By John Ivory, costs lawyer and mediator
(Estimated reading time: 4 minutes 17 seconds)
As we begin another year, it seems an opportune moment to think about how practitioners can operate to best protect their clients’ interests from a legal costs perspective. With that in mind, here are some pointers which may be worthwhile bearing in mind to ensure that costs proceedings are conducted efficiently and effectively in 2022 and beyond:
Be pro-active when a costs order is made
Make an early part 36 offer when an order for costs has been made. Here are four things to consider –
- Receiving parties can open up the possibility of recovering the rewards available pursuant to CPR 36.17(4), including an enhanced rate of interest, indemnity basis costs of assessment and 10% of the final assessed sum (up to a maximum of £75,000).
- Paying parties can obtain costs protection even before a formal bill is prepared, with a possibility of avoiding liability for a hefty costs draftsman’s fee. A credible offer based on costs management order allowances should create litigation risk for an opponent and may lead to a swift resolution on commercial terms.
- It’s highly advantageous for paying parties to make a payment on account of costs as soon as possible. This is to mitigate against liability for what could be a significant claim for interest, with the judgment rate of 8% applied from the date of the final order in the proceedings.
- “Letting sleeping dogs lie” is not a recommended tactic, as both parties may be penalised for any delay in commencing detailed assessment proceedings. Conduct issues could be relevant when the court comes to determine who should pay the costs of assessment.
Make the correct offer and in appropriate terms
It is not possible to make a part 36 offer in costs proceedings excluding interest in accordance with King v City of London Corporation [2019] EWCA Civ 2266. Furthermore, part 36 offers in costs proceedings should reflect the terms of CPR 36.5(5) in play since April 2021, by making an offer including interest up to the date of expiry of the 21-day time period. This is for unconditional acceptance, and stipulating that interest will continue to accrue on the principal sum offered beyond that relevant period until the date of acceptance.
If there are arguments concerning a receiving party’s entitlement to interest due to delay or conduct issues then the offeror or offeree should make their case clearly and at the earliest stage possible – in the part 36 offer letter or the paying party’s response thereto. This issue could be important when the court is asked to determine whether the part 36 offer has been successful or not.
Be wary of CPR 36.13(4), since if a part 36 offer is accepted after expiry of the relevant period for acceptance (of 21 days). This is unless the parties agree on the liability for costs, then the court will make an appropriate determination. This tactic was used by the defendant in Roxanne Pallett v MGN Limited [2021] EWHC 76 (Ch) who argued that the claimant should have engaged in settlement dialogue at an earlier stage and therefore, for conduct reasons, she should not be entitled to recover her costs. The court ultimately found in favour of the claimant who argued that the defendant had failed to disclose certain documents during the pre-action protocol stage, and this prevented an earlier settlement from being achieved.
If a party is unsure whether a part 36 offer is capable of acceptance or not based on the available information and evidence in existence at the time the offer is received, or due to conduct reasons, then they should say so. This is in order to try and avoid facing adverse consequences following a trial, reflecting the terms of CPR 36.17(5).
Offers may also be made on a Calderbank or “without prejudice save as to costs” (“WPSATC”) basis, usually on global terms in full and final settlement. When making such offers it might help to break down the constituent elements for interest and costs of assessment. This is to make it easier to argue whether the sum proposed for acceptance has been beaten or not following conclusion of the court’s assessment procedure.
WPSATC offers should also be monitored or, even better, made open for acceptance on a time-limited basis. This should avoid the consequences faced by the defendant in MEF v St George’s Healthcare NHS Trust [2020] EWHC 1300 (QB) where the claimant accepted a WPSATC offer on the second day of a detailed assessment hearing. On appeal, it was determined that it was permissible for the claimant to accept the defendant’s offer as common law principles applied. Also, that there can be no direct “read across” to the provisions of CPR part 36, which requires leave of the court to accept an offer once the final hearing has commenced.
Lastly it is highly advisable to keep your ATE insurer and/or the client informed as to progress in costs negotiations and to consider all available options to achieve a desirable outcome – especially given the time and expense associated with protracted detailed assessment proceedings and the costs risks involved.
If you would like to discuss any of the issues raised in this article, please contact John via email to john.ivory@keithbintley.co.uk or call 020 3940 4954.
