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Christopher McClure considers the somewhat contentious decision of Master McCloud in JLE v Warrington and Halton Hospitals NHS Foundation Trust  EWHC B18 (Costs).
The case was heard in the context of a detailed assessment of the claimant’s/receiving party’s costs and the question before Master McCloud was stated in the following terms:
“Whether the court has the power to award some, but not all, of the consequences set out in CPR r. 36.17(4) where a claimant has achieved an award more advantageous than its own Part 36 offer.”
Moreover, and relevant to the case before her, the court also considered whether, if it had the power to award the benefits of CPR r. 36.17(4) in piecemeal fashion, “that power should be exercised so as to allow the consequences at subparagraph (a), (b) and (c) of the Rule, but not that at (d).”
CPR r. 36.17(4)(d) makes provision for an “additional amount” to be determined by reference to the sum awarded to the claimant (or receiving party in assessment proceedings – as was the case here: CPR r. 47.20(4)(a)).
The bill of costs was drawn in the sum of £615,751.51 and the claimant, in respect of those costs, made a Part 36 offer of £425,000 inclusive of interest. That offer was not accepted, eventually expired and the matter was set down for assessment at which hearing the bill was assessed by Master McCloud in the sum of £431,813.05 inclusive of interest.
The receiving party had thus beaten its own offer by £6,813.05 in respect of a bill drawn in excess of £615,000.00.
Having thus beaten its offer the receiving party sought to rely on the benefits prescribed under CPR r. 36.17(4), which are as follows –
(a) interest on the whole or part of any sum of money (excluding interest) awarded, at a rate not exceeding 10% above base rate for some or all of the period starting with the date on which the relevant period expired;
(b) costs (including any recoverable pre-action costs) on the indemnity basis from the date on which the relevant period expired;
(c) interest on those costs at a rate not exceeding 10% above base rate; and
(d) provided that the case has been decided and there has not been a previous order under this sub-paragraph, an additional amount, which shall not exceed £75,000, calculated by applying the prescribed percentage set out below to an amount which is—
(i) the sum awarded to the claimant by the court
The paying party contested the receiving party’s entitlement to the ‘additional amount’ under CPR 36.17(4)(d) on the basis that it would be ‘unjust’ to award the claimant an additional amount standing in excess of £40,000 where it had, on assessment, bettered its own offer by less than £7,000.
The paying party’s submission was based on a disjunctive application of the applicable test at CPR r. 36.17, which provides that –
(1) Subject to rule 36.21, this rule applies where upon judgment being entered –
(b) judgment against the defendant is at least as advantageous to the claimant as the proposals contained in a claimant’s Part 36 offer.
(4) Subject to paragraph (7), where paragraph (1)(b) applies, the court must, unless it considers it unjust to do so, order that the claimant is entitled to [those benefits delineated at CPR r. 36.17(4)(a) to (d) inclusive]
In other words, the court must “approach the question of whether it is ‘unjust’ to make an order, separately, for each of the types of consequences (a) to (d), i.e. the court must decide whether it is just to award all, some or none of the consequences set out in the Rule.”
The claimant naturally disagreed. It was submitted that the test of whether the consequences would be ‘unjust’ if imposed is a gateway consideration which, once overcome, “triggers all of the consequences delineated at (a) to (d) with no discretion on the part of the court to depart from their provisions so as to omit one of them.” That “gateway” is found at CPR r. 36.17(5) and provides that –
(5) In considering whether it would be unjust to make the orders referred to in paragraphs (3) and (4), the court must take into account all the circumstances of the case including—
(a) the terms of any Part 36 offer;
(b) the stage in the proceedings when any Part 36 offer was made, including in particular how long before the trial started the offer was made;
(c) the information available to the parties at the time when the Part 36 offer was made;
(d) the conduct of the parties with regard to the giving of or refusal to give information for the purposes of enabling the offer to be made or evaluated; and
(e) whether the offer was a genuine attempt to settle the proceedings.
Master McCloud sided with the paying party by holding that the court should apply the ‘unjust’ test separately for each part of rule 36.17(4) as well as in the round. In reaching her decision the Master systematically considered the factors listed at CPR r. 36.17(5) against the circumstances of the case. It is noteworthy that the Master’s decision was primarily based on a factor not prescribed for by r. 36.17(5) but which fell within the general ambit of the “all the circumstance of the case” provision under that rule; r. 36.17(5) does not contain an exhaustive list.
Master McCloud was determinately influenced by the following points –
In summary, despite acknowledging that the rules clearly define the concept of a ‘more advantageous’ award (CPR 36.17(2): ‘more advantageous’ means better in money terms by any amount, however small, and ‘at least as advantageous’ shall be construed accordingly), the Court was ultimately persuaded by the fact that the receiving party had only just beaten its own offer (c. £7,000) and thus deemed it unjust to award the 10% uplift (c. £40,000) on the premise that it would be disproportionate to do so.
This is a judgment which, in the commentator’s view, ought to be vehemently resisted. The decision in JLE represents fertile ground for satellite litigation and one can readily anticipate the various arguments which will undoubtedly be marshalled by paying parties in cases where they fail to beat an opponent’s Part 36 offer. Ultimately, it fails to fully appreciate the impetus behind the claimant/receiving party-friendly benefits of Part 36: they are designed to be an incentive to settlement – rather than compensatory – and thus avoid the cost of unnecessarily litigation. Counterintuitively, this decision will have precisely the opposite effect.
Please contact Christopher McClure to discuss any query relating to this article. Christopher is based at our Manchester office and can be contacted on 0161 835 4087.
LLB (Hons), PG Dip (BVC)
Thursday 21st March 2019