Costs consequences of a Pt 36 offer
In Part I of this series (https://dbfamilylaw.wordpress.com/2017/03/20/offers-to-settle-hra-damages-claims-and-cpr-part-36-part-i/) the background to making offers to settle claims in civil proceedings, especially in HRA damages claims under HRA 1998 s 8. This article explains the consequences of offers being made, first on costs where an offer is accepted and secondly where a case goes to trial and the court makes an order which is more or less ‘advantageous’ to one or other party relative to the offer made by him or her in Pt 36 correspondence. Finally the importance of attempts to settle and of mediation will be touched upon.
Deemed costs awards; acceptance of an offer
The emphasis of Pt 36 is very much upon provision for costs being deemed as a result of offers being accepted or offers being beaten by parties – claimant or defendant – so that costs orders can be taken as read. Issues for the courts to resolve as to how costs should be awarded are kept to a minimum. Prescribed or deemed orders rule the scheme.
CPR 1998 rr 36.13(1) and 44.9(1)(b) ‘deems’ orders for the claimant’s costs to have been made on acceptance by either party of a Pt 36 offer within the relevant period. Thus:
44.9 Cases where costs orders deemed to have been made
(1) … where a right to costs arises under – (b) rule 36.13(1) or (2) (claimant’s entitlement to costs where a Part 36 offer is accepted);… a costs order will be deemed to have been made on the standard basis.
An order for costs is treated as having been made if an offer is accepted and acceptance is within the ‘relevant period’ (ie not less than 21 days or up to the termination of the trial if an offer is made less than 21 days before trial (r 36.3(g) or 36.5(1)(c))). After the ‘relevant period’ a respondent to the offer is liable for costs. Costs can include pre-proceedings costs (r 36.13(1)). (Slightly different rules apply where the offer is in respect of only part of a claim (r 36.13(3) and (4)(c); but that is unlikely to affect the main types of claim under consideration here.)
The rules encourage early attempts to settle. Different rules apply where an offer to settle is made less than 21 days before trial (r 36.13(4)(a)) or where it is not accepted within the ‘relevant period’ (r 36.13(4)(b)). That represents one of the instances where the court may become involved in determining costs issues if parties cannot reach agreement: r 36.13(4) concludes that ‘liability for costs must be determined by the court unless the parties’ can reach agreement.
Deemed costs – unless ‘unjust’
If an offer is made less than 21 days before the start of a trial, or is accepted outside the relevant period then – unless the parties can agree – the court will decide the costs order (r 36.13(4)). Subject to this, the deemed orders give the claimant costs up to the end of the relevant period, and the offeree (claimant or defendant) costs from expiry of the relevant period (r 36.13(5)) on the following bases, subject to the overriding check that the court can be asked to find such an order ‘unjust’. What is ‘unjust’ (within the terms of r 36.13(5)) is measured by the factors in r 36.17(5): that is all the circumstances of the case and the following inclusive list:
(5) … the court must 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;
(d) the conduct of the parties with regard to the giving of or refusal to give information for the purposes of enabling the offer to be made or evaluated; and
(e) whether the offer was a genuine attempt to settle the proceedings.
Judgment ‘more advantageous’
The scheme under r 36.17 (costs consequences following judgment), as for all of Pt 36, is to provide for costs which is designed to cater for Pt 36 offers both by claimants and defendants, and to provide a composite rule for both. In either case it depends on the judgment made at trial. If a claimant beats his/her offer, the defendant must pay costs, interest and other payments as set out in r 36.17(4) (below): that is to say, where a claimant’s judgment is ‘at least as advantageous’ (or better) than a defendant’s Pt 36 offer (36.17(1)(b)). In the case of a defendant, a claimant must pay the defendant’s costs in accordance with r 36.17(3) if s/he does not beat the defendants Pt 36 offer (r 3617(1)(a).
The terminology used in r 36.17(1) is that the Pt 36 is more ‘advantageous’, so if the offer is no monetary this may have to be taken into account in assessment of how the dice fall under r 36.17(1). Rule 36.17(2) elaborates a little: ‘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’, but perhaps only deals with the more obvious – ie monetary – aspect of r 36.17(1).
(1) Claimant’s costs
The consequences for a claimant who beats a defendants off is intended to reflect that the claimant is regarded, by the rule-makers, as at a disadvantage (as against the pre-CPR rules where there was no requirement on a plaintiff to make an offer to settle). The costs order for the claimant is as follows:
(4) Subject to paragraph (7) [ie if the offer is withdrawn or changed adversely], where paragraph (1)(b) applies, the court must, 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 for some or all of the period starting with the date on which the relevant period expired;
(b) costs (including any recoverable pre-action costs) on the indemnity basis from the date on which the relevant period expired;
(c) interest on those costs at a rate not exceeding 10% above base rate; and
(d) provided that the case has been decided and there has not been a previous order under this sub-paragraph, an additional amount, which shall not exceed £75,000, calculated by applying the prescribed percentage set out below to an amount which is—
(i) the sum awarded to the claimant by the court; or
(ii) where there is no monetary award, 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||10% of the first £500,000 and (subject to the limit of £75,000) 5% of any amount above that figure.|
Costs payable on the indemnity basis under r 36.17(4)(b) are intended to stigmatise the defendant. It is merely part of the Pt 36 scheme to encourage settlement (McPhilemy v Times Newspapers Ltd & Ors  EWCA Civ 933,  WLR 934).
(2) Defendants costs
Where costs are due to a defendant then, unless the court considers a payment ‘unjust’ (r 36.17(3)), the court must award:
(a) costs (including any recoverable pre-action costs) from the date on which the relevant period expired; and
(b) interest on those costs.
In either case the court can override the automatic awards because it considers their award to be unjust, and on the basis set out (see above) in r 13.17(5).
In SW & TW (Human Rights Claim: Procedure) (No.1)  EWHC 450 (Fam), Cobb J (at (x)) stressed the dangers that in HRA damages litigation, costs can quickly dwarf the damages which can be claimed. The same point was made by the Court of Appeal in Anufrijeva and anor v Southwark London Borough Council  EWCA Civ,  1 FLR 8. Cobb J urged mediation (and see Cowl & Ors v Plymouth City Council  EWCA Civ 1935,  Fam Law 265 for use of mediation in administrative law cases).
An offer in mediation cannot be a Pt 36 offer: it must be confirmed in writing using the formalities in r 36.5(1); though a written offer, not in r 36.5 terms can, be taken into account by the court in the exercise of its discretion where written in Calderbank terms (CPR 1998 r 44.2(4)(c); Calderbank v Calderbank  Fam 93,  3 WLR 586, CA: letter written ‘without prejudice save as to costs’).
Failure to engage in mediation or to respond to a request to mediate may be amongst the factors under r 36.17(5) which could persuade a court to find a costs order unjust (Halsey v Milton Keynes General NHS Trust  EWCA Civ 576; PGF II SA v OMFS Company 1 Ltd  EWCA Civ 1288).
Part 36 is designed to encourage settlement. Mediation can be part of the settlement process. Both are important parts of the courts’ concern to find ways to avoid litigation; and judges are alert to this at all times. Family lawyers rarely have the costs risk approach which most civil litigators have. Costs orders are very rare in children proceedings, and (for different reasons) in ancillary relief cases. If involved with HRA damages claims family lawyers must be alert to the extent to which Pt 36 can help to protect their local authority clients exposure to costs or to the corrosion of a damages award if claimant offers are not made.