Ensuring the validity of Part 36 offers – Essex County Council v UBB Waste (Essex) Ltd (No. 3) [2020] EWHC 2387 (TCC)

The High Court judgment in Essex County Council v UBB Waste (Essex) Ltd (No. 3) [2020] EWHC 2387 (TCC) considers a number of interesting costs issues. This article will focus on the intended Part 36 offer made by the receiving party and the judgment regarding the validity of the same.

The parties agreed that the local authority was successful in the substantive litigation and was therefore entitled to a costs order in its favour. There were, however, a number of issues in dispute, including whether an offer made by the receiving party in March 2019 complied with CPR 36.

In order to comply with the requirements of CPR 36 an offer must follow the form and content provisions set out at CPR 36.5 (1). Specifically, it must (a) be in writing, (b) make clear that it is made pursuant to CPR 36, (c) specify a period of not less than 21 days within which the Defendant will be liable for the Claimant’s costs in accordance with rule 36.13 or 36.20 if the offer is accepted, (d) state whether it relates to the whole or part of the claim and (e) whether it takes into account any counterclaim.

The offer in question, intending to comply with CPR 36.5 (1) (c), stated:

“If the Defendant accepts the offer within 21 days of the date of this letter (the ‘Relevant Period’), the Defendant will be liable for the Claimant’s costs of the Proceedings (including pre-action costs) up to the date on which written notice of acceptance of this Offer is received by the Claimant, in accordance with CPR 36.13.”

The key issue is the reference to the ‘date of this letter’. The offer was dated 7th March 2019 and was served by email at 4.54pm. It was therefore deemed served on 8th March 2019 (CPR 6.26).

The Defendant argued that, as the 21 days ran from the date of the letter (7th March), the relevant period expired only 20 days from service and the offer was therefore not compliant with the requirements of CPR 36.5 (1) (c).

The Claimant’s position was that the Court should construe the offer such that the 21 days ran from the date of deemed service as per C v. D [2011] EWCA Civ 646, [2012] 1 WLR 1962.

The judgment provides a detailed discussion of the approach to construction in respect of Part 36 offers and the preference to bring rational sense and consistency to the document as a whole. Mr Justice Pepperall concluded that, in the applicable context, the statement could be construed in either way, however, in accordance with C v D, it was preferable to construe the 21 days as running from 8th March which was “consistent with the clear intention to make a Part 36 offer and ensures that the offer is effective rather than ineffective”.

Whilst that concluded the issue, Mr Justice Pepperall went on to consider the position had the offer not been found to be compliant. Specifically, the Claimant’s ‘fallback’ arguments that any non-compliance was de minimis or that the Claimant could rely on estoppel.

In respect of de minimis errors, Mr Justice Pepperall concluded that Rule 36.3(2) is clear that an offer that does not comply with CPR 36.5 will not have CPR 36 consequences. The Court would, however, have the general discretion as to costs under CPR 44.

Similarly, as Part 36 is a self-contained procedural code, the rues of estoppel cannot be introduced. Again, the offer could be taken into consideration under CPR 44 but would not attract the advantages of CPR 36.

Mr Justice Peppernall concluded that the critical issue was one of construction and pointed out that similar difficulties could be avoided in future if parties used form N242A.

Points to take away

Part 36 offers need to fully comply with the mandatory requirements of CPR 36.5 to be effective. Where there is an ambiguity, the Court will prefer a construction that finds an intended Part 36 offer to be compliant, however, this should not be relied upon. If the Court is unable to make such a construction then estoppel and/or de minimis mistake will not assist in obtaining the advantages of CPR 36, such offers can only be taken into consideration under the general discretion under CPR 44.

When making (or indeed considering) Part 36 offers, practitioners should check the requirements carefully, if in doubt, use form N242A to avoid mistakes.

Helen Spalding is an Associate in the Costs and Litigation Funding Department at Clarion. You can contact her at helen.spalding@clarionsolicitors.com or on 0113 288 5639.

Open Meeting of the Civil Procedure Rules Committee – Costs Update

The Civil Procedure Rules Committee held their annual open meeting on 15th May 2020. Given the present circumstances, the meeting was successfully held via Skype.

The previous two meetings covered several costs issues including the establishment of a sub-committee to make recommendations in respect of guideline hourly rates which have not been updated in the last 10 years. The committee is due to make recommendations by the end of this year with an update to the rates to take place thereafter.

The April minutes, which have just been released, confirm a that a sub-committee has also been established to consider costs rates other than guideline hourly rates.

The following costs matters were discussed at the open meeting in May, minutes of which will likely be published in June:

Vulnerable Parties – The sub-committee sought guidance on four points; an amendment to the over-riding objective to cover vulnerable parties, an accompanying PD, an addition to CPR44.3(5) regarding proportionality to specifically include vulnerable parties, and whether to approach the MOJ in respect of amending fixed, scale and capped costs for cases involving vulnerable parties. The committee broadly agreed with the proposals with some caution regarding the overriding objective.

CPR 45.18 – The committee agreed that the deletion of the upper limit of £25,000.00 from tables 6 and 6A would be recommended.

Qader v Esure– Issues had been raised following the amendments to CPR 45 Section IIIA concerning the effect on parties’ settlement tactics in matters likely to be  allocated to the multitrack due to the difference in the level of costs recoverable pre and post allocation. The committee discussed the matter and concluded that no action should be taken.    

QOCS  / Ho v Adelekun – The issue of off-setting Defendant’s costs against Claimant’s costs where damages are insufficient has been referred to the costs sub-committee. The committee will keep a watching brief on the appeal in Ho and consider revision to CPR 44.14 thereafter.

Part 36 acceptance in pre-action matters – Where a Part 36 offer is accepted pre-action there is no deemed costs order (CPR  44.9(2)).  The costs sub-committee will consider whether there is a need to amend CPR 46.14 regarding costs only proceedings to be explicit in respect of Part 36 acceptance on pre-action matters.

Helen Spalding is an Associate in the Costs and Litigation Funding Department at Clarion. You can contact her at helen.spalding@clarionsolicitors.com or on 0113 288 5639.

Detailed guidance from Master Gordon-Saker on recoverable costs between the parties in Fuseon Ltd, R

The recent judgment in Fuseon Ltd, R provides a reminder of a number of established principles in respect of recoverability of various heads of costs between the parties.

The costs claim arose from a private prosecution by Fuseon Ltd, a Lancashire based letting agency, against a Director of the business who had committed fraud and theft of over £100,000 relating to tenancy deposits, personal expenses and false invoices. The police were unable to investigate and therefore the company brought a private prosecution using Central London firm, Edmonds Marshall McMahon Limited, having failed to find a local firm to take the case. The Director was ultimately convicted and an order was made for a payment of costs to the prosecution out of central funds including costs of the investigation. 

Costs were submitted in the sum of £427,909.00 to the Criminal Cases Unit of the Legal Aid Agency and were initially determined by the case manager in the sum of £180,000.00. The key decisions being a reduction from London hourly rates to Preston guidelines, a reduction in travel time to what would have been reasonable for a local firm, removal of duplication between fee earners, non-fee earner work, and a Singh reduction for proportionality.

Fuseon requested a redetermination and costs were increased to £240,000.00, a subsequent appeal was then dismissed by Master Rowley. In August 2019 Fuseon commenced judicial review proceedings and the decision of Master Rowley was quashed. It was directed that the assessment of the Claimant’s costs be remitted to the Senior Costs Master for further directions. The matter came before Master Gordon-Saker who re-heard the appeal from the determination of the case manager. This was dealt with on the papers at the Claimant’s request.

Hourly rates – At the initial assessment, it was not accepted that there was no choice but to instruct a central London firm. Rates for a local firm were therefore applied based on guideline rates for Preston. Master Gordon-Saker, guided by the comments of Lane J. in the judicial review judgment, found the use of a Central London firm to be reasonable on the facts. The Claimant had carried out suitable research and contacted firms but could not find anyone offering private prosecutions for fraud. It was reasonable to use London solicitors due to the specialism required. The hourly rates claimed were therefore reviewed against the guidelines for central London. The rates were allowed save for reductions to the Grade C and D handlers. It is worth noting that Master Gordon-Saker commented at paragraph 30 that ‘the guideline rates are of course just that. They are fairly blunt instruments designed to assist judges in the summary assessment of costs. The passage of time since 2010 means that they tend now to be used as a starting position rather than as carved in stone.’

Travel time – Additional travel was allowed in light of the permitted use of London Solicitors, however, travel to attend the client was disallowed as a client is generally expected to travel to attend their solicitor. 

Inter-fee earner discussions / duplication – Detailed guidance was provided in respect of what is and is not recoverable in this regard in paragraphs 42 through 44. Master Gordon-Saker confirmed that ‘reasonable time spent in inter-fee earner discussions is properly allowable. It is difficult to delegate tasks to junior fee earners without instructing them what to do and the reasonable time of the delegator and delegate is usually now considered to be recoverable. […] On the other hand, two fee earners attending on a witness or the client will rarely be reasonable, unless there is a specific reason. Lawyers should be reasonably adept, like most people, at speaking or listening and writing at the same time. For similar reasons I cannot see that more than one fee earner attending trial, together with Counsel, was reasonably required.’ For example, additional time was allowed for the Partner reviewing documents such as witness statements prepared by others but time spent for an additional fee earner to prepare for attendance at the trial was removed.

Non-fee earner work – Researching social media, contacting witnesses about the trial and preparing bundles were allowed as work normally carried out by fee earners. Items that were disallowed included photocopying (described in the bill as ‘collating extra copies’ and ‘preparing copies’), printing, posting, booking flights, and elements of the bundle preparation such as scanning.

Proportionality – Following from the judicial review judgment, it was found that the initial use of the CPS as a comparator to find the costs disproportionate was not legitimate. The Claimant had tried his best to get the police to take the case and his decision to institute the private prosecution was a last resort. The hours spent by each fee earner were considered and reductions were made to the principal handler and the Grade D assistants.

Points to take away

  • Use of a London firm may be reasonable for a particular specialism and if the client has made such enquiries as can reasonably be expected of a person in their position.
  • Travel to attend the client is not generally recoverable, I would suggest that this would turn on the facts and would be recoverable if there was a particular reason such as incapacity or the need for a site inspection.
  • Multiple fee earners attending meetings and hearings will be vulnerable at assessment. The context of the meeting should be considered.
  • Inter fee earner discussions are recoverable where it is necessary for delegation purposes. Again, consider the context of the meeting.
  • Care should be taken when describing tasks associated with preparing bundles to show legitimate fee earning work rather than scanning and copying.

Helen Spalding is an Associate in the Costs and Litigation Funding Department at Clarion Solicitors. You can contact her at helen.spalding@clarionsolicitors.com or on 0113 288 5639.