Master McCloud’s judgment in the matter of JLE (a child) v. Warrington & Halton Hospitals NHS Foundation Trust[2018] EWHC B18 (Costs) will be of great interest to many litigators as it deals with the interpretation of CPR 36.17(4):

(4) Subject to paragraph (7), where paragraph (1)(b) applies, the court must, unless it considers it unjust to do so, order that the claimant is entitled to—

(a) interest on the whole or part of any sum of money (excluding interest) awarded, at a rate not exceeding 10% above base rate for some or all of the period starting with the date on which the relevant period expired;

(b) costs (including any recoverable pre-action costs) on the indemnity basis from the date on which the relevant period expired;

(c) interest on those costs at a rate not exceeding 10% above base rate; and

(d) provided that the case has been decided and there has not been a previous order under this sub-paragraph, an additional amount, which shall not exceed £75,000, calculated by applying the prescribed percentage set out below to an amount which is—

(i) the sum awarded to the claimant by the court; or

(ii) where there is no monetary award, the sum awarded to the claimant by the court in respect of costs—

 

Amount awarded by the court

Prescribed percentage

Up to £500,000

10% of the amount awarded

Above £500,000

10% of the first £500,000 and (subject to the limit of £75,000) 5% of any amount above that figure.

 

By way of background, the Defendant had been ordered to pay the Claimant’s costs. The Claimant initially presented a bill in the sum of £615,751.51 but made a Part 36 offer in the sum of £425,000.00. The Claimant was awarded a total sum of £431,813.05 inclusive of interest and so had beaten their own offer.

 

At the detailed assessment hearing, the Claimant sought awards in accordance with CPR 36.17(4) (a) – (c) but omitted to request the extra 10% in accordance with CPR 36.17(4)(d). Before the order was sealed, the Claimant requested an amendment to the order to include the additional sum and the Defendant opposed on the basis that to award a sum of £43,000.00 because the Claimant had beaten their offer by a sum of less than £7,000.00 was unjust.

A further telephone hearing was scheduled, followed by written submissions. Essentially, the Claimant argued that CPR 36.17(4) was a gateway, which once satisfied meant that (a) – (d) should all be allowed and could not be separated, whereas the Defendant argued that the Court was entitled to assess individually whether any of (a) – (d) were unjust and disallow them accordingly.

Master McCloud concluded that, whilst there was no direct ruling on the point, her view, after considering a number of authorities, was that the consequences could be separated and so the Defendants “severed” approach was correct. Master McCloud then moved to conclude that this was a case where it would be unjust to allow the extra 10% taking into account:

“(1) the very small margin by which the offer was beaten relative to the much greater size of the bill;

(2) the fact that where a bill is reduced (and seems to have been expected to be reduced) significantly, it will on the whole generally be very difficult for a party to know precisely or even approximately to within a few percent, where to pitch an offer such that even a competent costs lawyer would operate close to chance level as   to whether an offer is likely to be ‘over’ or ‘under’ at the end of the hearing; and

(3) the large size of the 10% ‘bonus’ award relative to the margin by which the offer was beaten.”

In her closing remarks, Master McClolud went further than simply concluding that disallowing the extra 10% was the just decision in this case, but set out a more general principle, that:

“..where one is considering the 10% ‘bonus’ under sub-rule (4)(d) it is appropriate to disallow that sum if in all the circumstances the level of bonus is clearly disproportionate relative to the margin by which the offer was beaten”.