Part 36 consequences – The “near miss” arguments are back

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Posted on: January 10th, 2019 by Catrin Matterson

SCCO rules that Part 36 benefit under 36.17(4) are severable

The benefits/ consequences of the Claimant beating their own Part 36 offer provided for in CPR 36.17(4) have been considered in a recent SCCO Judgment by Master McCloud – JLE (a child by her litigation friend ELH) v Warrington & Halton Hospitals NSH Foundation Trust.

The question before the Court was whether the Court had the power to award some but not all of the Part 36.17(4) consequences and if the consequences were severable whether it would be just to apply them. In this case Master McCloud sitting in the SCCO, having found that that the consequences were severable, found that it would be unjust given the margin by which the Claimant beat their offer to award to the 10% uplift.

The costs sought by the Claimant totalled £615,751.51 and the Claimant had made a Part 36 offer in the sum of £425,000 inclusive of interest expiring shortly before the Detailed Assessment took place. Costs were assessed by Master McCloud at the sum of £431,813.05 inclusive of interest. The Claimant therefore beat their Part 36 offer by £7,000 on a bill drafted by just over 1%. Subsequent to the Hearing, but prior to the finalisation of the Order, the Claimant sought a 10% uplift on the costs awarded under CPR 36.17(4)(d). The Defendant argued that in the circumstances awarding a 10% uplift would be unjust given the level by which the Claimant had beaten their offer. If the uplift was awarded the Claimant would be entitled to a windfall of £40,000.

The Claimant contended when deciding whether it was “unjust” to apply the consequences flowing from CPR 36.17(4) that this was a single test and either all the consequences were applicable or none and it was not within the Court power to assess whether each consequence was just individually. The Defendant meanwhile argued that the Court were within their remit to consider whether each benefit/ consequences individually.

The Court considered the authorities presented by the parties and concluded that the Part 36 consequences under 36.17(4) were indeed severable and proceeded to consider each consequence in turn. Master McCloud noted that she did not think that in “most cases the extent to which an offer has been beaten is a very material factor since the rules provide a clear definition of “more advantageous”. However in this case she considered that while the offer was still “more advantageous” it was a small percentage of the overall bill which had then been substantially reduced. In considering all the circumstances of the case Master McCloud decided that it would be disproportionate to award the 10% up lift.

Master McCloud stated that in her judgment the 10% uplift should only be waived when the penalty would be “clearly disproportionate” and that the additional sum is not intended to be compensatory. Master McCloud also discounted the relevance of the proximity of the Claimant’s offer to the assessment as being relevant in this case.

It is uncontroversial I think that the consequences referred to in of CPR36.17 (4) are servable both based on the case law and is very practical. It might for example be unjust to allow the enhanced interest under CPR36.17(4)(a) if the receiving paying has displayed poor conduct resulting in delays but that the 10% uplift might still be just.

As regards the Court’s refusal to award the 10% up list in this case I am somewhat in 2 minds.

On the one hand I have concerns about the lack of certainty engendered by this decision. The Claimant clearly beat their Part 36 offer, by a not insignificant amount albeit less so in percentage terms. Although this is only an SCCO decision it may lead to further time consuming satellite litigation particularly as in my experience disputes post assessment are not at the top of the Court’s priority list and can take some months to be dealt with.

On the other hand the test of whether a consequence is “unjust” in CPR36.17(4) is undefined and therefore open to interpretation. If it had been intended that the receiving party would be entitled to the all consequences of CPR 36.17(4) automatically on beating their own offer this would have been the provision. The test of so called justness is not as high as say a test of exceptional circumstances which could have been written into the rule. As such it was well within the discretion of the Court to come to the decision reached.

As such it will interesting to see to what extent this decision is picked up by paying parties and indeed whether the point will be taken on and considered in a higher Court to provide an authority.

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