Playing the part

Back in April 2008, Matthew Harman, current president of the Association of Costs Lawyers (ACL), wrote an article suggesting there was no reason why part 36 offers should not be made in detailed assessment proceedings (DAPs). However, since then there has been little, if any, attempt by practitioners to use

Part 36 offers in DAPs; no doubt due to a general consensus that it was not really available in DAPs.

Then, at the ACL' AGM earlier this year the issue came back on the agenda when the senior costs judge, Master Hurst, expressed the view that he could see no reason why part 36 offers could not be used in DAPs. His reasoning was that the old part 36 regime required part 36 offers to be supported by a payment into court. There was no mechanism for such payments-in with DAPs, hence the creation of the separate rule for offers in DAPs (Part 47.19). Now that part 36 offers do not need to be supported by payments-in there is no reason why part 36 offers may not be made in DAPs.

The relevance on payments-in to this issue is not an obvious one. Under the old regime a claimant could, in the substantive matter, make a part 36 offer despite the claimant obviously not being required to make a payment-in. There did not seem to be anything special about the payment-in process that would have ever prevented a part 36 offer being open in DAPs if that had been the intention of the rule makers. Indeed, the rule makers could have simply inserted a provision stating paying parties' part 36 offers did not need to be supported by payments-in in DAPs, rather than creating the totally separate part 47.19 rule.

In fact, it seems clear that the Part 36 process was never intended to have any place in DAPs. Under CPR 47.18 paragraph (1) there is a built in presumption of an award of costs in favour of the receiving party.

This is qualified by the provisions in paragraph (2) which give the court a wide discretion as to what order to make to fairly reflect the justice of the situation.

We then have part 47.19 which provides: '(1) Where '“ (a) a party (whether the paying party or the receiving party) makes a written offer to settle the costs of the proceedings which gave rise to the assessment proceedings; and (b) the offer is expressed to be without prejudice save as to the costs of the detailed assessment proceedings, the court will take the offer into account in deciding who should pay the costs of those proceedings.'

Unbeaten offer

The courts, very sensibly, generally award costs to a party who makes a part 47.19 offer which is not beaten. However, this is not what the rule requires, even as a rebuttable presumption. The offer is simply a factor, along with the considerations at CPR 47.18(2), for the court to take into account.

If part 36 offers were available in DAPs it would totally undermine the court's wide discretion under CPR 47.18(2). Further, why should a receiving party who already has the benefit of a presumption in their favour then be able to give themselves a further advantage if they make a successful part 36 offer?

However, the issue now appears to have been put beyond doubt by the Court of Appeal in Howell v Lees-Millais [2011] EWCA Civ 786. The judgment concerned the issue of liability for the costs of an application. After judgement had been handed down one party made an offer, purporting to be a part 36 offer, that offered to pay the other party either a specific proportion of their assessed costs or a fixed sum in respect of those costs. The original judge ruled that this was not a valid part 36 offer.

On appeal, the Master of the Rolls said: 'The first reason advanced by the judge for rejecting the contention that the April 2009 letter was a part 36 offer, was that it was impossible for an offer to be within part 36 after the action to which it related had concluded and the only issue concerned the costs (i.e. the application had been determined by the judge, and the only issue was the allocation of costs). I would not necessarily go quite so far, but I would agree that the letter was not a Part 36 offer, because it could not, by its very terms, comply with CPR 36.10(1). That rule states that, subject to certain irrelevant exceptions, 'where a part 36 offer is accepted within the relevant period [i.e. the 21 days referred to in the April 2009 letter] the claimant will be entitled to the costs of the proceedings up to the date on which notice of acceptance was served on the offeror'. The April 2009 letter specifically excluded the offeree from recovering all her costs, as it gave her the option of recovering only a proportion of her costs or a fixed sum in respect of her costs.'

This means that any offer in respect of costs that offers a fixed sum for those costs, which an offer for costs inevitably does, may not be treated as a part 36 offer.

That is the end of the myth of part 36 offers in DAPs. Sanity restored.

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