SECRETARY OF STATE DEFENDANT MUST PAY THE ADDITIONAL LIABILITY AFTER IT FAILED TO BEAT A PART 36 OFFER ON COSTS: THE “PUBLIC PURSE” HAS NO SPECIAL STATUS AS A LITIGANT

October 26, 2021 · by · in Assessment of Costs, Costs, Part 36

In TT, R (On the Application Of) v Secretary of State for the Home Department [2021] EWHC B21 (Costs) Deputy Master Campbell found that the Secretary of State was liable to pay an additional sum when it failed to beat a Part 36 offer made in relation to the assessment of a bill of costs.  The case is (i) a reminder that the government has no special status as a litigant, certainly when it comes to Part 36 offers; (ii) the best way for a paying party to reduce their liability to pay interest is to make a payment on account of costs.

“… I am unaware of an authority which binds the court that it would be unjust to order payment of the Part 36.17(4)(d) additional sum where the public purse is paying as opposed to the situation which pertains where the paying party is an individual, a company or an insurer, so that point fails.”

“So far as the public purse argument is concerned, I would add this.  Having carried out numerous provisional and detailed assessments involving paying parties where payment of the costs is coming out of public funds, and which have concerned predominantly, claims for judicial review such as the case here and clinical negligence involving NHS Trusts, it is dispiriting how much public money is expended unnecessarily in arguing about those costs at assessment.  Many such matters will have been capable of settlement much earlier, either through effective Part 36 offers being made at an early stage or through a costs mediation before the fee for the assessment has been incurred”

 

THE CASE

The Master was assessing costs where the defendant Secretary of State was liable to pay the claimant. The claimant made a Part 36 offer on costs which the defendant failed to beat. The defendant contended that it was not liable to pay the additional sum due when it had failed to beat the Part 36 offer.

THE JUDGMENT ON THIS ISSUE

The defendant conceded liability to pay enhanced interest. It argued it would be “unjust” for it to pay the additional liability.

  1. Whilst both parties agree that the rule applies and indeed, have resolved the issues of enhanced interest under sub-rule (4) (a) and (b), no such consensus has been reached so far as the additional sum under (d) is concerned.  It is the Defendant’s case that it would be unjust for the additional sum to be added to the costs due, increasing by £7,0877.71 the amount payable by the Secretary of State.
  2. The reasons Mr Herhily has been instructed to advance are these:-
  3. i)It is only the addition of the interest which has enabled the Claimant to beat his own Part 36 offer.  Take out that interest and the offer is short of the sum required to engage CPR 47.17(4)(d).
  4. ii)It is unjust to take into account the interest because that element has arisen only due to the Claimant’s delay in bringing the proceedings for detailed assessment.
iii)               The interest agreed from 17 July 2020 amounts to £2,202.42 up to 6 December 2020 when the Defendant paid £49,867 on account, with a further £948 from that date until the date of assessment making a total figure of £3,150.42.  Interest at that level would not have arisen but for the Claimant’s delay.
  1. iv)The additional sum should not be visited on the Defendant bearing in mind that it is a public body and the funds will come out of the public purse.
  2. Against that, Mr Tollitt contends that the interest is a legitimate and important part of the costs claim.  Not only that, it is one aspect of the matter over which this defendant, and, indeed, any Defendant has control, since they can prevent interest running by making a payment on account.
  3. Here, the Defendant made no such payment until 1 December 2020 and when it did so, just £49,867 was paid.  For that reason, there is no injustice in the Claimant being able to recover the additional 10% when the Defendant could have mitigated its liability by paying earlier.  In that respect, the consent order had provided for a payment on account to be made within 28 days of receipt of the Claimant’s bill, that is to say by 14 August 2020, but it had not done so.  In any event, it is permissible in principle to take interest into account when working out whether a Claimant’s Part 36 offer is at least as advantageous as the figure for the costs assessed – see JLE (a child by her Mother and Litigation Friend, EH) v Warrington & Halton Hospitals NHS Foundation Trust [2019] Costs LR 829 in which the Claimant’s Part 36 offer had been less than the assessed costs, but when interest had been added, it meant that she had bettered her own offer, thereby entitling her to the additional 10%.  Of that fact, at [27] Stewart J had said this:-
“… it was said I should not be influenced on the “injustice” point by the fact that it was the award of interest on the bill which had pushed the sum assessed above the level of the Part 36 offer. That was foreseen by the rules.  I accept that.”
  1. It followed that there was nothing in principle which prevented interest tipping the balance in favour of a Claimant when the court was considering whether CPR 36.17(4) applied.
  2. As to the public purse point, Mr Tollitt was unaware of any authority which supported the Defendant’s contention on this point.  Indeed, had the offer been accepted as it should have been, the public purse would have been spared the time and expense involved in having the matter resolved at detailed assessment.
  3. Having given full consideration to these submissions, I prefer those advanced by Mr Tollitt for the following reasons.
  4. First, like Mr Tolllitt, I am unaware of an authority which binds the court that it would be unjust to order payment of the Part 36.17(4)(d) additional sum where the public purse is paying as opposed to the situation which pertains where the paying party is an individual, a company or an insurer, so that point fails.
  5. Second, the Defendant could and should have mitigated its liability to pay interest by making a payment on account.  Whilst it is right that there was no obligation to do so until 28 days after service of the bill, paragraph 7 of the consent order took effect on 14 August 2020 but no payment was made until 1 December 2020.  Had the payment been made on time, the interest saved would have been about £1,160.  Omitting to do so and failing to comply with an order to which the Defendant had itself given its consent, is not a promising start when it comes to seeking a discretionary remedy, as here.  Nor is the fact that the Defendant made no attempt to mitigate its liability for interest by making a payment earlier than the date it did, albeit that there is no obligation to do so: it just makes commercial sense that it should be done, irrespective of any delay by a receiving party in serving their bill.
  6. Finally, I also agree with Mr Tollitt that it is permissible to take interest into account when working out whether a Part 36 offer has been beaten.  In JLE, the figures were more striking that they are here.  The Master’s allowance was £421,089.16 against the Claimant’s offer to accept £425,000.  However, the addition of interest meant that the Claimant beat her own offer by £6,813 and in those circumstances, Stewart J was satisfied that there was no injustice in the defendant, a “public purse” body, having to meet the additional sum of £42,089.16.  In the present case, I am not persuaded, either, that there would be any injustice in the Defendant being required to pay the extra 10%, mindful as I am, of the guidance given by the court in JLE.
  7. So far as the public purse argument is concerned, I would add this.  Having carried out numerous provisional and detailed assessments involving paying parties where payment of the costs is coming out of public funds, and which have concerned predominantly, claims for judicial review such as the case here and clinical negligence involving NHS Trusts, it is dispiriting how much public money is expended unnecessarily in arguing about those costs at assessment.  Many such matters will have been capable of settlement much earlier, either through effective Part 36 offers being made at an early stage or through a costs mediation before the fee for the assessment has been incurred.
  8. Of course, there are occasions when that is not possible such as where there are points of principle involved in a group action, but in the present case, the public purse was put to unnecessary expense by the Defendant’s failure to make a Part 36 offer at a level sufficient to give it costs protection had it been rejected, and in a sufficient sum so as to be attractive to the Claimant and thus to make it acceptable.  Not only that, but here, the Defendant’s shortcomings were compounded by the fact that a realistic Part 36 offer was turned down, comprising, as it did, interest to date, as well as the amount which the Claimant was willing to accept for his costs – see CPR 36.5(5).  Had it not been for Mr Herhily’s realistic approach at the detailed assessment to see an end to the matter once and for all (and I should add that it was not he who had drafted the points of dispute, having come into the case late), still more expenses would have been incurred.
  9. It is a pity , therefore, in this case in advancing its “public purse” argument, that the Defendant appears to have overlooked the guidance given by Peter Smith J in Wills v Crown Estate Commissioners [2003] 4 Costs LR 581 at [33] when considering the position where one party is liable to pay the other party’s costs of assessment, (the reference to CPR 47.19, now being embodied in CPR 47.20. which provides for Part 36 to apply in detailed assessment proceedings):
“This appeal emphasises the need for paying parties who wish to protect themselves against the costs consequences of CPR 47.19 to make realistic settlement offers at the beginning of the detailed assessment proceedings and not at the end.  The court is bedevilled with late settlements.  The procedures in CPR 47.19 are designed to promote early reasonable offers and parties should bear this in mind in the future”.
  1. For these reasons, I am not persuaded that it would be unjust for CPR 47.17(4)(d) to apply and the Defendant must therefore pay an additional £7,080.77 to the claimant.
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