Failing to make an offer on costs “precludes CPR 47.20 argument” if bill is slashed

A party that fails to protect itself by making an effective offer on costs cannot then argue that, because the bill has been significantly reduced on provisional assessment, CPR 47.20(1)(b) should apply to reduce the costs of the assessment, a deputy costs judge has argued.

But Deputy Master Campbell acknowledged there was “no consistency on the costs judges’ corridor on this point” and said a definitive view from a higher court would help.

In Mullaraj v Secretary of State for the Home Department [2021] EWHC B5 (Costs), the claimant asylum seeker settled for damages of £12,500 plus costs for her claim for unlawful detention. In April 2020, she sought costs of £54,290 plus £18,633 in disbursements (of which £14,000 was for counsel), making a total of just over £74,000.

The defendant made a £40,000 ‘without prejudice save as to costs’ offer in July 2020, which the claimant rejected a month later. The defendant asked for a counter-offer, but none was forthcoming.

In November, Deputy Master Campbell carried out a provisional assessment and allowed £41,437, including disbursements, finding the bill “littered with completely unreasonable items”. In addition, by agreement, there was interest payable of £2,924, together with the costs of provisional assessment of £1,500 and the court fee of £1,106.

The defendant applied for a review of the order for the costs of the assessment without saying what order it was seeking.

The deputy master said the starting point was CPR 47.20 – that the claimant is entitled to the costs of the assessment unless the court makes some other order, having regard to all the circumstances.

The first circumstance was whether the defendant took steps to protect herself with a part 36 offer. “It is by no means clear to me that the SSHD ever made a part 36 offer, even though the claimant may have believed that it did,” the judge said. In any case, it did not comply with part 36 and “the claimant gained more through rejecting it”.

Though he had to take account of the offer that was made, the judge said a “near miss” did not help the defendant.

The next circumstance was the fact that 44% came off the bill. This was a factor under CPR 47.20(3)(b) to take into account. “The SSHD advances the question rhetorically, that if the consequence of a paying party’s failure to beat a part 36 offer were always to be that the receiving party recovered the costs of assessment regardless of any other circumstances, there would be no point in having a rule 47.20(1)(b).”

Deputy Master Campbell said there were “at least” two answers to this: first, a paying party who makes no offer at all should not be in a better position than a paying party who does make an offer but one which is just short.

“It would provide a potential reward for a paying party, who sits back, having deliberately made no offer, to rest secure in the knowledge that a successful challenge can always be advanced later under CPR 47.20(1)(b) if the bill is reduced by a significant amount after a good day in court…. Moreover, what tariff should be used to decide whether enough has come off to reverse CPR 47.20: 25%, 30%, 50%, more?”

Second, the judge said, other than where the receiving party has been engaged in fraud “or other skulduggery”, “I cannot think of a circumstance where a paying party whose without prejudice offers have been too low could successfully argue that the receiving party should be deprived of the costs of assessment”.

The defendant’s contention that the claimant did not reply promptly to the offer and made no counter-offer were also insufficient reasons: taking a little longer than the 21 days under a part 36 offer could not “seriously be criticised”, while there was no obligation on an offeree to make a counter-offer.

Deputy Master Campbell dismissed with application with costs, which he summarily assessed at £1,000.

He added: “The conclusion I have reached is that having failed to protect itself by making an effective offer under CPR 36 or by a ‘without prejudice save as to costs’ offer, or through its open offer, the SSHD cannot succeed on a ‘Let’s see by how much the bill has been reduced’ argument and then deploy CPR 47.20(1)(b).

“To permit that would be to discourage the making of offers and enable paying parties who advance no offers to be in a better position to argue for a ‘different order’ than those who make offers in a genuine attempt to settle the costs.

“However… I am aware that there is no consistency on the costs judges’ corridor on this point. For that reason, I consider a definitive view at a higher level would assist parties in understanding where they stand, when they make a part 36 offer which is too low, or no offer at all, but then argue that they can rely on CPR 47.20(1)(b) to their advantage, depending upon how good a day they have had in court.”

He said that, if asked, he would give permission to appeal and invite the parties to transfer the case to the High Court for a binding ruling.

Duncan Lewis Solicitors for the claimant. Government Legal Department for the defendant.

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Costs News
Published date
28 Apr 2021

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