Accepting part 36 offers after an assessment has commenced

Occasionally a detailed assessment can go badly wrong-or right-depending on your point of view and one party’s confidence in defeating the other party’s part 36 offer may prove misplaced as the points of dispute fall like dominoes.

In such circumstances it can be tempting to accept the part 36 out of time. But is this possible one a detailed assessment hearing has started? Or is it possible to accept a part 36 offer after a provisional assessment has taken place but before any oral hearing, or even in the alternative to an oral hearing?

This matters because some costs practitioners believe they can simply accept a part 36 offer after the assessment or the hearing has commenced: some of their opponents believe this too as they withdraw part 36 offers after a provisional assessment, afraid their opponent may accept them.

Rule 47.20(4) applies the provisions of part 36 to detailed assessments in the following terms so far as is material:

(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) a detailed assessment hearing is “in progress” from the time when it starts until the bill of costs has been assessed or agreed;

(d) for rule 36.14(7) substitute “If such sum is not paid within 14 days of acceptance of the offer, or such other period as has been agreed, the receiving party 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.

It will be observed that the modifications are terminological rather than substantial: simply tidying up the terminology so that the provisions of part 36 when read across, are more comprehensible. As a point of substance the provisions in part 36 including rule 36.11(3) which constrain the circumstances in which acceptance of a part 36 offer may take place will apply from the time a detailed assessment hearing starts:

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

(a) rule 36.15(4) applies;

(b) rule 36.22(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) a trial is in progress.

There are further provisions in Practice Direction 36 which deal with the mechanics of obtaining the court’s permission to accept a part 36 offer when an assessment is in progress:

3.2  Where the court’s permission is required to accept a Part 36 offer, the permission of the court must, unless the parties agree otherwise, be sought—

(1) by making an application under Part 23, which must be dealt with by a judge other than the trial judge;

(2) at a trial or other hearing, provided that it is not to the trial judge.

(Rule 36.3 defines “the trial judge”.)

Curious readers will wonder whether a provisional assessment means that the “trial” is in progress when the costs judge or officer provisionally assesses the bill, noting that a provisional assessment is undertaken on papers, without the parties being present and that the oral hearing may follow it.

The rules could be more precisely drafted: it may be possible to argue that as a provisional assessment is undertaken before a hearing and so no permission for acceptance is required. It might also be pointed out the rules give a discretion to the court to order a hearing, instead of a provisional assessment suggesting that whatever else it is, a provisional assessment is not a hearing.

The better view may be that a distinction is to be drawn between a hearing on the papers and an oral hearing, both being simply different types of hearing where a judge will make a decisions on the merits of the case, noting that the purpose of the permission requirement is to prevent a party accepting a part 36 offer once a judge has started making decisions.

The converse argument is to point out that those decisions are not binding at the time they are made, and are readily capable of review at an oral hearing as of right.

But assuming that in some shape or form the requirement to seek the court’s permission for acceptance is engaged, what is the court likely to do, when such an application comes before another judge as envisaged by the practice direction?

In the case of Houghton Stanley v P B Donoghue Haulage Plant Hire Ltd Ors [2017] EWHC 1738 (Ch) Morgan J observed as follows:

6. I have been shown a number of authorities which are said to bear on the approach I should adopt. The three authorities are Capital Bank Plc v Stickland [2005] 1 WLR 3914, Sampla and others v Rushmoor Borough Council and another [2008] EWHC 2616 (TCC), and Nulty v v Milton Keynes BC [2012] EWHC 730 (QB). It is right that the rules under part 36 were different at the time of those cases. Version 1 was considered in the Capital Bank case; version 2 was considered in the two TCC cases; and now we have version 3, which came in I think in 2015.

7. I am particularly struck by the approach and the comments of the judges in the two TCC cases. They indicated in strong and, I have to say, persuasive terms that if an offeree, when he sees the way the wind is blowing in the trial, changes his attitude and wants to accept an offer that he previously did not want to accept, that is a change of circumstances which means that it may no longer be appropriate to allow the offeree to accept the offer which is still on the table subject to the court’s permission.

8. I bear in mind in particular what is said in the first of the TCC cases from 45 to 55 and in the second of the two TCC cases at paragraphs 16 and 17. Nonetheless, there are arguments in favour of the court giving permission. If the court gives permission then there is a settlement; the court’s time is saved; but, as was said in the Capital Bank case, the party who wants to accept the offer and save the court’s time has left it to a very late stage; not the last possible moment, because that would be the moment before judgment, but a very late stage mid-trial.

9. Effectively, what I am asked to do is to impose upon the defendant a liability to pay £330,000, which it is no longer willing to do because it has asked the court to refuse permission. The defendant now wishes to take its chances with the trial continuing, so the court is imposing a result, imposing a settlement which is not a voluntary settlement any longer.

10. I think that the philosophy exists that where a claimant decides to take his chances with the trial and then repents of his earlier decision to turn down the offer of settlement because the trial, he thinks, is going less well or more badly than predicted, that the court will often take the view that it is not right to give permission to impose a settlement on the reluctant defendant.

It follows that it is likely that a permission application made in the course of an assessment hearing, absent something unusual will likely fail, particularly where it is evident that the reason for the application was an excessively optimistic attitude on the part of the party seeking to accept the part 36 offer.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.