QC warns of part 36 “trip hazard” when seeking indemnity costs

Part 36 offers are a good way to secure indemnity costs and so remove the strictures of costs budgeting but lawyers should be aware of the risks, a QC told last week’s ACL Manchester Costs Conference.

In a speech on budgeting subtitled ‘I thought it was supposed to make life easier’, Andrew Post QC, head of the costs group at Hailsham Chambers, said that the various difficulties budgeting threw up highlighted the importance of trying to get indemnity costs.

They not only shift the burden of proof and “allow the recovery of a few percent more”, but they also enable the receiving party to avoid the constraints of budgeting and sidestep the effects of the proportionality test.

“Of course, that route is difficult – judges are generally slow to make costs orders on the indemnity basis,” he said. “But claimants have another, much more certain route – an effective part 36 offer will entitle the successful claimant to costs on the indemnity basis unless it is unjust to make such an order. Even parties who have failed to file budgets and are therefore limited to fees-only budgets can recover half the assessed costs if they obtain an order for costs on the indemnity basis (CPR 36.23).”

So the “vagaries” of costs budgeting would often be yet another good reason why a claimant should make an early and realistic part 36 offer – a point made by various speakers in various contexts throughout the day.

But here, Mr Post warned, there was a potential “trip hazard”. He explained: “If the terms of the retainer with the client are such that he or she is not liable for any shortfall in costs, then that client may have little interest in making a discounted offer, while the solicitors may have a very considerable interest in protecting their position by way of an effective offer.

“Practitioners need to be careful in the advice they give to clients like this about the benefits and costs of part 36 offers, and will need to be sure that any such advice is very carefully and fully recorded.”

There will be a full report of the Manchester conference in the next issue of Costs Lawyer.

– The ACL is carrying out a survey to gauge members’ views about costs budgeting and the new bill of costs. We would be grateful for a couple of minutes of your time to give your views on an anonymous basis. Click here to take part.

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Costs News
Published date
08 Nov 2016

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