Kerry Underwood

PART 36: STANDARD AND INDEMNITY COSTS

with 2 comments


In Shalaby v London North West Healthcare NHS Trust [2018] EWCA Civ 1323

the Court of Appeal held that where a claimant failed at trial to beat a defendant’s offer, and consequently was ordered to pay the defendant’s costs from expiry of the relevant period, those costs were to be on the standard basis, and not the indemnity basis, absent any other special circumstance.

The Court of Appeal pointed out the difference between CPR 36.17(3) and CPR 36.17(4), noting that it is only when judgment is given against the defendant which is at least as good as the claimant’s Part 36 offer, that the claimant is awarded indemnity costs.

The Court of Appeal quoted from its own decision in

Excelsior Industrial and Commercial Holdings v Salisbury Hammer Aspden and Johnson [2002] EWCA Civ 879

where it said:

 

“53. Before this Court Mr Cunnington fairly and candidly accepted that the judge did not receive the assistance from him that he should have done and therefore fell into error. The judge appears to have thought that the provision relating to costs on an indemnity basis also applied to the present sort of case, when judgment is entered against a claimant. In fact it has been made clear by this Court that the significance of the absence of any reference to an indemnity basis in what is now CPR 36.17(3) is that:

“… In normal circumstances, an order for costs which the court is required under that Part to make, unless it considers it unjust to do so, is an order for costs on the standard basis. That means that if the court is going to make an order for indemnity costs, as it can …, it should do so on the assumption that there must be some circumstance which justifies such an order being made … there must be conduct or (I add) some circumstance which takes the case out of the norm.” ”

 

The reasons are obvious, although apparently not to the number of first instance judges.

A winning claimant who fails to beat a defendant’s Part 36 offer is punished in two ways:

  • not getting costs from the expiry of the relevant period; and
  • having to pay costs to the defendant from the expiry of the relevant period.

It is important to remember in such case the claimant has won.

Where a claimant matches or beats its own offer, and again has won, it will get its costs on the standard basis anyway, for winning, irrespective of whether it made an offer itself.

That is why indemnity costs are required where a claimant matches or beats its own offer, so as to give the claimant an incentive to make an offer, in exactly the same way as defendants have incentives to make offers.

Awarding the claimant indemnity costs is equivalent to the costs shifting that a defendant benefits from in relation to a successful defendant’s offer.

That is also why Parliament has decided that a claimant who matches or beats its own offer should get an uplift on damages, that is to give the claimant an incentive to make such an offer.

That is also why, as a matter of logic and policy, if not the Civil Procedure Rules, a late accepting defendant should have to pay indemnity costs from expiry of the relevant period.

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Written by kerryunderwood

July 9, 2018 at 10:02 am

Posted in Uncategorized

2 Responses

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  1. I don’t follow why there is any difference between the outcome regardless of which side is successful with their part 36 offer. A claimant hasn’t “won” by attending a trial which was a waste of time as a defendant’s offer should have been accepted. Why not a level playing field here?

    David

    July 9, 2018 at 3:54 pm

  2. Otherwise a claimant suffers a double penalty and a defendant suffers no penalty. It is clear and obvious and this is just the old insurer line being trotted out. It is nonsense.

    Kerry

    kerryunderwood

    July 9, 2018 at 4:10 pm


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