Kerry Underwood

PART 36: UNJUST TO AWARD DAMAGES UPLIFT WHERE OFFER DEALT ONLY WITH HOURLY RATES ON ASSESSMENT

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The matters dealt with in this piece are examined in great detail in my three volume, 1,300 page book Personal Injury Small Claims, Portals and Fixed Costs – price £50 and available from Underwoods Solicitors here.

Kerry Underwood offers consultancy services in relation to this and other matters and details are here.

In

White & Anor v Wincott Galliford Ltd [2019] EWHC B6 (Costs) (28 May 2019)

the Senior Courts Costs Office was considering the situation where a receiving party in provisional assessment costs proceedings purported to make a Part 36 offer, simply on the hourly rates, which the court subsequently allowed.

The claimants argued that they had beaten their Part 36 offer and consequently the amount of the the hourly rate, and therefore the entire profit costs, should attract the 10% damages uplift.

Here matters were resolved by way of provisional assessment and in accordance with CPR 47.15(5) the costs of the assessment cannot exceed £1,500 plus VAT and court fees, and that applies even where the receiving party has beaten its own Part 36 offer.

This follows from the case of

Lowin v W Portsmouth & Co [2017] EWCA Civ 2172 ,

where the Court of Appeal distinguished its own reasoning in the case of

Broadhurst & Anor v Tan & Anor [2016] EWCA Civ 94 .

The Lowin case dealt only with the amount of costs and did not deal with the issue of the 10% uplift on damages under CPR 36.17(4)(d).

Essentially the paying party said that the offer related only to the hourly rates and not the bill of costs in total, and that could not be within the spirit or purpose of Part 36.

The receiving party said that Part 36.2(3) clearly states that Part 36 offer may be made “in respect of the whole, or part of, or any issue that arises…”.

The receiving party drew an analogy with a party in substantive proceedings making a Part 36 offer in relation to a single head of loss, rather than the whole claim.

Here the Master, one might think somewhat surprisingly, held that this was a valid Part 36 offer and then applied the test of justness under CPR 36.17(4) which provides:

“(4) Subject to paragraph (7), where paragraph (1)(b) applies, the court must, unless it considers it unjust to do so, …”.

The Master found that it was unjust.

The reasons are far from convincing, to put it mildly.

The Master said that although Part 36 was intended to be used to allow a party to gain tactical advantage, “the court must guard against it being used for the purposes of mere gamesmanship.”

I, for one, cannot see any meaningful difference between “tactical advantage” and “mere gamesmanship”.

The Master also said that the court should take into account its own resources and effectively said that if a Part 36 offer would not save the court time, then it would be unjust to allow the 10% damages uplift.

I have not seen that in the Act, Civil Procedure Rules or case reports.

The Master also said, consistent with his previous view, that he had the power, not exercised here, to allow a partial uplift on damages, and not a straight “all or nothing” 10%.

As he did not do so here, that is obiter, but again is at odds with the clear wording of CPR 36.17, which as I have pointed out before, uses the term “not exceeding” in CPR 36.17(4)(a) and (c), relating to interest, but does not contain those words in CPR 36.17(4)(d) in relation to the 10% uplift.

The ultimate decision is correct.

If a party was able to get the Part 36 consequences simply by beating the hourly rate, or an item of work, then as pointed out by the paying party here a receiving party could receive a 10% uplift on everything by, for example, simply beating a time claimed of 24 minutes for a tiny piece of work.

In another scenario the receiving party could put forward an hourly rate, and match or beat it, and then get the full uplift on an enormous bill of costs.

It would be the equivalent of having a costs budget which said:

 

“We are going to charge £200 an hour, but we are not going to tell you how much work we will do. Please agree the budget.”

 

In substantive proceedings it is the equivalent of making an offer “In relation to loss of earnings” without stating the amount, or “In relation to lots of painkillers costing £1 a packet, but I don’t know how many packets I will buy, or have bought.”

Although this was not a Solicitors Act 1974 assessment, that Act arguably does not allow a challenge to the hourly rate, but concentrates on the amount of work done, whether it was properly and necessarily done, and by whom it was done.

My view here is that the true position was this was not an offer under Part 36 of the Civil Procedure Rules but was a good old fashioned Calderbank offer.

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Written by kerryunderwood

May 31, 2019 at 8:12 am

Posted in Uncategorized

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