The latest Costs Law Reports newsletter reports:
“Moreover, alert practitioners are already seeking to punish paying parties who fail to provide with their points of dispute an open letter setting out the sum they are willing to offer in settlement (see Practice Direction para 8.3 to CPR 47.9). Applications to strike out points of dispute are now being issued. They are likely to result in unless orders, but whether non-compliance with such orders will result in bills being assessed as drawn is an interesting point. That used to be the practice on defaults, but Days Healthcare UK Ltd v Pihsiang Machinery Manufacturing Ltd [2006] 5 Costs LR 788 held that where points of dispute had been served, the court could not simply tick through the bill, but, on the contrary, was obliged to assess the bill by reference to the points, even if the paying party was not permitted to attend the hearing. A first satellite point to interest the designated LJs in the Court of Appeal perhaps?”
It is difficult to see that such applications have realistic prospects of success or what is to be gained by them.
Contrary to the implication of the above quote, there is no duty to make any open offer. The relevant Practice Direction section reads:
“The paying party must state in an open letter accompanying the points of dispute what sum, if any [emphasis added], that party offers to pay in settlement of the total costs claimed. The paying party may also make an offer under Part 36.”
The paying party is therefore free to state in their open letter that they have no offer to make or that they offer £0. How does an unless order requiring a party to do no more than produce such a letter take the matter any further? The fact that the open letter states that no offer is being made (or the offer is £0) does not preclude the paying party making proper Part 36 or Calderbank offers separately. If no open letter has been sent, is it not implicit that there is no open offer? Does this require an unless order to spell this out? If the failure to provide the open letter was intended to have sanctions under normal circumstances, then why do neither the rules nor the Practice Directions impose any such sanction (such as giving the receiving party the right to apply for a default costs certificate)?
19 thoughts on “Sanction for failing to make open offer in assessment proceedings”
PD 8.3 just gives the receiving party another excuse to cause the paying party grief. Certain people in the market are being entirely sensible and not insisting on service of a PD 8.3 letter whereas others (and it appear to be mostly in-house teams) are insisting on a letter (even when pre-bill Calderbank offers have been made). Also, no one appears to want to grant extensions for points of dispute any more. I waited six months for a £500K bill recently and when I asked for a two week extension to prepare points of dispute, the other side refused. Just when the costs draftsman / lawyer market is at risk, the fools in our profession make it worse.
I think the intention is to avoid situations where paying parties just sit behind no proposals, i.e. the Court want that position to have been confirmed openly in correspondence at the relatively early stage of PODs. This clearly does take things forward, as it forces the paying party to confirm their position openly, which wasn’t previously required.
In terms of any sanctions to be applied, is this not something that will come out in case law? A DCC doesn’t seem correct, given that PODs will have been served.
On a case where the paying party literally has nothing to offer, why is there a problem in confirming that openly?
Look at it the other way – the best thing a paying party can now do is make a reasonable and realistic offer at the PODs stage, and stick to it. This places all the risk on the receiving party, and if the offer is good enough then surely the PP would win at the DAH anyway, thus receiving some DA costs as well.
I am advised the intention behind PD 8.3 is for the court to consider the amount of “undisputed costs” should the court wish to consider issuing an interim costs certificate once a hearing is requested.
What an absolute nonsense!
@ Anon o mous – more fool you waiting 6 months without making a compel application; your clients must have been so pleased about the interest
@ Simon you are right, the letter may be £0, but it MUST be served. As this is mandatory, it effects the service requirements of Pods, and consequent they are not deemed served = DCC. Just because some people disagree with the rule, doesnt mean you can ignore it – I can hear the CPR 3.9 application now ” well Sir we just ignored that rule, so let our objections stand please”!
@ A Non – you are quite correct, however, why is it nonsense, when a PP failing to make or making Nil offer, is essentially misleading the Court, whom is otherwise trying to manage its valuable time and resources by only dealing with what is actually disputed, rather than having to trawl through the whole thing??
the simple answer is a letter with an open offer of £nil and confirmation that the only reason is to comply with 8.3, and not to take the michael, and that as soon as have instructions will make a formal offer.
Why is that so hard?
Its a rule at the end of day so comply. There are lots of new rules that dont agree with but we cannot cherry pick can we.
The rules don’t make it mandatory to make an offer with service of the points. Paragraph 48 of KU anyone?
it is a must provision and so arguably is elavated to rule status, see CPR 1 and 3.9 – the court must ensure compliance with PD’s
I agree with Anonymous (9:47 am)on the point of nil offers.
I have seen several offers of nil in cases where there hasn’t even been a retainer issue raised. Surely the offer should be the reduction that the PODs bring the Bill down to?
Is it so hard to put that figure as an offer in the open letter rather than nil? It is not particularly conduct that reflects the intention of the rule.
Anonymous – I act mainly for receiving parties and dont see how the Court was being “mislead” under the old rules. If anything, the Court is now being mislead when a PP makes a nil open offer despite making an offer WP and/or pursuant to Part 36 in the background.
The following example is why the new provisions are a nonsense and do nothing else other than waste time for all concerned:
Bill of costs = £78,000.
Part 36 offer served before pods = £50,000
Open offer = £25,000 accompanied by the following statement from a costs lawyer working for a national firm, ‘I am obligated to make an offer with service of PODS – so rather than me offer “nil” and open up my client to criticism for being “daft”, I have offered £25,000’
I agree with him and make no critiscism of the the stance he takes but if this is not a waste of time, then I dont know what is!
I gather that even the judiciary cannot make sense of why PD8.3 has appeared but if the parties consent to waiving the need for an open letter, the court will not interfere.
And I agree with Truly Elephant. A PD is not a rule.
I suspect that as time moves on, Costs Draftsman will find something else to make a fuss about. This is just the current vogue.
@ Anon 05.07 8:06pm
so if we follow what you say that PD’s aren’t “rules”,please, invite us all to the 1st CMC you attend on budgeting where you ignored the PD element as its not a “rule”.and of course, you wont be getting paid for that, given the PD contains the section about cost of preparing the budget
oh, and PS, have you read CPR 1.1(f)??
The point of the new CPR, is to cost manage cases, for the very reason for too long people ignored the rules and PD’s, and subjected them to exactly the sort of “interpretation” and elitism demonstrated here. ignore the rules and PD’s at your peril
Of course you have to make an offer, even if it is £0. The “if any” part of the PD only relates to if you were confident that you could get the costs struck out.
If it is obvious that you are simply reducing the Bill within your PODs, and not trying to get the costs struck out, then you really should make an offer even if £0 to satisfy the PD.
If the “if any” part of PD8.3 of CPR47.9 meant that you did not even have to make an offer, then what is the point of the PD8.3? They would not have bothered, or simply wrote “make an offer with your PODs, if you want to”. 🙂
The sanction should be that you have incorrectly served the PODs and that DCC should be requested. The request for DCC form should be slightly amended, and paying parties should pull their heads from their bottoms.
Either that or, if you have not made an offer before or at service of PODs, that any offers by PP after this time will not be viewed or considered at da/provisional assessment. RP get costs of da/provisional assessment. Indemnity basis???
I am struggling to find the bit in the rules where it says that an open offer is an integral part of PODs or that PODs are invalid if not accompanied by an open offer.
SW states,
“The sanction should be that you have incorrectly served the PODs and that DCC should be requested….”
He SHOULD have added to that ” ….in my opinion. However, I am of course extremely partisan and that is not unfortunately not the actual sanction under PD 47″
Why won’t defendants make PD 8.3 offers??
Because there’s no cost consequences they can impose on acceptance
And we all know our helpful defendant friends in this new world of co-operation and looking to resolve matters, are mad keen on ensuring any offer they make has clauses to kill discussion dead for fear of costs penalties they self-impose
Odd that this blog seems to champion ignorance of this PD…..
I am struggling to see why paying parties would not make their offer after the pods, when the pertinent issues of the case are fresh in your mind?
hi
when making such an open offer is there any reason why the Defendant should not set a deadline to accept the offer (eg 14 days) setting out that after that deadline passes it is no longer available for acceptance unless parties agree costs etc. many thanks
I’ve just done a hearing where C applied to strike out our PODs and have their costs as drawn because we failed to serve an open offer with our PODs.
We did in fact make an offer 15 minutes after service of the PODs by email which did not state on it that it was open. C made their application in ignorance of that offer but then claimed the offer was not open once we sent them a copy. It had nothing on it to make it not open. C argued in court that as it repeated the same figure as an earlier w/p offer, that made this one w/p. The judge did not agree.
Interestingly there appears to be no case law saying what is open and what is not, the judge held that unless it said the offer was ‘without prejudice’ then it was open.
The judge also commented (obiter) that making a Part 36 offer could be compliance with 8.3 as that is contemplated too in the same para. I was very surprised about that.
The judge held that the receiving party should not – in these days of proportionate costs – make an application without any warning or correspondence first trying to sort it out. This effectively rules out an ‘ambush’ application, but then I’m left wondering what is the point of para 8.3?
Thanks Sarah. Interesting.
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