A guide to the tricks of the trade, how to make tactical offers, and how to ‘win’ detailed assessment proceedings.
So, you’ve lost the proceedings and now your client has to pay their opponent’s costs. You have replayed what might have been in your head, worried over the mistakes you think you made and the things you should have done. Your opponent, you think (as they probably do) is on an easy ticket to recover its costs too. You imagine them cracking open the champagne in the office.
Being the paying party in assessment proceedings can be tough. The information provided to you is meagre, you do not have the benefit of disclosure and inspection, you are essentially conducting a damage limitation and you feel like the underdog.
But you don’t have to be.
In this short guide I set out how you can use offers and the assessment procedure to take control of the proceedings and dictate its flow, achieve a good result for your client, and win an order that the receiving party pay your costs of the assessment proceedings.
Under CPR 47 PD 8.3 the paying party must state ‘…in an open letter accompanying points of dispute what sum, if any, that party offers to pay in settlement of the total costs claimed.’ In other words, when serving points of dispute the paying party must make an open offer of settlement but, strangely, it can offer to pay nothing.
At first glance it might appear to be a somewhat toothless provision that requires an offer to be made, but that offer can be nil, however the single most important thing to remember when making the offer is that the judge will see it. Thus the amount of the open offer is of tremendous tactical importance and is possibly the single most important part of detailed assessment proceedings.
It can be tempting to make the open offer very low, so low that there is no chance that it will be accepted. There are indeed good reasons to adopt this approach, which I will address later, however first I will look at the advantages of making the open offer attractive.
The first reason is that, as stated above, the judge or assessing officer will see the offer at the assessment. A very low or nil offer is only likely to give the impression that you are unwilling to compromise, do not wish to engage in realistic negotiations, or that you just want the court to assess the bill. All of this will give a poor first impression, and in an assessment of costs (especially a provisional assessment), you want the judge on side from the start.
The second reason is that the general rule in detailed assessment is that the paying party will pay the receiving party’s costs under CPR 47.20(1). As the paying party, if you do not make any offers (or make unrealistically low offers), you will pay your opponent’s costs. This has the serious potential to give rise to a professional negligence claim from your client if they end up losing reductions to the bill in paying the further costs of assessment, in addition to bearing the cost of their own costs draftsman.
The third, and possibly most important, reason is that a realistic open offer is likely to make your opponent more amenable to settlement and at the very least to plant the idea of a target sum for the court to aim for. I recently had a case where the costs were well in excess of what would ordinarily be expected for a claim with similar circumstances. I advised my client what such a claim would ordinarily be assessed at, and that they make an offer in that amount. The receiving party was highly unlikely to accept the offer, however when the assessing judge, who has probably seen numerous such cases before, comes to consider the bill the open offer will plant the seed of what a reasonable amount to award is.
Low or ‘nil’ open offers
Whilst in general it is not a good idea to make a very low or nil offer, this is not always true. Every case turns on its own facts and there are circumstances where it can be advantageous to make a low offer. One good example of this is where there is an allegation that the receiving party’s bill is incorrectly drafted or otherwise non-compliant, making it impossible to identify costs which should not have been included.
In these circumstances a very low or nil offer could be appropriate and, importantly, justifiable as it would be possible to argue that it was impossible to make any meaningful offer until the bill was properly drawn. The circumstances where such offers are appropriate are, however, few and far between and it should be seen as a fall-back position, not the first port of call.
Part 36 Offers
The most commonly repeated mistake with receiving party Part 36 offers is to start too low. Frankly an unrealistic Part 36 offer is not worth the paper it is written on; the purpose of a Part 36 offer is to provide costs protection and if the offer is so low it is less than your best case scenario, it provides no protection at all.
By way of example, if my opponent has served a £100,000 bill and I make an offer of £1,000, not only is it highly unlikely to be accepted but there is almost no chance that I will beat it. That being the case, I may as well have made no offer at all. No judge is likely to consider that such an offer was realistic and indeed were it raised in a hearing such an offer would be more likely to anger the judge than anything else.
A Part 36 offer should be the very best offer that you are willing to make and, if it is not accepted, you must be willing to press on to assessment. Part 36 offers should also be made early in proceedings and I would suggest no later than the time you serve your Points of Dispute. The reasons for this are:-
- The higher a Part 36 is, the more chance your opponent will settle the case early, and the lower the costs your client will have to pay for detailed assessment.
- If the offer is not accepted you have a much higher chance of beating it at detailed assessment and recovering your costs.
- A high offer early on is likely to make your opponent think that they can negotiate higher still. By the time they realise their error they will be faced with accepting your offer and paying your costs, or pressing on to the hearing and facing a serious risk that they will lose and have to pay your costs, which by that point will have increased.
- Even if not beaten, a good Part 36 offer early on may well make a judge more favourable to you when making an order for costs following the hearing.
- If you come close to beating the Part 36 offer, but don’t quite, there is a much stronger argument to say that the benefit to the receiving party of continuing with litigation was outweighed by the additional costs incurred, and therefore either they should pay your costs or there should be no order for costs.[i]
A good Part 36 offer, made early in proceedings, is the best way for the paying party to take control of the assessment proceedings and wrong foot its opponent.
The paying party’s open offer made with the points of dispute should be realistic, and at minimum should be the paying party’s best case. The open offer should be coupled with a good Part 36 offer, which should represent the most the paying party is willing to pay. The paying party should be prepared to proceed to detailed assessment if the Part 36 offer is not accepted.
[i] Rangos v Secretary of State for Business Innovation & Skills & Anor (unreported, Ch D, Judge Cooke QC, 24 April 2012) held where costs were assessed at only slightly more than an offer, the receiving party was liable to pay the paying party’s costs following the date of the offer. The rationale behind this judgment was that the costs incurred in litigating the assessment of costs were not justified by the gains made from doing so. This judgment related to the old CPR 47.19 offer regime, not CPR 36, however there is no rule which would prevent the court exercising its discretion under CPR 44.2(2) save where the receiving party beaten its own CPR 36 offer. Even in those circumstances it might be possible to argue that it would be unjust to award the receiving parties costs under CPR 36.17(3).