Part 36 and detailed assessment proceedings

This paper was first delivered at the ACL conference on 10th May 2013.

Introduction

1.         One of the reforms to the detailed assessment procedure, made by the Civil Procedure (Amendment) Rules 2013, was to repeal the familiar provisions relating to offers in rules 47.18 and 47.19, and apply the provisions of part 36 to detailed assessments.

2.         The reform does not appear to have been the subject of any particular consideration, or targeted at any particular mischief, that rules 47.18 and 47.19 were failing to address.

3.         Rather the suspicion is that this was a reform enacted for the sake of procedural neatness, and to ensure that familiar concepts within general litigation would have application within the more specialised arena of costs litigation.

The Jackson Report

4.         The Jackson report has surprisingly little to say about part 36 offers in the context of detailed assessments:

5.13 Compulsory offers. PP should be required to make an offer when it serves its points of dispute. The offer may be contained in the points of dispute or in a separate document. The sum offered may be more or less than the amount of the interim payment ordered by the court.

 5.14 Offers. The Part 36 procedure should apply to detailed assessment proceedings. The “14 day” provision in Costs PD paragraph 46.1 should be repealed.

5.         Perhaps of more significance, is what the report has to say about the revised part 36 procedure in general terms:

3.15 Benefits of the proposed reform. I believe that there are three benefits to begained from the proposed reform. The first benefit is that there will be a more levelplaying field as between claimants and defendants. The second benefit is that more cases will settle early. Defendants will be less willing to press on to trial, whenclaimants have made reasonable offers. The third benefit is that in those cases which do go to trial, despite the claimant having made an adequate offer, the claimant will recover a significantly larger sum.

 3.16 Importance of the third benefit. The third benefit is important, because of theproposals which I make in chapter 10 above in respect of conditional fee agreements (“CFAs”). If those proposals are implemented, claimants in successful cases on CFAs will have to pay success fees to their lawyers, but will not recover the success fees from the other side. As can be seen from chapter 2 above and from the tables in appendix 1 to this report, in cases which settle early the CFA success fees are generally modest and can be met by claimants out of their damages. It is cases that go to trial which generate the largest success fees. The claimants in those cases now will be able to increase substantially their financial recovery by making well judged offers. The various rewards and gains which the claimant will make should enable him to pay the success fee, and still be no worse off than he is under the present regime of recoverable success fees.

3.17 Conclusion. The reforms to Part 36 advocated in this chapter constitute a further justification for the central proposal of this report, which is contained in chapter 10 above, namely that CFA success fees should cease to be recoverable under costs orders.

5.         It can be seen that benefits 1 and 2, have some application to costs litigation, but benefit 3 does not. This is because the receiving party has already won, will receive substantial costs, and only if a success fee, is applied to the assessment costs, can it have any application, in effect encouraging the preservation of the practice which developed after Crane.v.Canons Leisure: a practice which in another version of his report, Jackson LJ wished to see reversed.

Transitional provisions

6.         Rule 22 of the Civil Procedure (Amendment) Rules 2013 provides as follows:

(10)The provision made by rule 47.20(1) to (5) and (7) in the Schedule (liability for costs of detailed assessment proceedings) does not apply to detailed assessments commenced before 1 April 2013 and in relation to such detailed assessments, rules 47.18 and 47.19 as they were in force immediately before 1 April 2013 apply instead.

(11)The amendment made by rule 47.20(6) in the Schedule to these Rules (interest on the costs of detailed assessment proceedings) does not apply where the date of the default, interim or final costs certificate (as the case may be) is before 1 April 2013.

Rules 47.18 and 47.19 have a little time to run yet.

Application of part 36 to detailed assessment proceedings

7.         The starting point for consideration of the new scheme for offers within detailed assessment proceedings is rule 47.20. Rule 47.20(1) maintains the current presumption, that a victorious party in litigation is entitled to have his costs assessed at the expense of the losing party, but feathers this starting point by bringing into play four particular caveats, of which the most important for our purposes is 47.20(4), which applies the part 36 scheme to detailed assessments.

8.         The terminology of rule 47.20(4) is largely concerned with tweaking part 36 to make it more apposite to the context of a detailed assessment. It is also material to note the placing and significance of rule 45.20(5) which provides that the costs of the detailed assessment are usually to be summarily assessed at its conclusion.

9.         Contrary to the views expressed by some commentators, I think that the placing of this sub-rule is significant: although summary assessments usually take place at the end of a contested hearing, I see no reason why, in a detailed assessment that settles using part 36, if the costs of the detailed assessment cannot be agreed, there should not be a short summary assessment of those costs, probably by telephone.

10.      I think there is little scope to argue that the rules contemplate that any deemed costs order made in respect of the costs of the detailed assessment when a part 36 offer is accepted, should be quantified by way of detailed assessment. The emphasis of the rules is very much on reducing the “costs of the costs”.

47.20

(1) The receiving party is entitled to the costs of the detailed assessment proceedings except where –

(a) the provisions of any Act, any of these Rules or any relevant practice direction provide otherwise; or

(b) the court makes some other order in relation to all or part of the costs of the detailed assessment proceedings.

(2) Paragraph (1) does not apply where the receiving party has pro bono representation in the detailed assessment proceedings but that party may apply for an order in respect of that representation under section 194(3) of the 2007 Act.

(3) In deciding whether to make some other order, the court must have regard to all the circumstances, including –

(a) the conduct of all the parties;

(b) the amount, if any, by which the bill of costs has been reduced; and

(c) whether it was reasonable for a party to claim the costs of a particular item or to dispute that item.

(4) The provisions of Part 36 apply to the costs of detailed assessment proceedings with the following modifications –

(a) ‘claimant’ refers to ‘receiving party’ and ‘defendant’ refers to ‘paying party’;

(b) ‘trial’ refers to ‘detailed assessment hearing’;

(c) in rule 36.9(5), at the end insert ‘or, where the Part 36 offer is made in respect of the detailed assessment proceedings, after the commencement of the detailed assessment hearing.’;

(d) for rule 36.11(7) substitute ‘If the accepted sum is not paid within 14 days or such other period as has been agreed the offeree may apply for a final costs certificate for the unpaid sum.’;

(e) a reference to ‘judgment being entered’ is to the completion of the detailed assessment, and references to a ‘judgment’ being advantageous or otherwise are to the outcome of the detailed assessment.

(5) The court will usually summarily assess the costs of detailed assessment proceedings at the conclusion of those proceedings.

(6) Unless the court otherwise orders, interest on the costs of detailed assessment proceedings will run from the date of default, interim or final costs certificate, as the case may be.

(7) For the purposes of rule 36.14, detailed assessment proceedings are to be regarded as an independent claim.

Integrating part 36 with other provisions of the rules

11.      Part 36 offers are “hidden” offers and run in parallel to the scheme of open offers, contemplated by the revised rules. In truth, there is nothing revolutionary about the proposal for an open offer accompanying the Points of Dispute: if one were to simply calculate the deductions sought in the individual points, and aggregate them, then by definition, this deduction from the amount claimed in the Bill, is the “open offer” contemplated by the Practice Direction.

Costs Practice Direction

8.3 The paying party must state in an open letter accompanying the points of dispute what sum, if any, that party offers to pay in settlement of the total costs claimed. The paying party may also make an offer under Part 36.

12.      There is also a requirement to file part 36 offers, with the papers for a provisional assessment. This requirement is probably otiose, in circumstances, where the court making a provisional assessment, is not actually carrying out the calculations of the assessed bill.

Costs Practice Direction

14.3 In cases falling within rule 47.15, when the receiving party files a request for a detailed assessment hearing, that party must file—

(a) the request in Form N258;

(b) the documents set out at paragraphs 8.3 and 13.2 of this Practice Direction;

(c) an additional copy of the bill, including a statement of the costs claimed in respect of the detailed assessment drawn on the assumption that there will not be an oral hearing following the provisional assessment;

(d) the offers made (those marked “without prejudice save as to costs” or made under Part 36 must be contained in a sealed envelope, marked “Part 36 or similar offers”, but not indicating which party or parties have made them);

(e) completed Precedent G (points of dispute and any reply).

How Part 36 works

13.      Part 36 is disarmingly simple in terms of its scope. The problems that have arisen in terms of its application in the facts of a particular case, and which have generated a significant amount of caselaw, stem principally from the failure of practitioners to read the rules. Or to continue to use outmoded precedent offers, heedless of the fact that in the years since the precedents were drafted, the rules have actually been amended, rendering that precedent redundant.

14.      It should be noted, that part 36 is not the only way an offer can be made in detailed assessment proceedings: the right to make eg: a Calderbank offer is expressly preserved within part 36 itself. But any offer not made in accordance with part 36, will obviously be of less weight and afford the recipient more “wriggle room” to argue that it is only a factor to take into account, and not necessarily a decisive factor.

36.1

(1) This Section does not apply to an offer to settle to which Section II of this Part applies.

(2) Nothing in this Section prevents a party making an offer to settle in whatever way he chooses, but if the offer is not made in accordance with rule 36.2, it will not have the consequences specified in rules 36.10, 36.11 and 36.14.

(Rule 44.3 requires the court to consider an offer to settle that does not have the costs consequences set out in this Section in deciding what order to make about costs)

15.      The form and content of a part 36 offer are most important. Practice Direction 36A, directs the maker of a part 36 offer towards the current practice form N242A, but the form only reflects the contents of the rules, which must be carefully read.

1.1

A Part 36 offer may be made using Form N242A.

1.2

Where a Part 36 offer, notice of acceptance or notice of withdrawal or change of terms is to be served on a party who is legally represented, the document to be served must be served on the legal representative.

16.      In effect any part 36 offers, to be a part 36 offer, must comply with the requirements of rule 36.2.

36.2

(1) An offer to settle which is made in accordance with this rule is called a Part 36 offer.

(2) A Part 36 offer must –

(a) be in writing;

(b) state on its face that it is intended to have the consequences of Section I of Part 36;

(c) specify a period of not less than 21 days within which the defendant will be liable for the claimant’s costs in accordance with rule 36.10 if the offer is accepted;

(d) state whether it relates to the whole of the claim or to part of it or to an issue that arises in it and if so to which part or issue; and

(e) state whether it takes into account any counterclaim.

(Rule 36.7 makes provision for when a Part 36 offer is made)

(3) Rule 36.2(2)(c) does not apply if the offer is made less than 21 days before the start of the trial.

(4) In appropriate cases, a Part 36 offer must contain such further information as is required by rule 36.5 (Personal injury claims for future pecuniary loss), rule 36.6 (Offer to settle a claim for provisional damages), and rule 36.15 (Deduction of benefits).

(5) An offeror may make a Part 36 offer solely in relation to liability.

17.      There are some common considerations set out in rule 36.3. Of these, the most significant relate to time: in particular the 21 day period, that must be afforded to the offeree to chew over his options, and to decide whether to accept the offer or not. This does not mean that a part 36 offer made less than 21 days before the start of the detailed assessment hearing is otiose: far from it.

18.      But a late part 36 offer is subject to a different set of criteria and also it should be noted, that a part 36 offer cannot be unilaterally withdrawn within the 21 day period. It should also be noted that part 36 offers endure, despite, being ignored or even rejected, unless they are specifically withdrawn in writing by the offeror. It follows that it is perfectly possible, to have a suite of part 36 offers on the table, any of which might be potentially capable of acceptance.

36.3

(1) In this Part –

(a) the party who makes an offer is the ‘offeror’;

(b) the party to whom an offer is made is the ‘offeree’; and

(c) ‘the relevant period’ means –

(i) in the case of an offer made not less than 21 days before trial, the period stated under rule 36.2(2)(c) or such longer period as the parties agree;

(ii) otherwise, the period up to end of the trial or such other period as the court has determined.

(2) A Part 36 offer –

(a) may be made at any time, including before the commencement of proceedings; and

(b) may be made in appeal proceedings.

(3) A Part 36 offer which offers to pay or offers to accept a sum of money will be treated as inclusive of all interest until –

(a) the date on which the period stated under rule 36.2(2)(c) expires; or

(b) if rule 36.2(3) applies, a date 21 days after the date the offer was made.

(4) A Part 36 offer shall have the consequences set out in this Section only in relation to the costs of the proceedings in respect of which it is made, and not in relation to the costs of any appeal from the final decision in those proceedings.

(5) Before expiry of the relevant period, a Part 36 offer may be withdrawn or its terms changed to be less advantageous to the offeree, only if the court gives permission.

(6) After expiry of the relevant period and provided that the offeree has not previously served notice of acceptance, the offeror may withdraw the offer or change its terms to be less advantageous to the offeree without the permission of the court.

(7) The offeror does so by serving written notice of the withdrawal or change of terms on the offeree.

(Rule 36.14(6) deals with the costs consequences following judgment of an offer that is withdrawn)

19.      Further considerations apply to paying party’s offers; in essence, a part 36 offer should be offering the receiving party a “lump” of money: with the Costs Practice Direction providing further detail, as to what the “lump” will be taken to include, unless clearly specified to the contrary.

36.4

(1) Subject to rule 36.5(3) and rule 36.6(1), a Part 36 offer by a defendant to pay a sum of money in settlement of a claim must be an offer to pay a single sum of money.

(2) But, an offer that includes an offer to pay all or part of the sum, if accepted, at a date later than 14 days following the date of acceptance will not be treated as a Part 36 offer unless the offeree accepts the offer.

20.      Sometimes part 36 offers can engage the battle of the forms: it is interesting to note that part 36 offers are effective when “served”, and also that any change in terms will be effective when “served”.

36.7

(1) A Part 36 offer is made when it is served on the offeree.

(2) A change in the terms of a Part 36 offer will be effective when notice of the change is served on the offeree.

(Rule 36.3 makes provision about when permission is required to change the terms of an offer to make it less advantageous to the offeree)

21.      Sometimes a part 36 offer can be ambiguous in its terms: if so, there is a procedure contained within the rules, wherein it can be clarified. This means what it says: an offer to pay £100,000 in respect of the receiving party’s claim for costs is a “clear” offer, even if it does not break down how the offer is calculated, or what assumptions have been made when deciding how to offer the sum in question.

36.8

(1) The offeree may, within 7 days of a Part 36 offer being made, request the offeror to clarify the offer.

(2) If the offeror does not give the clarification requested under paragraph (1) within 7 days of receiving the request, the offeree may, unless the trial has started, apply for an order that he does so.

(Part 23 contains provisions about making an application to the court)

(3) If the court makes an order under paragraph (2), it must specify the date when the Part 36 offer is to be treated as having been made.

 22.      The acceptance of a part 36 offer takes place when the acceptance is served in writing upon the other party. It should be noted that if the detailed assessment hearing is in full swing, the court’s permission will be required to accept the offer.

36.9

(1) A Part 36 offer is accepted by serving written notice of the acceptance on the offeror.

(2) Subject to rule 36.9(3), a Part 36 offer may be accepted at any time (whether or not the offeree has subsequently made a different offer) unless the offeror serves notice of withdrawal on the offeree.

(Rule 21.10 deals with compromise etc. by or on behalf of a child or protected party.)

(3) The court’s permission is required to accept a Part 36 offer where –

(a) rule 36.12(4) applies;

(b) rule 36.15(3)(b) applies, the relevant period has expired and further deductible amounts have been paid to the claimant since the date of the offer;

(c) an apportionment is required under rule 41.3A; or

(d) the trial has started.

(Rule 36.12 deals with offers by some but not all of multiple defendants)

(Rule 36.15 defines ‘deductible amounts’.)

(Rule 41.3A requires an apportionment in proceedings under the Fatal Accidents Act 1976 and Law Reform (Miscellaneous Provisions) Act 1934)

(4) Where the court gives permission under paragraph (3), unless all the parties have agreed costs, the court will make an order dealing with costs, and may order that the costs consequences set out in rule 36.10 will apply.

(5) Unless the parties agree, a Part 36 offer may not be accepted after the end of the trial but before judgment is handed down.

 23.      Assuming that an offer was made with a clear 21 days for the other party to accept it, then the receiving party will be able to accept it with impunity, up until 21 days, and thereafter can continue to accept (absent withdrawal) but on the basis that after the 21st day, the paying party will be entitled to its costs of the detailed assessment. If the parties disagree, that this should be the result, perhaps through issues of conduct, which indicate another order might be made, application can be made to the court, for an order to the contrary, though the starting point will be based on the 21 day cut off point.

36.10

(1) Subject to paragraph (2) and paragraph (4)(a), where a Part 36 offer is accepted within the relevant period 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.

(2) Where –

(a) a defendant’s Part 36 offer relates to part only of the claim; and

(b) at the time of serving notice of acceptance within the relevant period the claimant abandons the balance of the claim,

the claimant will be entitled to the costs of the proceedings up to the date of serving notice of acceptance unless the court orders otherwise.

(3) Costs under paragraphs (1) and (2) of this rule will be assessed on the standard basis if the amount of costs is not agreed.

(Rule 44.4(2) explains the standard basis for assessment of costs)

(Rule 44.12 contains provisions about when a costs order is deemed to have been made and applying for an order under section 194(3) of the Legal Services Act 2007.)

(4) Where –

(a) a Part 36 offer that was made less than 21 days before the start of trial is accepted; or

(b) a Part 36 offer is accepted after expiry of the relevant period,

if the parties do not agree the liability for costs, the court will make an order as to costs.

(5) Where paragraph (4)(b) applies, unless the court orders otherwise –

(a) the claimant will be entitled to the costs of the proceedings up to the date on which the relevant period expired; and

(b) the offeree will be liable for the offeror’s costs for the period from the date of expiry of the relevant period to the date of acceptance.

(6) The claimant’s costs include any costs incurred in dealing with the defendant’s counterclaim if the Part 36 offer states that it takes into account the counterclaim.

24.      Despite the wording of the rules, and the use of the word “stay” for all practical purposes, the acceptance of a part 36 offer brings the detailed assessment proceedings to an end, although if the sum in question is not paid within 14 days, a costs certificate can be applied for, which in turn raises the spectre of enforcement proceedings. If the costs of the detailed assessment are not swiftly settled, then the court which remains seised of that issue, can continue to determine it.

36.11

(1) If a Part 36 offer is accepted, the claim will be stayed(GL).

(2) In the case of acceptance of a Part 36 offer which relates to the whole claim the stay(GL) will be upon the terms of the offer.

(3) If a Part 36 offer which relates to part only of the claim is accepted –

(a) the claim will be stayed (GL) as to that part upon the terms of the offer; and

(b) subject to rule 36.10(2), unless the parties have agreed costs, the liability for costs shall be decided by the court.

(4) If the approval of the court is required before a settlement can be binding, any stay(GL) which would otherwise arise on the acceptance of a Part 36 offer will take effect only when that approval has been given.

(5) Any stay(GL) arising under this rule will not affect the power of the court –

(a) to enforce the terms of a Part 36 offer;

(b) to deal with any question of costs (including interest on costs) relating to the proceedings.

(6) Unless the parties agree otherwise in writing, where a Part 36 offer by a defendant that is or that includes an offer to pay a single sum of money is accepted, that sum must be paid to the offeree within 14 days of the date of –

(a) acceptance; or

(b) the order when the court makes an order under rule 41.2 (order for an award of provisional damages) or rule 41.8 (order for an award of periodical payments), unless the court orders otherwise.

(7) If the accepted sum is not paid within 14 days or such other period as has been agreed the offeree may enter judgment for the unpaid sum.

(8) Where –

(a) a Part 36 offer (or part of a Part 36 offer) which is not an offer to which paragraph (6) applies is accepted; and

(b) a party alleges that the other party has not honoured the terms of the offer,

that party may apply to enforce the terms of the offer without the need for a new claim.

25.      Just as a receiving party may have triumphed in the litigation and be entitled to damages against several defendants, so he may be entitled to costs against several paying parties. It is important to note that when drawing up such a bill, it can be useful to specify what are regarded as common costs and what individual costs are, and to consider whether the paying parties are under a joint or several liabilities in turn.

36.12

(1) This rule applies where the claimant wishes to accept a Part 36 offer made by one or more, but not all, of a number of defendants.

(2) If the defendants are sued jointly or in the alternative, the claimant may accept the offer if –

(a) he discontinues his claim against those defendants who have not made the offer; and

(b) those defendants give written consent to the acceptance of the offer.

(3) If the claimant alleges that the defendants have a several liability(GL) to him, the claimant may –

(a) accept the offer; and

(b) continue with his claims against the other defendants if he is entitled to do so.

(4) In all other cases the claimant must apply to the court for an order permitting him to accept the Part 36 offer.

26.      As noted at the outset, a part 36 is a hidden offer, which will not be communicated to the court, before the end of the hearing.

36.13

(1) A Part 36 offer will be treated as ‘without prejudice(GL) except as to costs’.

(2) The fact that a Part 36 offer has been made must not be communicated to the trial judge or to the judge (if any) allocated in advance to conduct the trial until the case has been decided.

(3) Paragraph (2) does not apply –

(a) where the defence of tender before claim(GL) has been raised;

(b) where the proceedings have been stayed(GL) under rule 36.11 following acceptance of a Part 36 offer; or

(c) where the offeror and the offeree agree in writing that it should not apply.

27.      Assuming that the hearing goes ahead, then it should be noted that there is no scope now for an “open textured” approach to part 36 and the question of what constitutes success under it. If an offer is beaten by a £, then the consequences prescribed by part 36 will flow. The consequences are significant. A successful paying party will get its costs from 21 days after making the offer, which the receiving party failed to beat, together with interest on those costs.

28.      A successful receiving party will get rather more. First it gets interest at up to 10.5% on the costs actually awarded. He will also receive the costs of the assessment on the indemnity basis. Then interest on those costs at up to 10.5%. Further an additional amount, of 10% of the sum awarded by the court (presumably exclusive of interest). It should be noted that the interest which can be awarded is not to be “double counted” with judgment debt interest, which if recoverable at 8% will reduce the gain to at most 2.5%.

29.      The additional 10% of the costs awarded, in effect represents a statutory incursion into the indemnity principle, and raises the interesting question as to whom this money belongs. As it represents an award of costs, it belongs to the client, unless of course, the client in the retainer has agreed that the solicitor can retain it.

36.14

(1) This rule applies where upon judgment being entered –

(a) a claimant fails to obtain a judgment more advantageous than a defendant’s Part 36 offer; or

(b) judgment against the defendant is at least as advantageous to the claimant as the proposals contained in a claimant’s Part 36 offer.

(1A) For the purposes of paragraph (1), in relation to any money claim or money element of a claim, ‘more advantageous’ means better in money terms by any amount, however small, and ‘at least as advantageous’ shall be construed accordingly.

(2) Subject to paragraph (6), where rule 36.14(1)(a) applies, the court will, unless it considers it unjust to do so, order that the defendant is entitled to –

(a) his costs from the date on which the relevant period expired; and

(b) interest on those costs.

(3) Subject to paragraph (6), where rule 36.14(1)(b) applies, the court will, unless it considers it unjust to do so, order that the claimant is entitled to –

(a) interest on the whole or part of any sum of money (excluding interest) awarded at a rate not exceeding 10% above base rate(GL) for some or all of the period starting with the date on which the relevant period expired;

(b) his costs on the indemnity basis from the date on which the relevant period expired; and

(c) interest on those costs at a rate not exceeding 10% above base rate(GL); and

(d) an additional amount, which shall not exceed £75,000, calculated by applying the prescribed percentage set out below to an amount which is –

(i) where the claim is or includes a money claim, the sum awarded to the claimant by the court; or

(ii) where the claim is only a non-monetary claim, the sum awarded to the claimant by the court in respect of costs –

  Amount awarded by the court        Prescribed percentage     
up to £500,000 10% of the amount awarded;  
above £500,000 up to £1,000,000   10% of the first £500,000 and 5%   of any amount above that figure

(4) In considering whether it would be unjust to make the orders referred to in paragraphs (2) and (3) above, the court will 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; and

(d) the conduct of the parties with regard to the giving or refusing to give information for the purposes of enabling the offer to be made or evaluated.

(5) Where the court awards interest under this rule and also awards interest on the same sum and for the same period under any other power, the total rate of interest may not exceed 10% above base rate(GL).

(6) Paragraphs (2) and (3) of this rule do not apply to a Part 36 offer –

(a) that has been withdrawn;

(b) that has been changed so that its terms are less advantageous to the offeree, and the offeree has beaten the less advantageous offer;

(c) made less than 21 days before trial, unless the court has abridged the relevant period.

(Rule 44.3 requires the court to consider an offer to settle that does not have the costs consequences set out in this Section in deciding what order to make about costs)

Strategy and tactics

30.      So, the rules of the game having changed, it remains now to consider how this new regime might be applied in practice. In effect, the question now becomes one, not of civil procedure, but rather one of the applicable behavioural economics and the behavioural psychology which might be thought to be in play.

31.      In mainstream litigation, defendants who make part 36 offers, whether they make one or several, during the course of the litigation, as the matter advances inexorably towards trial, will be driven to make what might be termed the “stand and fight” part 36 offer, made on the basis, that if the claimant does not accept it, then a trial will follow. The claimant conversely will be trying to winkle ever increasing part 36 offers out of the defendant, until satisfied that the stand and fight position has been reached, together with a robust evaluation, as to the degree of danger posed by the part 36 offer.

32.      When it comes to the claimant’s own part 36 offers, historically a very different approach has been taken. Rather than making an offer at the outset, which represents the sum they will accept, or instead go on to trial, if it is not forthcoming, claimants tend to use part 36 offers to “anchor” the negotiations and plant within the defendant’s mind, what they regard as the parameters within which those negotiations will be conducted. The stand and fight offer is notable by its absence: and in 14 years of trials, hundreds of them, since the rules changed, I can think of only 2 occasions, when a claimant exceeded their own part 36 offer at trial.

33.      What remains to be seen, is whether now the consequences of beating a part 36 offer have been considerably enhanced, in the claimants’ favour, this in turn will lead to a change in behavioural psychology.  In effect, will claimants pitch their offers, to try to achieve the additional amount ?

34.      In the context of costs, the same sorts of considerations apply. When making a part 36 offer on the part of the paying party, there are three considerations in play, the strength of your case, coupled with your knowledge of your opponent’s likely perception of the strength of your case and what I call systemic considerations.

35.      The first point relates to formulating a stand and fight position. The second is concerned with when you unleash your stand and fight offer. An opponent who lacks robustness, may well compromise some way below your bottom line. And the third, relates to those wider considerations when dealing with the same opponent on many different cases, across a wide caseload. One solicitor I knew many years ago would ask his opponent for an informal schedule of costs, would peruse it, work out a “fair offer” and then make that offer, his one and only offer.

36.      In time it became known, that this was his modus operandi, and that if he was right as he often was, then the costs of drawing up a bill, the costs of the detailed assessment and the hearing would likely be borne by the receiving party. Most of his opponents took his offers. This in turn led to a depression, in the amount of costs his insurance company client paid out, across the board, as they didn’t pay costs of drawing up bills, etc.

Drafting part 36 offers

37.      Perhaps the most important point to note, when drafting a Part 36 offer is to be precise, as to what sums are included within the global figure offered and which are not. The Costs Practice Direction notes:

COSTS PRACTICE DIRECTION

COSTS OF DETAILED ASSESSMENT PROCEEDINGS – RULE 47.20: OFFERS TO

SETTLE UNDER PART 36 OR OTHERWISE

 

19. Where an offer to settle is made, whether under Part 36 or otherwise, it should specify whether or not it is intended to be inclusive of the cost of preparation of the bill, interest and VAT. Unless the offer states otherwise it will be treated as being inclusive of these.

Conclusions

38.      The rules are tolerably clear. Many of the difficulties, in them, have been ironed out by the Court of Appeal, when considering their application in substantive litigation. What remains the undiscovered country at this juncture is how they will be applied, in costs litigation, and in particular, how people believe they will be used, with their own behaviour moderated in consequence.