Part 36 penalties in detailed costs assessments.

 By Justin Crossley

Cashman v Mid Essex Hospital Services NHS Trust [2015] EWHC 1312 (QB)

 

This matter was an appeal from a senior cost Judge refusing to award an additional amount under CPR  36.14(3) (d) on a detailed assessment of costs.  The law with which this judgement is concerned is CPR 36 as it was prior to its amendment on the 6^th April 2015.

The claim giving rise to the cost proceedings was for clinical negligence arising out of the fatal treatment of the receiving parties wife.  The Respondent agreed to pay the receiving party the sum of £90,000 and this cost be assessed on the standard basis if not agreed.

The receiving party put in a bill of costs of about £262,000.  The paying party served points of dispute and approximately 7 months before the costs assessment hearing the receiving party made a Part 36 offer to settle for £152,500.  At a detailed assessment a senior cost Master awarded the receiving party costs in the sum of £176,693.  As the cost judgement was more advantageous to the Claimant than the proposal contained in the Part 36 offer CPR 36.14 (3) applied.

The Master observed that the application of CPR 36  to  detailed assessment proceedings was fairly new.  He directed himself that the Court may decline to apply CPR36.14 (3) if it would be unjust to do so.  He referred to the previous position under which timely Calderbank offers will be taken into account when deciding what costs order to make.  The Master held that in this case it would be unjust to require the paying party to pay the penalties imposed under CPR 36.12, which include interest at 10.5%.  The Master noted that in this case to order the additional penalties would be to increase the cost bill by a further £17,000.  The Master went on to state that where there had been such a reduction between the original bill and the assessed bill it would be unjust to “reward the Claimant with an additional amount”.

The Claimant appealed the decision.  The matter came before Mrs Justice Slade.

Various arguments were raised by the respective parties.  On behalf of the Defendant it was contended that costs should be treated differently from damages for the purposes of CPR 36.14 (3) (d) as a reasonableness of a cost offer is more difficult for a Defendant to assess than an offer to settle a damages claim.  It was argued that there is disclosure in a claim for damages which enables the Defendant to make informal assessment or an offer to settle a damages claim.  There is no such disclosure in cost proceedings.

On behalf of the Claimant it was argued that the master had failed to consider the circumstances required to be taking into account by CPR36.14 (4) when deciding whether it was unjust to make the order under CPR 36.14 (3).  All the matters set out in that favoured the Claimant.  Further it was noted that no complaints had been made of a failure by the Claimant to give information to enable the Defendant to assess the reasonableness of the offer.  She also argued that the Defendant’s were experienced litigators and had the necessary experience which should enable them to evaluate the Part 36 offer.

It was conceded by the Claimant’s Counsel that it could not be said that a high bill which is much reduced on assessment is not a valid reason for refusing to make an additional award under the rules.  In circumstances in which the inflated level of costs claim leads the Defendant to incur expense and investigating the claim before the Part 36 cost offer was made it maybe unjust to make just an award.

However the Judge repeated an parts of an earlier judgement in which it was reinforced that a judge who is asked to depart from the norm, on the ground that it would be “unjust” should not be tempted to make an acceptation merely because he or she thinks a regime itself harsh or unjust.  There must be something about particular circumstance of the case which takes it out of the norm.

In this case the Judge found that there was a requirement for a Judge to take account of each of the factors set out in CPR 36.14 (4) before concluding that it would be unjust to make an order. The Master had  failed to do that.  Further it was held that the Master had erred in relying on the degree of reduction made on assessment to the cost claimed as rendering it unjust to make such an award in circumstances which the Part 36 offer was lower than the sum at which the costs were assessed.  The Judge stated that the approached adopted by the Master penalised the Claimant for making “what turned out to be a reasonable Part 36 offer.”  It is the terms of the Part 36 offer not the level of the sum claimed in the bill of costs which are to be considered under CPR 36.14 (4).  Further the Master was criticised for making an exception by not making an award under the provision not because he considered the making of such an award unjust but because he thought it unjust to make an award as required, of 10% of the assessed costs.

The appeal was allowed.