Costs (incl. Part 36) Flashcards
When advising a client on not accepting a Part 36 offer at trial - what are ALL the consequences you need to cover?
If the offer is rejected and the matter progresses to trial, the consequences depend on what happen at trial
- If claimant is awarded more than the offer?
- If the claimant is awarded the same as the offer?
- If the claimant is awarded less than the offer?
- If the claimant does not win at trial (loses)?
Need to cover ALL outcomes (not just the one where the Part 36 offer is ‘triggered’)
- Can refer to Part 36 does not apply / Part 36 will apply (as a result of the judgment obtained)
What is the rationale behind the cost sanctions for not accepting Part 36 offer if it is triggered?
The offeree should have accepted the offer instead of insisting on continuing to trial
What is the advantage of a party making a counter-offer pursuant to Part 36? (Advising on strategy for negotiation)
If a party believes the other side’s Part 36 offer is too low, they can make a counter-offer. This has the advantage of continuing the negotiations to avoid trial
- Advise a client that they can make a counter-offer pursuant to Part 36
What do you need to advise a client on when suggesting a counter-offer pursuant to Part 36?
- chances of success
- potential recovery amount
- costs that will not be recovered even if successful
What judgment must the Claimant obtain at trial if the Defendant has made a Part 36 offer?
If C rejects the offer, C must do BETTER than the Part 36 at trial
What are the main consequences of a Claimant not accepting a Defendant’s Part 36 offer at trial?
- Claimant wins at trial and is awarded more than settlement offer:
- Part 36 does not apply
- C receive damages and costs. Costs awarded under general rule, subject to court’s discretion - Claimant wins the same or less than the settlement offer:
- Part 36 will apply
- Rationale: C should have accepted D’s offer instead of insisting on trial and C will be penalised even though they have won the claim
- Split costs order - Claimant loses at trial
- C is not entitled to damages
- C likely has to pay D’s costs until the expiry of the relevant period
- C pays costs and interest from date the relevant period expired, unless court considers unjust
What judgment must the Claimant obtain at trial if the Claimant has made an offer?
If the Defendant rejects the Claimant’s offer, the Claimant must do at least as well as the Part 36 offer at trial (the same or better)
What are the main consequences of a Defendant not accepting a Claimant’s Part 36 offer?
- Claimant obtains judgment for the same or better than the Part 36 offer (at least as advantageous)
- The claimant gets: indemnity costs from end of relevant period, interest on these costs up to 10%, interest on damages up to 10% above base rate, an additional sum. Unless the court considers it unjust - Claimant does not obtain judgment at least as advantageous (Claimant does worse than its part 36 offer)
- There are no consequences under Part 36 - it will not apply
- It is likely that the claimant gets its costs of the whole claim under the normal costs rules (as claimant has still won the claim), but this is at court’s discretion - Claimant loses at trial
- There are no consequences under Part 36 (as it has not obtained judgment at least as advantageous)
- It is likely the defendant will get its costs of the whole claim under the normal cost rules (defendant has won)
What are the two costs you need to consider when analysing / advising on Part 36
- Is Part 36 triggered - are there cost consequences under a Part 36 offer?
- The costs of the case as a whole
- who has won?
- general costs rule - unsuccessful party pays successful party’s costs
- even if Part 36 does not apply, still need to advise on costs of the whole claim
What is a Part 36 offer?
A formal, written settlement offer which is designed to encourage parties to make and accept reasonable offers through a system of financial incentives and penalties
- It is a different form of settlement offer as there are consequences if the offer is rejected
What is the rationale behind Part 36?
- Parties who make realistic proposals to settle should get some benefit if they are not accepted at trial and it turns out they should have been
When and who can make a Part 36 offer?
It can be made at any stage in proceedings, at any time
How to make a valid Part 36 offer?
Claimant or defendant making offer:
- in writing
- pursuant to Part 36
- specify a period of not less than 21 days where the defendant is liable for the claimant’s costs if the offer is accepted (relevant period)
Defendant making the offer:
- offer to pay a single sum of money
- within 14 days of acceptance
Withdrawal of Part 36 offer
- If the offer has been accepted, it cannot be withdrawn or terms changed
- If the relevant period has expired, the offer can be withdrawn or terms changed without the court’s permission
- If the relevant period has not expired, any notice of withdrawal/change will take effect at the end of the relevant period, if the offeree does not serve notice of acceptance during the relevant period
- If they do serve notice of acceptance, the offeror can allow the acceptance; or apply to court for permission to withdraw the offer within 7 days
How is a Part 36 offer accepted?
Serve written notice of acceptance on the offeror and file at court
An offer remains open for acceptance unless it has been withdrawn, even after the relevant period has expired
What are the consequences of accepting a Part 36 offer?
- The claim is stayed and does not continue to trial
- The defendant has 14 days from the date of acceptance to pay the settlement sum
Cost consequences of accepting within / outside the relevant period
Cost consequences of acceptance within the relevant period:
- Claimant entitled to its costs of proceedings up to the date of acceptance
Cost consequences of acceptance outside the relevant period:
- The court has discretion, but unless it is unjust to do so:
a) claimant is awarded costs up to date of expiry of relevant period
b) offeree pays the offeror’s costs from date of expiry of relevant period to date of acceptance
Special rule where the offer was made less than 21 days before trial
Cost consequences: if parties do not agree liability for costs, the court must determine liability
Privilege of a Part 36 offer
It is a ‘without prejudice save as to costs’ document
- This means a party cannot show a Part 36 offer to the judge
- The terms of the offer are not communicated to the court until the case is decided
What are the client’s main concerns as to costs?
- The costs the client will incur in preparing their own case
- The risk of being ordered to pay an opponent’s costs
Have these concerns at the front of your mind when advising clients –> cost consequences !!
These concerns pervade all of litigation
Common costs in litigation
- Solicitor’s fees
- Court fees
- Expert’s fees
- Counsel’s fees
Inter-party costs
Costs between the parties
- Either party is going to want to get their costs back from the other party
- C seeks to recover costs from D / D seeks to recover costs from C
Indemnity principle: a party cannot recover more from its opponent than it is liable to in relation to litigation
Court’s discretion as to costs
- Whether
- How much
- When
General rule as to costs
Court has a broad discretion, but there is a general rule: unsuccessful party pays the successful party’s costs
What is qualified one way costs shifting
Applies to personal injury claims
- restricts defendant’s ability to enforce costs order against the claimant if the claimant is unsuccessful
- costs orders cannot be enforced except up to level of damages and interest awarded
How does the court assess costs?
It asks whether the costs are proportionately and reasonably incurred and proportionate and reasonable in amount
When does assessment take place?
Summary assessment:
- end of a hearing of an interim application of less than one day
- fast-track cases
Detailed assessment:
- other cases
1. Court orders detailed assessment
2. Receiving party serves notice of commencement and bill of costs
3. Paying party can dispute (within 21 days)
4. Receiving party applies for detailed costs hearing - costs decided by costs officer
When must parties file statements of cost?
At least 24 hours before the hearing
Interim costs orders
An interim costs order relates to the interim application
- Costs in any event: regardless of what happens at trial
- No order as to costs: no party can recover the costs of interim application
- Costs in the case: costs of the interim application are paid by the party who pays costs following the trial
Wasted costs order
Requires a solicitor to personally cover the costs incurred by another party due to their improper, unreasonable or negligent conduct in proceedings
- Solicitor must pay for unnecessary costs caused by their actions
- It protects clients and other parties from bearing costs for solicitor’s failings
- Directly penalises the solicitor
When might a wasted costs order be ordered?
Any legal representative who attends a case management conference must be familiar with the case and have sufficient authority to deal with any issues. If such a representative does not attend, the CMC is postponed and likely to result in wasted costs order
