ASSESSMENT OF COSTS & FAILURE TO MEDIATE: CLAIMANT BEATS OWN OFFER AND COSTS INCREASED BY 10%

The claimant beat its own Part 36 offer on costs in the case of Reid -v- Buckinghamshire Healthcare NHS Trust [2015] EWHC B21. Consequently costs were increased by 10% and additional interest accrued.

“If the party unwilling to mediate is the losing party, the normal sanction is an order to pay the winner’s costs on the indemnity basis, and that means that they will have to pay their opponent’s costs even if those costs are not proportionate to what was at stake. This penalty is imposed because a court wants to show its disapproval of their conduct. I do disapprove of this defendant’s conduct but only as from the date they are likely to have received the July offer to mediate.”

KEY POINTS

  • When a claimant, recovering costs, had beaten its own Part 36 offer they were entitled to an additional 10% costs.
  • The defendant was ordered to pay costs on an indemnity basis from the date on which it failed to respond to an offer to mediate.
  • Where the losing party is the party that refuses to mediate the normal sanction will be indemnity costs.

PRACTICE POINTS

  • This case emphasises the advantages and importance of a claimant’s Part 36 offer. It is unwise for a receiving party not to make an offer.
  • It also shows the dangers in failing to respond to an offer to mediate. In the current case this led to an award of indemnity costs.

THE CASE

An assessment of costs took place over two days following a clinical negligence action.  On the second day of the assessment the costs to be allowed were agreed. The claimant had

  1. Written a letter offering to mediate.
  2. Made a Part 36 offer in relation to all the costs (which the defendant failed to beat).
  3. Made a separate Part 36 offer in relation to counsel’s fees (which the defendant failed to beat).

THE AWARD MADE

Master O’Hare made a number of awards
“a. I award a sum equivalent to ten per cent of the costs assessed. That is a figure of £13,000-odd.
b. I award interest on the costs assessed at eight per cent from the day of the judgment, the day of the award for costs. That was 7 January 2015.
c. I order the Defendant to pay the Claimant’s costs of detailed assessment up to 27 July 2015 on the standard basis.
d. I order the Defendant to pay the Claimant’s costs of detailed assessment from 27 July on the indemnity basis.
e. Lastly, I want to award interest on item (i) and on the costs of assessment (items three and four) at eight per cent starting from today.”

FAILURE TO BEAT THE CLAIMANT’S PART 36 OFFER TO SETTLE: AN ADDITIONAL 10% IN COSTS

  1. As to (i), I am making the standard order which ought to be made when a paying party fails to beat the receiving party’s offer to settle. It seems to me no good reason has been shown to me to make an exception; as to that, see Cashman v Mid Essex Hospital Services NHS Trust [2015] EWHC 1312 (QB). Whilst there are some points which might lead one to think the standard penalties are unjust in this case (the imbalance of information between the parties (the claimants know more about their bill than the defendants do) and the claimant’s failure to alter that imbalance by making replies) but those factors did not influence me to depart from the standard order. I think the defendants did have suitable information to make an assessment of the sum likely to be awarded, bearing in mind the high costs of assessment if this matter went as it did to a two-day hearing. The offer was made well before any detailed assessment was in the offing. No hearing appointment was made until several weeks after the offer was made.
  2. But now I will say what I have not allowed. I did not think it right to order an additional percentage reward or penalty in respect of the offer of 6 October. That offer relates to counsel’s fees. The penalty on the defendants in respect of counsel’s fees has already been awarded in respect of the earlier offer. I did not think it right that a receiving party can multiply the number of ten per cent awards he obtains simply by itemising different parts of his offer and expecting the court to increase allow 10% increases in respect of all of them.
  3. Also I think it is not right to allow any enhancement of interest either on the costs assessed or on the costs of assessment. It seems to me the ten per cent sum I have awarded is by itself a sufficient reward or penalty. I think it would be disproportionate to impose further penalties.
  4. Next, I think it is not right for me to award interest on the ten per cent itself for any period starting earlier than today. That is a sum which is being assessed and awarded today; it is not a sum which the defendants could reasonably be expected to pay before today. Its arrival time is now. It having arrived, interest on it will run under the Judgments Act at eight per cent per annum from today, but that is not something I need state; that is the automatic effect of the Judgments Act 1838.

CONSEQUENCES OF FAILING TO RESPOND TO THE OFFER TO MEDIATE: COSTS ON AN INDEMNITY BASIS

  1. In respect of the defendant’s failure to mediate, I think the only sanctions available for me to impose are to award costs on the indemnity basis and to award interest on those costs from a date earlier than today, today being the normal date. I am persuaded that the defendant’s refusal to mediate in this case was unreasonable. It took them six weeks to reply to the offer and they then replied in the negative. But nevertheless I do not think I should impose the indemnity basis penalty from a date earlier than the date the defendants are likely to have received the claimant’s offer, and that is why, in item (iii) I said interest should run from 27 July, that is, some three days after the offer was sent. I do not think I have any power to award a percentage penalty as I can in respect of a Part 36 offer. In my view I do not have power to alter the rate of interest payable and I do not think it proportionate to add interest penalties on top of an award on the indemnity basis from a date earlier than today.
  2. I want to end with a brief note of caution about sanctions imposed on parties who unreasonably refuse to mediate. Case law on this topic is largely about penalties imposed on parties who are in other respects the successful party. In Halsey v Milton Keynes NHS Trust [2004] EWCA Civ 576 and in other cases, penalties imposed upon winners. They do not involve the imposition of further penalties upon losers. One can see that throughout the judgment in Halsey. I will read out a sentence from paragraph 28:
“As we have already stated, the fundamental question is whether it has been shown by the unsuccessful party that the successful party unreasonably refused to agree to mediation.”
  1. There are many other such references to this being a penalty against winning parties, for example, see paragraphs 13 and 34.
  2. If the party unwilling to mediate is the losing party, the normal sanction is an order to pay the winner’s costs on the indemnity basis, and that means that they will have to pay their opponent’s costs even if those costs are not proportionate to what was at stake. This penalty is imposed because a court wants to show its disapproval of their conduct. I do disapprove of this defendant’s conduct but only as from the date they are likely to have received the July offer to mediate.

RELATED POSTS

On mediation

Mediation

Part 36: Claimant’s offers

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