This is the fourth in the series of posts on the new Part 36 coming into force on the 6th April 2015. The rules contain a brand new provision that deals with the position where a offeror’s costs are limited to court fees. The rules allow a party to recover 50% of their costs if their opponent fails to beat a Part 36 offer.
When a party has failed to file a costs budget in time and its costs are limited to court fees only there is little incentive on the opposing part to settle in the face of a Part 36 offer.
THE NEW RULE
“Cases in which the offeror’s costs have been limited to court fees
36.23.—(1) This rule applies in any case where the offeror is treated as having filed a
costs budget limited to applicable court fees, or is otherwise limited in their recovery of
costs to such fees.
(Rule 3.14 provides that a litigant may be treated as having filed a budget limited to court
fees for failure to file a budget.)
(2) “Costs” in rules 36.13(5)(b), 36.17(3)(a) and 36.17(4)(b) shall mean—
(a) in respect of those costs subject to any such limitation, 50% of the costs assessed
without reference to the limitation; together with
(b) any other recoverable costs.”
CROSS-REFERENCING AND WHAT IT MEANS
This requires a lot of cross referencing.
(1) 36.13(5)(b) is a reference to where the parties cannot agree the liability for costs and where the court, unless it is unjust to do so, order “the offeree do pay the offeror’s costs for the period from the date of expiry of therelevant period to the date of acceptance”
(2) 36.17(3)(a) is a reference to the costs being ordered to be paid by a claimant to a defendant where a claimant fails to beat a defendant’s offer.
(3) 36.17(4)(b) is a reference to costs ordered to be paid by the defendant to a claimant when the defendant fails to beat the claimant’s offer.
It means, in essence, that a party subject to a nil costs budget can still recover 50% of their fees for the period after a Part 36 offer if the offer is not beaten.
A GOOD PART 36 OFFER MEANS YOU COULD STILL GET HALF YOUR COSTS
This is a clever rule. A party, on a nil budget, could still get half their costs if they make a realistic Part 36 offer and their opponent fails to beat it.This does not undermine the purpose of the sanction (only half the costs can be recovered). It still gives both parties an incentive to settle.
COSTS BUDGETING WILL STILL HAVE TO TAKE PLACE EVEN WHEN THE NIL BUDGET SANCTION IS BEING APPLIED
This means that there is an incentive for the court to budget a case even when it is imposing the sanction. There are circumstances in which the opposing party could still be liable to pay the costs and it could be important that these costs are both reasonable and proportional. It would be ironical, and highly unfair, if a litigant faced with an opponent who had a nil budget then had to pay costs which were not budgeted. Particularly if that party had their own costs subject to budgeting.