Ruling on Part 36 in Costs Cases

In a recent matter before Andrew Gordon-Saker, the Senior Costs Judge at the SCCO, the issue of Part 36 and unreasonableness was considered.  In Cashman v Mid-Essex Hospital Services NHS Trust [2015] EWHC 1312 (QB), [2015] 3 Costs L.O. 411, the court was asked to consider a case in which the Claimants during detailed assessment proceedings issued a bill of costs of approximately £262,000 and then made a Part 36 offer on the costs to the tune of £152,500.  This in my experience is not unusual as parties often recognise the uncertainties of litigation and if a major head of the bill is varied such as the hourly rate for fee earners, the sum can be cut considerably.

This was offer was not accepted by the Defendant and Master Gordon-Saker at the original hearing rejected the Claimant’s request under CPR 36.14(3)(d) for the 10% increase, indemnity costs and 10% interest after the bill was assessed in the sum of £173,693.78.  He considered it disproportionate and unjust where there had been a significant reduction in the bill.

However, the lead judgment from Slade J DBE in the High Court disagreed with the senior costs judge.  She overturned his decision as he had erred in relying on the degree of reduction made on the assessment where the Part 36 offer was less than the assessed amount.  The approach penalised the Claimant for making a propert and appropriate Part 36 costs offer.

This ruling is consistent in my view with the various cases on Part 36.  To not allow the Claimant’s costs undermines the process of Part 36 offers.  In many respect they are there for the other side to take them or leave them.  If they do the latter, they do so knowing there may be costs consequences.  In this case they could have paid less as the part 36 offer ended up giving the Claimant a unexpected windfall.

If you would like advice on costs or other commercial litigation, contact Marcus Croskell by EMAIL or on 0843 8862603.