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Howard Dean

Howard Dean


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The high threshold of showing injustice when Part 36 penalties bite

Costs Aware Autumn 2019

In JLE v Warrington & Halton Hospitals NHS Trust Foundation Trust, a dispute arose where the claimant was allowed costs of just under £432,000 and beating the claimant’s Part 36 offer to accept £425,000.

The claimant successfully appealed the decision disallowing a10% uplift despite making a successful Part 36 offer.

Mr Justice Stewart overturned the decision of a costs master who had disallowed the 10% uplift, concluding that it should be awarded in full unless it was unjust to do so.

The consequences of failing to beat the claimant’s Part 36 offer are that the Court must, unless it considers it unjust to do so, order that the claimant is entitled to— interest on the whole or part of any sum of money (excluding interest) awarded, at a rate not exceeding 10% above base rate;

  •  costs on the indemnity basis from the date on which the relevant period expired;
  • interest on those costs at a rate not exceeding 10% above base rate and an additional amount of 10% of the amount awarded up to a maximum of £75,000.

In the assessment, Master McCloud, stated that in the circumstances of the case it would be clearly disproportionate to award the 10% uplift and it would be unjust to award it. The Master relied upon the following factors:

The margin by which the offer was beaten was a small margin relative to the size of the bill.

The significant reduction from the amount claimed in the bill

The large size of the 10% “bonus” relative to the margin by which the offer was beaten.

On appeal, the claimant argued that a single test of whether it was unjust applied to all of the penalties and that it was wrong to apply a separate test to the uplift.

Further that the Master had erred in concluding that it was unjust for the “additional amount” to be awarded to the claimant.

Upon appeal, Stewart J found that there was nothing in the wording of the rules that prevented the Court from having jurisdiction to consider to award some, but not all of the penalties. However, it would be an unusual case where the circumstances yield a different result for each of the intended penalties.

The Court found that all three reasons given by the Master were inadmissible reasons for finding it to be unjust to make the additional award.

There was nothing unjust about the circumstances of this case. Indeed there was nothing unusual about the circumstances so that the high threshold of proving injustice could be properly regarded as met.

This is important because if this case qualified for withholding an additional award, then it would be a green light to similar arguments in many, many other detailed assessments.