A recent case underscores that best practice is to only make receiving party Pt 36 offers on discrete & significant issues, says Francis Kendall
In White and another (executors of the estate of William White, deceased) v Wincott Galliford Ltd, the costs master concluded that it would be unjust to award the claimants a 10% uplift on the assessed costs.
In May, Deputy Master Friston delivered his judgment at the Senior Courts Costs Office in Andrew White and Samantha White (executors of the estate of William White, deceased) v Wincott Galliford Limited  EWHC B6 (Costs). The case concerned a part 36 offer made by the receiving party that went solely to the hourly rates. The hourly rates contained in the offer were allowed on assessment and the judgment concerned the impact of that result.
It is perhaps easiest to focus on the uplift sought by the receiving party, who said they were entitled to an “additional amount” pursuant to rule 36.17(4)(d). They sought a 10% uplift and, as this related to the hourly rates, said it should apply to the entirety of the profit costs. The receiving party had not covered itself in glory with regard to an indemnity principle dispute and there was no dispute that the original provisional assessment resulted in a maximum amount of costs of assessment of £1,500 (rule 47.15(5)).
The issue arguably arose from the wording of rule 36.2(3), which allows for a compliant offer “in respect of the whole, or part of, or any issue that arises”. The paying party sought to trivialise the issue by suggesting a series of offers could, in theory, be made on any item in a costs claim or even a constituent part of that item (hourly rate or time claimed). The receiving party countered that the hourly rates are a “highly significant part” of a bill of costs.
The court recognised that the uplift should be awarded unless it would be unjust, that the burden of proving an injustice was on the party seeking to rely on it and that this burden was a formidable obstacle. Despite that, the additional amount was not awarded.
Deputy Master Friston focused on several factors, but I will ignore those relating to court resources and how much time would have been saved if the issue at stake had settled by accepting the offer rather than requiring adjudication. The key was that he saw the offer as “gamesmanship” and, arguably correctly, noted that hourly rates were only one component of any profit costs to be allowed on assessment – if hourly rates are allowed at those contained within the offer but if no time is allowed, the offer is sterile. However, surely the enhancement he persuaded himself not to allow would have been reflected on any such issue, i.e. no time allowed means an enhancement of zero value anyway.
I once attempted to persuade a client to make a part 36 offer on the level of uplift in a CFA case. The case had gone to trial and the staged uplift reaching 100% in those circumstances (and those of the case) seemed reasonable, but not to the paying party. Testing the position was frustrated by settlement. Given this would be a discrete award (the uplift level), it would, similar to this case, result in an enhancement dependent on other factors (both the time and hourly rates allowed to base costs). With the benefit of hindsight, I can accept my client’s reluctance to make the offer.
Moving forward, it would seem to be best practice to only make receiving party part 36 offers on discrete and significant issues that are capable of individual and discrete quantification. If we follow Deputy Master Friston’s judgment fully, any such issue should also save the parties and/or court significant resources in determining the costs covered, although I doubt that he intended that to be a stumbling block in isolation.
Francis Kendall is vice-chair of the Association of Costs Lawyers and is a practising costs lawyer at Kain Knight
This article first appeared in the New Law Journal on 2 July 2019