The forthcoming changes to the Costs Practice Direction substitute for paragraph 35.3:
“The paying party must state in an open letter accompanying the points of dispute what sum, if any, it offers to pay in settlement of the total costs claimed. The paying party may also make an offer under Part 36.”
I really don’t know what to make of this.
Under the current rules, which will remain, Points of Dispute must be served within 21 days of service of the Bill (subject to any extension being obtained). Receiving parties have the luxury of 3 months to prepare a Bill (why the huge difference in timescale?). It can be bad enough for paying parties to instruct a costs draftsman, get the papers to them, the costs draftsman to draft the points of dispute (which can require several days of reading in time), arrange for approval and serve within 21 days. There are many cases where quantifying an offer and obtaining instructions (especially where there are multiple defendants or insurers) within 21 days is simply not realistic.
What will be the sanction for failure to make the open offer? The new rules are silent. Does it invalidate service of the Points of Dispute? Or does one just shrug?
What happened to the suggestion of being able to make a conditional offer, such as where there was an issue over a retainer?
The paying party’s offer is meant to be contained within an open letter. Does this mean it can be referred to during a detailed assessment hearing? If so, it potentially prejudices paying parties. There is no corresponding requirement for the receiving party to make an open offer.
What role does this open offer play? The rule is absolutely silent. We are expressly told that the general rules relating to Part 36 will apply in the future to assessment proceedings. A paying party can therefore make an improved Part 36 offer at any stage, notwithstanding the open offer.
Costs Practice Direction 46.1 currently states:
“An offer made by the paying party should usually be made within 14 days after service of the notice of commencement on that party. If the offer is made by the receiving party, it should normally be made within 14 days after the service of points of dispute by the paying party. Offers made after these periods are likely to be given less weight by the court in deciding what order as to costs to make unless there is good reason for the offer not being made until the later time.”
Although most courts will currently take into account offers made long after 14 days, offers made at a very late stage are often given less weight. CPD 46.1 is to be scrapped and a Part 36 offer may therefore be made at any stage. A paying party may not have any costs protection until they do make a good Part 36 offer (subject to how “successful party” is to be interpreted for the purposes of CPR 44.3(2)), but overall the change to the rules makes an early offer less important than under the current rules. Why then the mandatory open offer requirement?
If the normal Part 36 rules will apply to assessment, which is what we are told, where does the open offer come into play? For example, a paying party makes an open offer of £10,000 on a £100,000 bill. Six months later the paying party makes a Part 36 offer of £90,000. At assessment the bill is assessed at £80,000. The receiving party will get their costs from 21 days after they made their Part 36 offer plus interest on those costs. What relevance then the open offer of £10,000? Why have a rule requiring an offer to be made that becomes irrelevant once a better Part 36 offer is made?
Or, is this to deal with the issue I raised the other day about the fact the new rules appear to remove the presumption a receiving party is entitled to the costs of assessment? Is the open offer to be the key factor the court takes into account unless and until a successful Part 36 offer is made? Will beating the open offer be treated as meaning the receiving party is the successful party for the purposes of Part 44.3(2) and, if not, that the paying party is the successful party?
Rules committee, please explain.
The new rules are presumably meant to simplify matters but I am struggling with the basics at this point. I’m going to have a right go at the costs lawyers sitting on the rules committee who came up with this mess. Please remind me of their names again.