The purpose of the 'open offer' is a mystery

The new costs rules introduced in April 2013 continue to cause difficulties for practitioners at the most basic level. The new PD 8.3 to CPR 47.9 states: "The paying party must state ?in an open letter accompanying the points of dispute what sum, if any, that party ?offers to pay in settlement of the total ?costs claimed. The paying party may also make an offer under Part 36". It remains ?a mystery as to what purpose the open ?offer is meant to serve.

Firstly, it does not create an absolute obligation to make an offer at the outset. A paying party is free to state in the open letter that no offer is being made. The rule also expressly allows for Part 36 offers to be made, which may be made at any stage.

Because the provisions of Part 36 apply to the costs of detailed assessment proceedings, CPR 36.1(2) also applies which allows a party to make an offer in whatever way he chooses, although an offer not made in compliance with Part 36 will not have Part 36 consequences. Calderbank offers are therefore permitted. A paying party could, therefore, state in their open letter that they had no offer to make while simultaneously making a Calderbank offer of £50,000 followed up a week later by a Part 36 offer of £60,000. All permitted under the rules.

If the purpose of the 'open offer' is to force paying parties to make realistic offers at an early stage, it has failed.

There is no corresponding requirement for an open offer from the receiving party. It was no doubt thought that the rewards available to the receiving party upon making a successful Part 36 offer would be incentive enough.

Pointless

Some commentators have suggested that the open offer should be no more than the net product of the paying party's points of dispute (i.e. assuming each point were to be upheld). This would be the equivalent of the paying party's 'pleaded' case. Although there is some logic to this, it would generally be a rather pointless, and in some cases time consuming, exercise. Firstly, this is not what the wording of the practice direction requires. Secondly, points of dispute may be made up of a large number of individual disputes each pleaded on a best case scenario. It will often be the case that there is no realistic prospect of being 100 per cent successful on every dispute, and any offer a paying party would actually wish to make would be based on a more realistic figure allowing for the inevitable unpredictability and litigation risks of assessment proceedings. Thirdly, there is no suggestion the judge on assessment can simply take one look at the open offer, conclude it is reasonable without further ado and then dispense with the rest of the assessment by assessing the bill in the same amount as the open offer.

Surprising sanctions

The rules impose no sanctions for failure to serve the open letter with the points of dispute. Some quarters have suggested that in this situation an application could be made to strike out the points of dispute or to have the bill assessed as drawn. These would be surprising sanctions to impose in their own right when the rules impose no sanction of any kind. This is to be contrasted with the situation where a paying party fails to serve points of dispute at all, enabling the receiving party to apply for a default costs certificate. Secondly, given there does not even exist a requirement to make an actual offer (the letter can state no offer is being made) these would be bizarrely draconian sanctions to impose for the failure to spell out that no offer was being made, particularly if a Part 36 or other admissible offer had actually been made at the same time. In any event, if no open offer is made it is surely obvious that no open offer is being made. Does it need spelling out?

Normally, liability for the costs of the detailed assessment proceedings will be dependant on whether a successful Part 36 offer or Calderbank offer has been made. It is not obvious what role the open offer, if any, would have on that issue. So, what then is the purpose of the open offer? Answers on a postcard please.