Kerry Underwood

PART 36: A MAJOR PROBLEM

with 17 comments


A claimant makes a Part 36 offer and after the time for accepting the offer the defendant makes a higher Part 36 offer which the claimant then accepts.

 

Does the claimant then just get ordinary costs in the ordinary way or indemnity costs from the date of expiry of its own offer?

 

Thus the question can be asked:-

 

“Can a defendant avoid the costs consequences of late acceptance of a claimant’s Part 36 offer by making a higher offer, which the claimant then accepts, thus triggering a right to ordinary costs in the usual way, but not indemnity costs from expiry of the claimant’s offer, or will the court find that the claimant has beaten its first offer and is entitled to those indemnity costs?”

 

Does the same apply the other way round:-
“Can a claimant make a lower Part 36 offer than a previous one made by a defendant, thus avoiding paying costs from the expiry of the defendant’s offer?”

 

From the number of emails and blog comments I am getting this is now happening a lot and both sides are taking advantage of this apparent lacuna.

 

For what it is worth my view is that in those circumstances the court should exercise its very wide discretion on costs and take into account the original offer.

 

If the court does not do so then in any case where there is effectively late acceptance, the paying party can simply make a higher offer that is say £5.00 above the original offer, or the receiving party could make an offer of say £5.00 below the original offer and effectively neuter Part 36.

 

Consequently my view is that public policy demands that in those circumstances the claimant would have to pay costs from the expiry of the original defendant’s offer and a defendant would have to pay indemnity costs from the expiry of the claimant’s Part 36 offer.

 

Any thoughts anyone? Any decisions on this point?

 

Please see my related blogs:-

 

PART 36: THE DRY SALVAGES: UNIFIED

 

PART 36 LIABILITY OFFERS ON DAY ONE

 

PART 36 & ISSUE BASED ORDERS

 

CLAIMANT’S PART 36 OFFER OVERRIDES FIXED COSTS

 

10% UPLIFT IN ALL CASES EXCEPT WHERE THERE IS A RECOVERABLE SUCCESS FEE

 

PART 36: DOES A CLAIMANT GET INDEMNITY COSTS ON LATE ACCEPTANCE?

 

CLAIMANTS’ PART 36 OFFERS: FIVE NEW KEY DECISIONS

 

 

Advertisements

Written by kerryunderwood

September 20, 2016 at 10:12 am

Posted in Uncategorized

17 Responses

Subscribe to comments with RSS.

  1. The rules give the consequences and, as an immutable self-contained code there is no discretion.

    Of course, one could argue that if a claimant beats their own offer at trial then they have beaten their own offer notwithstanding that they have failed to beat a higher defendant Part 36 offer. The defendant could then argue that their Part 36 has not been beaten and the court will have to determine the actual outcome. I bet that in those circumstances a judge would be harshly critical of a claimant for failing to accept a good offer, and the claimant then having to bear the costs consequences.

    My inclination is that if an offer is a good one it should be accepted, notwithstanding any costs consequences. With fixed costs you know where you stand. With standard costs the claimant has got a better deal anyway. Where you might get bitten in the arse is on proportionality especially if a lot of work is done between the original offer and the higher one, but then proportionality wears big boots and will only ever kick claimants in the teeth.

    H

    Hxyay

    September 20, 2016 at 10:26 am

    • I disagree
      .
      CPR 36.17(3) gives the court a discretion. The choice is not between fixed costs and standard costs; it is between fixed costs and indemnity costs. Typically a claim handled well under the fixed costs regime will result in higher profits than the standard costs scheme.

      Kerry

      kerryunderwood

      September 23, 2016 at 4:02 pm

  2. My view is that the obsession with seeking indemnity costs needs to be reviewed. It only became an issue when you mentioned in in your blog (not saying you shouldn’t have raised it) but now everyone seems to be getting hung up on something which isn’t particularly relevant in most cases. Higher value and lots of money spent cases then yes it is more relevant but lower value then not so much. Can parties not be happy (as used to happen) with standard costs if everyone is happy that the claimant is getting a reasonable amount? Or shall the costs (about which most claimants have no interest whatsoever) be the focus? Surely only conduct reasons should amount to indemnity costs nothing else.

    David

    September 20, 2016 at 1:45 pm

    • David

      David

      I am flattered that my blog is given the status of being the law, but I was only interpreting the provisions of Part 36, which interpretation some judges share. Indemnity costs for successful Part 36 claimants is the counterpoint to claimants having to pay the costs of the defendant on failure to beat a defendant’s Part 36 offer. I am sure that every claimant in the land would agree no indemnity costs in return for no adverse costs consequences of failing to beat a defendant’s Part 36 offer. The defendants can not have it both ways.

      Kerry

      kerryunderwood

      September 23, 2016 at 4:07 pm

  3. Isn’t the critical issue here obtaining Judgment for an amount better than the offer? Absent a Judgment, P36 consequences do not kick in, do they?

    Wouldn’t the fairest way to look at it to be to work out the timing of the offers and award costs from 21 days after the offer up to the point of the next offer and if C did not beat Ds (higher) offer not to award C their costs 21 days after that offer / to award D their costs 21 days after the offer was made (and vice versa if D made an offer and C made a lower offer)?

    Whilst I can see a Cs solicitor bemoaning Ds conduct by making an increased offer undermines the effect of P36 (and I am a Claimant PI Solicitor so will understand their gripe to a degree) they should bear in mind that by making the offer in the first place, they have forced Ds hand to make a better offer that might not otherwise have been made. Thus, by making the offer they have leveraged their client a better settlement, which is surely what it was all about? Also, what is to stop C making a further offer (for a couple of quid more) than Ds latest offer?

    If D does make an offer that is for more than Cs offer and the case is litigated, what is to stop C from asking D to sign a Consent Order that a) asks for Judgment in favour of C b) states the amount of the award and c) asks for costs to be assessed if not agreed (no mention of standard or indemnity basis as no need – P36 makes it clear what basis applies unless Court rules to the contrary)?

    Part and parcel

    September 20, 2016 at 4:31 pm

    • There is no requirement to obtain judgment.

      Please see my post: Part 36: Does a Claimant get Indemnity Costs on Late Acceptance? where everything is explained in detail.

      One of the problems now with Part 36 in personal injury cases is that it defeats Qualified One-Way Costs Shifting and thus has a far greater impact on the claimant than previously. I realise that it could be said that QOCS is a concession to personal injury claimants, and that is true.

      However, previously the availability of After-the-Event insurance meant that for all intents and purposes a claimant was protected in relation to post expiry Part 36 costs.

      The deal was that in return for the abolition of recoverability of the ATE premium, claimants would no longer be liable for adverse costs absent fundamental dishonesty, or the claim being struck out on certain grounds etc.

      However due to the fact that Part 36 effectively trumps QOCS, as it creates a fund from which the defendant can exercise the right of set-off, it does no such thing.

      The interplay between Part 36 and QOCS is all dealt with in great detail in my book Kerry on… Qualified One-Way Costs Shifting, Section 57 and Set-Off which can be ordered from Amazon here.

      The whole issue of Part 36 generally is dealt with in my new book Kerry on… Personal Injury Small Claims, Portals and Fixed Costs which can also be ordered from Amazon here.

      Kerry

      kerryunderwood

      October 7, 2016 at 4:28 pm

  4. Wonder whether there is really the appetite to continue with this can of worms or whether only poor conduct should result in indemnity costs being sought post late acceptance. Pretty sure defendants almost certainly never took the point and now they will if claimants do. How different really is indemnity costs? It it worth the argument? Does this not come across as another claimant way to increase their costs and add fuel to the costs first damages second issue (which caused success fees and premiums to go). Either way, once the position is hopefully dealt with higher up both sides will be at risk and I know (def lawyer) that I accept a fraction of offers out of time compared to claimants who’ve over egged their pudding or failed to grasp the proper value at the outset so if that is the same trend elsewhere only claimants will suffer

    David

    September 20, 2016 at 8:05 pm

    • Section 57 appears to have passed you by, as does the fact that a claimant who fails to beat a defendant’s Part 36 offer has to pay costs even though they have won the claim.

      Kerry

      kerryunderwood

      September 23, 2016 at 4:12 pm

  5. Of course this particular problem only arises if one accepts the controversial proposition that late acceptance should be penalised in indemnity costs. But it is not difficult to devise other examples of “the battle of the Part 36 offers”. For example, what should happen if the claimant beats his own money offer but fails to better the defendant’s liability offer or vice versa. I am surprised that these issues haven’t troubled the Court of Appeal before now (or perhaps they have but the cases have passed me by…)

    Jon Heath

    September 21, 2016 at 6:10 pm

    • Jon

      As I have said in reply to another comment – if defendants agree to claim no costs when a claimant fails to beat a defendant’s Part 36 offer, then I am sure that claimants would agree to forego indemnity costs when matching or beating their own offer.

      Sauce for the goose and all that……

      Kerry

      kerryunderwood

      September 23, 2016 at 4:10 pm

      • Kerry,

        You seem to state that C paying the D’s costs on the standard basis when D’s P36 offer is accepted out of time is an unjust outcome – whereas when D accepts the C’s P36 offer out of time, the rule is that D pays the C’s costs on the standard basis?

        So it works both ways. Please explain how is this unfair?

        Josh Coleman

        September 28, 2016 at 11:06 am

      • Josh

        The whole point about late acceptance is that there must be a penalty. The penalty that the claimant suffers is that the claimant has to pay the defendant’s post Part 36 costs, even though the claimant has won the case, and is deprived of its own cost for the post expiry period, so it is in a sense a double penalty.

        If the defendant just has to pay standard costs on late acceptance of a claimant’s offer then there is no penalty as the losing party, that is the defendant in this scenario, has to pay standard costs in any event.

        That is the whole point of section 55 of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 and it is crystal clear.

        Standard costs do not “work both ways”. there is a penalty on the winning claimant but not on the defendant. That is why the courts, absolutely correctly, have found that a defendant must pay indemnity costs on late acceptance.

        In personal injury cases there is in a sense a triple penalty on a claimant as the claimant effectively loses the protection of Qualified One Way Costs Shifting, due to CPR 44.12 and the common law doctrine of set-off.

        Kerry

        kerryunderwood

        September 28, 2016 at 12:26 pm

  6. I would say the answer to your question is Yes.

    If a defendant put forward a part 36 offer that was £5 higher than an earlier part 36 offer from the claimant, and the claimant accepts the defendant’s offer, then any costs consequences of accepting the defendants offer follow.

    If I were in this situation, I’d be inclined to tell the Defendant that if they want to settle they must accept the Claimants previous offer. If they don’t, then, well, you could take your chances at Court.

    Assuming the court awards at least 5 pounds more than the claimants original part 36, then indemnity costs would apply.

    brumdine

    September 23, 2016 at 4:58 pm

    • Was I wrong? Sorry, lack of reply makes me wonder.

      brumdine

      October 7, 2016 at 8:15 pm

      • No, I think that you are right. I do get a huge number of comments on the posts overall. 😄

        kerryunderwood

        October 10, 2016 at 12:24 pm

  7. Unlucky claimants. Kerry has just caused you to pay indemnity costs when you accept defendants’ part 36 offers out of time.

    David

    September 28, 2016 at 10:09 pm

    • If you bother actually to read the piece and the comments it is crystal clear that it is the claimant who gets indemnity costs, not the defendant. Which bit of the Act, the Rukes, the decisions of the court and my blog and comments and replies do you not understand?

      Kerry

      kerryunderwood

      September 29, 2016 at 10:01 am


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: