The Association of Costs Lawyers often used to have an examination question along the lines of: “There is no point in a receiving party making an offer to settle in detailed assessment proceedings. Discuss.”
The reasoning behind the question is that receiving parties currently have a presumption in their favour that they will be awarded their detailed assessment costs. Unless and until the paying party makes an offer that puts them at risk they can carry on regardless. If a receiving party does make a successful offer (usually by way of Part 47.19) there is no bonus (eg by way of enhanced interest or costs on the indemnity basis)) for making such an offer. All that is likely to happen is that the receiving party will be awarded their assessment costs; which is no more than the general presumption allows for in any event.
From 1 April 2013, Part 47.19 offers, as they now are, go. Part 36 will then apply. I have already written about one of the problems this creates and there are others. Nonetheless, Part 36 is here to stay.
The wording of Part 36 is changed slightly (eg “receiving party” substituted for “claimant”), but with the amended wording this is the position where a paying party makes a successful Part 36 after 1 April 2013 and that offer is not beaten at assessment:
“Costs consequences following detailed assessment
36.14
(1) This rule applies where upon completion of the detailed assessment –
(a) a receiving party fails to obtain an outcome more advantageous than a paying party’s Part 36 offer;
…
…
(2) … the court will, unless it considers it unjust to do so, order that the receiving party is entitled to –
(a) his costs from the date on which the relevant period expired; and
(b) interest on those costs.”
Subparagraph (a) is much the same as one would expect now (although “from the date on which the relevant period expired” may be worse than now where a successful offer may result in all detailed assessment costs being awarded to the Defendant). The only benefit to the current position is interest on those costs. This is likely to be of little extra incentive.
On the other hand, where the receiving party makes a successful offer and the matter proceeds to assessment:
“Costs consequences following detailed assessment
36.14
(1) This rule applies where upon completion of the detailed assessment –
…
(b) the outcome of the detailed assessment hearing is at least as advantageous to the receiving party as the proposals contained in a receiving party’s Part 36 offer.
…
(3) … the court will, unless it considers it unjust to do so, order that the receiving party is entitled to –
(a) interest on the whole or part of any sum of money (excluding interest) awarded at a rate not exceeding 10% above base rate for some or all of the period starting with the date on which the relevant period expired;
(b) costs on the indemnity basis from the date on which the relevant period expired;
(c) interest on those costs at a rate not exceeding 10% above base rate and
(d) an additional amount, which shall not exceed £75,000, calculated by applying the prescribed percentage set out below to an amount which is—
(i) where the claim is or includes a money claim, the sum awarded to the claimant by the court
…
Amount awarded by the court Prescribed percentage
up to £500,000 10% of the amount awarded;
above £500,000 up to £1,000,000 10% of the first £500,000 and 5% of any amount above that figure”
Subparagraph (d)(i) appears to be drafted widely enough to cover a claim for costs. The successful receiving party therefore gets a 10% uplift on whatever the bill is assessed at plus the other benefits listed at (a) to (c). (Again, not clear how the judge undertaking the provisional assessment will deal with (a) or (c).)
Taken together, this change means a receiving party who makes a successful Part 36 offer will find themselves, on average, somewhere in the region of 15-20% better off at the end of an assessment than currently.
This change will act as a massive incentive for receiving parties to make sensible early Part 36 offers. The days of silly drip feeding of offers by receiving parties will hopefully end. (Yes, I know some paying parties are also guilty of this and the new rule does little to discourage this.) Claimant Costs Lawyers and law costs draftsmen who do not advise on sensible Part 36 offers at an early stage are likely to leave themselves open to negligence claims.
I will shortly be setting up shop as an expert witness to help deal with these negligence claims. I’ll need something to keep myself busy post-April.