offer but not one that complied with Part 36, than I would have done had it been compliant.  It follows that in so far as a “near miss” argument is relied upon, it must fail.
  3. The next circumstance is the fact that 44.05 % came off the bill.  It is right that this is a factor under CPR 47.20(3)(b) to take into account in deciding whether to make a different order as to costs.  The SSHD advances the question rhetorically, that if the consequence of a paying party’s failure to beat a Part 36 offer were always to be that the receiving party recovered the costs of assessment regardless of any other circumstances, there would be no point in having a rule 47.20(1)(b).
  4. There are at least two answers to this.
  5. First, I do not find it persuasive that a paying party who makes no offer at all, should be in a better position than a paying party who does make an offer but one which is just short.  That would place a non-offering paying party at an advantage over a paying party who has tried to settle the costs, but whose offer has not been quite enough.  It would provide a potential reward for a paying party, who sits back, having deliberately made no offer, to rest secure in the knowledge that a successful challenge can always be advanced later  under CPR 47.20(1)(b) if the bill is reduced by a significant amount after a good day in court.  In circumstances such as these, Rule CPR 47.20(1)(b) and (3)(b) could simply be argued in every case where the bill has been reduced without an offer made, in disregard of the Court of Appeal’s guidance in Global, that a party who is vulnerable for a smaller sum than the amount claimed, should use Part 36 to protect their position.  Moreover, what tariff should be used to decide whether enough has come off to reverse CPR 47.20: 25%, 30%, 50%, more? There is simply no guidance upon which to draw.
  6. Second, whilst rule 47.20(3)(b) indeed requires the court when considering whether to make a different order, to take into account the amount by which the bill has been reduced,  I am puzzled (with one exception) how a circumstance could ever arise in which a paying party who has made an offer to settle which has been short (in addition to those who have deliberately made no offer) could successfully deploy that rule.  The exception is where a paying party would have no way of knowing whether there has been fraud or other skulduggery by a receiving party, such as claiming costs where it was known that there had been a failure to comply with the indemnity principle.  Such a situation would arise where the receiving party had made a bargain with his solicitor not to be liable for any costs so by operation of the indemnity principle, nothing would be recoverable from the paying party.  These would be matters to which only the Costs Judge would be privy, since a retainer letter, which would provide the answer, is a privileged document only available for the court to read upon receipt of the receiving party’s papers lodged for assessment under CPR 47.19 PD 3.12.  Other than that, I cannot think of a circumstance where a paying party whose without prejudice offers have been too low, could successfully argue that the receiving party should be deprived of the costs of assessment.  That is particularly the case here where the SSHD’s open offer under PD paragraph 8.3 to CPR 47.9 was also way off the mark, with nil having been offered, a deficiency of over £41,000.
  7. Even if I am wrong about that, there are sound explanations here why the costs were reduced substantially.  Part One of the bill was disallowed completely for want of a retainer before legal aid was granted, the Claimant went to counsel far too often and every e mail appeared to have been charged for.  None of these matters, however, in my judgment, would justify any adjustment under which the SSHD should benefit from a different costs order.
  8. The next circumstance to consider is SSHD’s contention that the Claimant did not reply promptly to the offer and made no counter offer.
  9. It is correct that the Claimant took 32 days to reply to the offer and that no counter offer was made.  Given, however, that an offeree under Part 36 (where that applies) has 21 days for consideration, the Claimant cannot be seriously be criticised for taking an extra week to give her opinion on it. 
  10. There is nothing, either, in the ADR point. ADR is defined in the glossary to the CPR as:-
“A collective description of methods of resolving disputes, otherwise than through the normal trial process.”
Here, there was no ADR proposed by the SSHD such as a costs mediation and the point fails for that reason.
  1. As to the counter-offer, there is no obligation under the rules to which I have been referred which mandates that an offeree must make a counter-offer.  It might be said that a receiving party will be unwise not to do so, since, absent a counter-offer under Part 36, the special benefits conferred by CPR 36.17(4) will be unavailable.  In the present case, had the Claimant made an offer under Part 36 of £41,000 which the SSHD had rejected, a further £4,136.66 would have been payable under CPR 47.20(4)(d) as an additional sum unless it was unjust to make that order.  In this respect, it is useful to observe that in JLE Stewart J held that it was not unjust for the rule to apply (including an additional sum of £42,000 in that case), where the bill had been reduced by £206,000, or 31% of the total, and the Claimant had beaten her Part 36 offer only when interest had been added to the amount payable.  He did not consider that there should be a “different order” in that case.  On that basis, in this case, neither do I.
Result
  1. The application is dismissed with costs which I summarily assess at £1,000 on the basis that the time spent on documents is too high and there is no VAT as the Claimant is an Albanian national.  However, the application has raised an interesting point upon which I am aware decisions have gone both ways at Costs Judges’ level.
  2. The conclusion I have reached is that having failed to protect itself by making an effective offer under CPR 36 or by a “without prejudice save as to costs” offer, or through its open offer, the SSHD cannot succeed on a “Let’s see by how much the bill has been reduced” argument and then deploy CPR 47.20(1)(b).  To permit that would be to discourage the making of offers, and enable paying parties who advance no offers, to be in a better position to argue for a “different order”, than those who make offers in a genuine attempt to settle the costs.  However, as I have said, I am aware that there is no consistency on the Costs Judges’ corridor on this point.  For that reason, I consider a definitive view at a higher level would assist parties in understanding where they stand, when they make a Part 36 offer which is too low, or no offer at all, but then argue that they can rely on CPR 47.20(1)(b) to their advantage, depending upon how good a day they have had in court.  If asked, I would give permission to appeal and in that eventuality, invite the parties to transfer the case to the High Court so that the appeal is dealt with by a High Court Judge whose decision will be binding.”
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