Judge bemoans public authorities’ “dispiriting” approach to costs

Costs: Home Office should have made a part 36 offer

A judge has described as “dispiriting” how much money is spent by public authorities arguing about costs while not making sensible part 36 offers.

Deputy Master Campbell was speaking from the experience of carrying out “numerous” detailed assessments where the costs were coming out of public funds – predominantly judicial review and clinical negligence cases.

“It is dispiriting how much public money is expended unnecessarily in arguing about those costs at assessment,” he said.

“Many such matters will have been capable of settlement much earlier, either through effective part 36 offers being made at an early stage or through a costs mediation before the fee for the assessment has been incurred.

“Of course, there are occasions when that is not possible such as where there are points of principle involved in a group action, but in the present case, the public purse was put to unnecessary expense by the defendant’s failure to make a part 36 offer at a level sufficient to give it costs protection had it been rejected, and in a sufficient sum so as to be attractive to the Claimant and thus to make it acceptable.

He was ruling in R (on the application of TT) v Secretary of State for the Home Department [2021] EWHC B21 (Costs), a judicial review in an immigration case from July published last week.

The defendant failed to beat the claimant’s part 36 offer by £1,928 but argued it would be unjust to have to pay the 10% uplift that resulted – some £7,000 – in part because the money was coming out of the public purse.

The defendant also said the offer was only beaten because of the interest and it was unjust to take this into account because it only arose due to the claimant’s delay in bringing the proceedings.

The judge held that the secretary of state could and should have mitigated its liability to pay interest by making a payment on account.

“Whilst it is right that there was no obligation to do so until 28 days after service of the bill, paragraph 7 of the consent order took effect on 14 August 2020 but no payment was made until 1 December 2020.

“Had the payment been made on time, the interest saved would have been about £1,160. Omitting to do so and failing to comply with an order to which the defendant had itself given its consent, is not a promising start when it comes to seeking a discretionary remedy, as here.

“Nor is the fact that the defendant made no attempt to mitigate its liability for interest by making a payment earlier than the date it did, albeit that there is no obligation to do so: it just makes commercial sense that it should be done, irrespective of any delay by a receiving party in serving their bill.”

Deputy Master Campbell also said it was permissible to take interest into account when working out whether a part 36 offer has been beaten.

He was unaware of any binding authority that it would be unjust to order payment of the additional sum where the public purse was paying.

“Not only that, but here, the defendant’s shortcomings were compounded by the fact that a realistic part 36 offer was turned down, comprising, as it did, interest to date, as well as the amount which the claimant was willing to accept for his costs.”

The judge said it was “a pity” that the defendant, in advancing its public purse argument, “appears to have overlooked” the guidance given by Peter Smith J in the 2003 case of Wills v Crown Estate Commissioners.

This emphasised the need for paying parties who wished to protect themselves against the costs consequences of part 36 offers in detailed assessment proceedings to make “realistic settlement offers” at the beginning of the proceedings and not the end.

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