The Ministry of Justice made an error in its announcement on the link between part 36 and qualified one-way costs-shifting (QOCS), it has admitted.
The written statement released by justice minister Jonathan Djanogly last week said that there was to be an additional 10% sanction paid where judgment for the claimant was more advantageous than a defendant’s part 36 offer.
However, an amended statement put before Parliament this week said that this was a “factual error”.
The statement now says: “There is to be an additional amount to be paid by a defendant who does not accept a claimant’s offer to settle where the court gives judgment for the claimant that is at least as advantageous as an offer the claimant made to settle the claim.”
This resolves the confusion of observers who had expressed surprise at the original statement on the ground that there is no need to give a claimant an extra uplift for beating a defendant’s offer.
Meanwhile, confirmation last week that part 36 will trump QOCS has led defendant insurance firm Kennedys to advise defendants to make “good fighting offers” under part 36 “at the earliest possible opportunity” so as to gain costs protection and avoid sanctions.
In a briefing issued this week, partners Richard West and Jennifer Harris said: “This is particularly relevant to MoJ portal cases for stage 3 hearings. Properly valuing a claim at an early stage should either bring the claim to a conclusion quickly or provide costs protection if the case progresses.”
They pointed out that even as now drafted, the rules will not always allow a defendant to recover all costs as they will be limited to the level of damages awarded.
“For example, if a defendant makes a part 36 offer of £5,000 (including an enhancement to encourage early settlement) which is rejected, and at trial a year later the claimant recovers £4,000, all that the defendant can recover in costs will be £4,000. If the defendant’s costs of taking the matter on to trial are £7,000, the defendant is still worse off. It is true to say, however, that things could have been much worse as was originally proposed to the MoJ.
“Therefore, an appropriate additional calculation will need to be factored into early offers, and at each stage the case is reviewed as it heads towards trial so that defendants balance the costs being incurred with any offers made.”