Kerry Underwood

INDEMNITY COSTS ORDERED ON LATE ACCEPTANCE OF PART 36 OFFER, OR WERE THEY?

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In Holmes v West London Mental Health NHS Trust – Case No:  HQ15C00683 29 June 2018

the Queen’s Bench Division of the High Court ordered a defendant to pay indemnity costs from the date of expiry of the claimant’s Part 36 offer on liability on a 95/5 basis.

The offer was made in February 2017 and accepted in May 2018.

The judge was very critical indeed of the defendant’s conduct in relation to almost every aspect of the case and the NHS Trust had repeatedly failed to respond to the claimant’s invitations to engaged in ADR, and at all times the defendant knew that the claimant was mentally fragile.

A Master had described the defendant’s cases “worse than hopeless” and the judge here described the defendant’s conduct in defending the case as unreasonable, as it had eventually capitulated, and criticized its “drip feeding” of liability offers at a lower percentage than 95.

 

Comment

Not too much should be read into this decision, which cannot be seen as in any way disagreeing with, or undermining, the decision of the Court of Appeal in

Hislop v Perde [2018] EWCA Civ 1726.

It appears, from a not very clear judgment, that in fact the indemnity costs order was made on the basis of conduct, and not late acceptance of a Part 36 offer.

The expiry of the date for accepting the claimant’s Part 36 offer seems simply to have been used as a convenient date from which to order indemnity costs.

In some areas, the judgment is plain wrong.

 

For example the judge says:

 

“I remind myself that the indemnity basis does not mean what that word implies.  It does not entitle the receiving party to recover any more than reasonably incurred costs and in reasonable amounts and proportionate to the claim.” (Paragraph 38).

 

That is not correct.

 

CPR 44.3(2) reads:

 

“(2) Where the amount of costs is to be assessed on the standard basis, the court will –

  • only allow costs which are proportionate to the matters in issue. Costs which are disproportionate in amount may be disallowed or reduced even if they were reasonably or necessarily incurred; and

 

  • resolve any doubt which it may have as to whether costs were reasonably and proportionately incurred or were reasonable and proportionate in amount in favour of the paying party.”

(Factors which the court may take into account are set out in rule 44.4.)

CPR 44.3(5) then sets out the test for proportionality, but that only applies where the basis of assessment is the standard one.

 

CPR 44.3(3) deals with assessment on the indemnity basis and states:

 

“(3) Where the amount of costs is to be assessed on the indemnity basis, the court will resolve any doubt which it may have as to whether costs were reasonably incurred or were reasonable in amount in favour of the receiving party.”

 

That is often referred to as the reversal of the burden of proof in relation to reasonableness, and it is.

However, it is clear, and widely accepted, that proportionality has no part to play when costs are assessed on the indemnity basis.

 

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Written by kerryunderwood

August 21, 2018 at 8:10 am

Posted in Uncategorized

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