Kerry Underwood

PART 36: THE DRY SALVAGES : UNIFIED

with 6 comments


Updated to July 2016

 

Time present and time past

Are both perhaps present in time future

And time future contained in the past.

If all time is eternally present

All time is unredeemable

 

T.S. Eliot: The Four Quartets

 

Fail to beat a Part 36 offer and all time is indeed unredeemable.

 

Record every offer and keep that record on a separate sheet of paper; better still have it stuck to the inside of the file.

 

Review it each month.  Should it be withdrawn?  Should the other side’s offer now be accepted?  There is no time limit on accepting an unwithdrawn Part 36 offer.

 

More than one offer can be outstanding.  Thus a claimant may make an offer and then make a much higher offer.  The defendant is free to accept the original offer until and unless it is withdrawn.  A fresh higher offer makes no difference to the original offer.  A claimant who does not wish an old offer to be accepted should withdraw it unequivocally and in writing.  New offers do not supersede old offers.

 

Even express written rejection of an offer leaves it as open to acceptance as if there had been no communication of any kind – Gibbon v Manchester City Council (2010) 1 WLR 2081.

 

Defendants are in the same position.  An old offer might still be left on the table when the defendant discloses, for example, surveillance evidence which lessens, or totally undermines the claimant’s case.  Unless the original offer has been withdrawn the claimant can accept it.

 

CLAIMANTS’ PART 36 OFFERS: SIX NEW KEY DECISIONS

 

There have been six very recent decisions, five supportive of claimants and one not, and dealing with matters of great importance to civil litigators.

 

The first decision confirms the law as set out in my blog – Part 36: Does a Claimant get Indemnity Costs on Late Acceptance?, that is that the claimant does indeed get indemnity costs in those circumstances. This is a very important decision.

 

That decision follows on from Broadhurst v Tan as does the second decision, concerning provisional assessment, where the court held that the cap of £1,500.00 plus VAT and court fees on provisional assessment is overridden by Part 36.

 

That decision also follows my view in the same blog post.

 

The third and fourth decisions deal with the situation where there is an appeal and the fifth decision deals with the 10% Part 36 uplift on the interest element of any award.

 

Overall these decisions are correct, helpful and give expression to the will of Parliament in relation to Part 36 offers, especially those made by claimants.

 

These decisions, along with Broadhurst v Tan and other recent decisions – dealt with in my blog post – Part 36 – Important Recent Cases – have gone a very long way to resolve the problems caused by earlier courts failing to realize that indemnity costs for successful Part 36 claimants are the mirror image of defendants getting costs when a claimant wins a claim but fails to beat a defendant’s Part 36 offer.

 

  1. INDEMNITY COSTS PAYABLE BY LATE ACCEPTING DEFENDANT

 

In Sutherland v Khan, Kingston-Upon-Hull County Court, Case number A81YM424

 

District Judge Besford, Regional Costs Judge, held that a late accepting defendant of a claimant’s Part 36 offer was liable to pay indemnity costs from the date of expiry of the time for accepting the offer.

 

This was a fixed costs case. Broadhurst v Tan and Taylor v Smith [2016] EWCA Civ 94 (23 February 2016) establishes that a successful Part 36 claimant, that is one who matches or beats her or his own offer, is entitled to indemnity costs on an open basis, that is that those indemnity costs are not limited to a sum equal to fixed costs.

 

I deal with the Broadhurst case in my blog post – Claimant’s Part 36 Offer Overrides Fixed Costs.

 

The issue remained, and as this is a first instance decision, albeit by a highly respected Regional Costs Judge, remains, whether in the absence of judgment being entered a late accepting defendant is liable to pay indemnity costs in the way that a late accepting claimant has to pay costs from the date of expiry of time for acceptance.

 

I deal with this whole subject in detail in my post – Part 36: Does a Claimant get Indemnity Costs on Late Acceptance?  where I expressed the view that a claimant is indeed entitled to indemnity costs on late acceptance by a defendant.

 

Here the judge said, correctly:-

 

“Unfortunately, part 36, whilst dealing with situations where the claimant accepts out of time a defendant’s offer, would appear to be silent as to a defendant accepting a claimant’s offers out of time or prior to trial. The nearest analogy is part 36.17, but it is accepted that part 36.17 can only apply where a judgment has been entered. That situation is not applicable here.”

 

The judge declined to follow the High Court decision in Fitzpatrick Contractors Ltd v Tyco

Fire v Integrated Solutions (UK) Ltd [2010] 2 Costs LR 115 on the ground that it is “perhaps a statement of the law as it was in 2009, but not necessarily the way the law in respect of Part 36 is being interpreted in 2016.”

 

In Fitzpatrick the court was referred to Petrotrade Inc v Texaco Ltd [2000] All ER (D) 724.

 

In the key section of the judgment DJ Besford said:-

 

“18. In addition, in the course of submissions I was referred to Petrotrade Inc v Texaco Ltd [2000] All ER (D) 724, which is mentioned by Coulson J in Fitzpatrick. Coulson J dealt with these cases at paragraph 22: “I accept Mr Thomas’s submissions that the other cases relied upon by Fitzpatrick, namely Petrotrade, Hook and Read, do not offer very much assistance to the central question here, which is whether a rebuttable presumption in favour of the indemnity costs, taken from a rule dealing with a situation following a trial, where the offer has not been accepted, should be inferred into a rule dealing with the position prior to trial, where the offer has been accepted. I do not accept that the present situation is analogous to those cases. In all three of them, the courts were endeavouring to apply the words of the old CPR 36.21, in a commonsense way, to achieve a just and sensible result and to prevent injustice; they all arose after a trial on the merits, (either on a summary or a full basis). In contrast, I conclude that the replacement of old CPR 36.21 – the new CPR 36.14 – does not apply to the present case, because there has been a settlement, and it has occurred before the trial. The claimant has therefore been spared the cost, disruption and stress of the trial.”

 

“19. The interpretation of these cases put forward by Coulson J is not, with respect how I read the more recent cases coming forth from higher courts. My understanding is, as I have alluded to, that there has been a tightening up as to the ‘carrot and stick effect’ of part 36 offers. To my mind, notwithstanding the comments of Coulson J, if there was no incentive or penalty there would be little point in a defendant accepting offers early doors, as opposed to waiting immediately prior to trial. It also seems to me unsatisfactory that there should be penalties flowing if you do not beat an offer at trial, whereas if you settle before trial there are none. This position does not sit comfortably with the overriding objective of saving expense. In my view, I think that Fitzpatrick is perhaps a statement of the law as it was in 2009, but not necessarily the way the law in respect of part 36 is being interpreted in 2016.”

 

“20. In conclusion, I do not find that the court has to find that the defendant has, in some way been guilty of inappropriate behaviour or conduct capable of censor before I can consider making an order for costs on an indemnity basis.”

 

The judge then set out the relevant provisions of Part 36 and said:-

 

“27. It follows that for the court to deny the consequences that flow from accepting a part 36 out of time the court has to make pretty exceptional findings and there has to be some very good reason as to why it is unjust not to make the usual order. The very fact that the claimant obtains a ‘windfall’, most certainly does not constitute unjustness, under part 36.17.”

 

Comment

 

Unsurprisingly I always agree with decisions that follow my blog posts. Having said that this is a sensible, pragmatic and bold decision giving effect to the will of Parliament.

 

It is a shame that the Rules Committee cannot rise above nursery class English.

 

I am very grateful to John McQuater for his help in relation to this piece and for bringing it to my attention and, most of all, for being the solicitor who pushed this issue and won.

 

  1. PROVISIONAL ASSESSMENT

 

In Lowin v W Portsmouth and Co Ltd, 20 June 2016

 

the Queen’s Bench Division of the High Court held that where a receiving party matched or beat its own Part 36 offer in provisional assessment proceedings it was entitled to costs on the indemnity basis under CPR 36.17(4) which overrode the cap of £1,500.00 plus VAT and court fees contained in CPR 47.15(5).

 

The decision thus followed the Court of Appeal’s reasoning in Broadhurst v Tan and Taylor v Smith [2016] EWCA Civ 94 (23 February 2016) where it ruled that a claimant matching or beating its own Part 36 offer received indemnity costs, and not fixed costs and that those indemnity costs were to be assessed on the open basis and not by reference to fixed costs.

 

The argument here, successful in front of the original master but not on appeal, was apparently the same – namely that even an order that costs should be assessed on the indemnity basis would be subject to the £1,500.00 cap.

 

The paying party here had submitted that there is a difference in principle between fixed costs as dealt with in Broadhurst v Tan and capped costs.

 

The logic of this argument is that in fixed costs, costs are just that: fixed and therefore unless costs on the indemnity basis could exceed fixed costs an order for indemnity costs would be meaningless, and indeed arguably as far as costs are concerned, a claimant’s Part 36 offer would be meaningless.

 

However with capped costs it would be possible for costs on the standard basis to be say, £750.00 but, say £1,250.00 on the indemnity basis and therefore an indemnity costs order would still mean something in practice and would still incentivize a receiving party to make a Part 36 offer.

 

Whatever the original status of the parties, that is claimant or defendant, in provisional assessment proceedings for all intents and purposes the receiving party is the claimant.

 

Thus the argument was that where the costs cap applied, indemnity costs could be assessed and awarded but would be subject to the cap – see Nizami v Butt [2006] EWHC 159 (QB).

 

Here the High Court rejected that approach.

 

CPR 47.20(4) considered how Part 36 should apply to Part 47 and it applies to the costs of a detailed assessment, with modifications.
There was a conflict between CPR 47.15(5) and Part 36 because CPR 47.15(5) potentially derogated from the entitlement to costs on an indemnity basis under Part 36.

 

Here the court said that the correct view was that taken by the Court of Appeal in Broadhurst, namely that CPR 36.14 continued to have “full force and effect”.

 

Had the Draftsman of the Rules Committee wished Part 36 to be modified so that the cap would remain then that would have been stated.

 

The High Court further stated that the dislodging of the cap would incentivize parties to accept reasonable costs offers because if they did not do so they would be at risk of substantial costs under Part 36.

 

I deal with this whole area in detail in my post – Claimant’s Part 36 Offer Overrides Fixed Costs.

 

In that post I said of the Broadhurst v Tan decision:-

 

“The same principle appears to apply to provisional assessment and thus a receiving party who matches or beats its own offer will get indemnity costs.”

 

Comment

 

Unsurprisingly I always agree with decisions that follow my blog posts. Having said that this is a sensible, pragmatic decision giving effect to the will of Parliament.

 

It is a shame that the Rules Committee cannot rise above nursery class English.

 

  1. APPEAL

 

In Pawar v JSD Haulage Ltd [2016] EWCA Civ 551

 

the Court of Appeal considered the effect of two Part 36 offers made by the defendant in the original proceedings where the amount of damages was increased on appeal to a figure above the first offer but below the second offer.

 

On 5 February 2014 the defendant made a Part 36 offer of £80,000.00. It was refused. On 1 May 2014 a further offer in the sum of £129,332.00 was made and that too was refused and neither offer was beaten at trial.

 

Consequently the trial court made the usual order that the defendant pay the costs to the date of expiry of the first unbeaten offer and the claimant pay the costs thereafter. The Court of Appeal allowed the substantive appeal in part and increased the damages to a figure above the first offer, but below the second offer.

 

It was common ground that that costs order had to be amended as the claimant had now beaten the first offer.

 

The Court of Appeal allowed the claimant its costs up to expiry of the period of acceptance of the second offer and ordered the claimant to pay the defendant’s first instance costs thereafter.

 

So far, so clear.

 

The issue then arose as to the costs of the appeal. It was common ground that an unsuccessful party will generally be ordered to pay the successful party’s costs – see CPR 44.2(2)(a).

 

The claimant said that his damages had been increased by the Court of Appeal and so he should get the costs of that appeal.

 

The defendant conceded that rules governing Part 36 offers apply to the proceedings in which they are made, not the costs of any appeal, but said that pursuant to CPR 44.2(4)(c) the Court of Appeal should consider the second offer when assessing who is the real winner on appeal.

 

If the claimant had accepted the sum in the second Part 36 offer he would have been better off by some margin than he was following the Court of Appeal’s ruling as the increased sum awarded by that court still fell well short of the amount in the second Part 36 offer.

 

The defendant had made no offer once appeal proceedings had been launched, even though the trial court had awarded a sum significantly below the sum that the defendant had previously considered reasonable.

 

Although the amount recovered on appeal fell short of the second offer by some margin that offer was not open to the claimant once the first instance proceedings had concluded.

 

In order to improve his position the claimant had to pursue the appeal, for which he had permission on all grounds, to its conclusion.

 

Consequently the claimant was entitled to the costs of the appeal.

 

Comment

 

A correct and sensible decision.

 

Lawyers should always review Part 36 offers if a matter is appealed as any Part 36 offer made in the previous proceedings falls away at the end of those proceedings.

 

  1. CLAIMANT’S PART 36 OFFER DURING APPEAL

 

In Summers v Bundy [2016] EWCA Civ 126

 

the Court of Appeal held that the claimant was entitled to a 10% uplift on general damages under the principles set out in

 

Simmons v Castle [2012] EWCA Civ 1039 and [2012] EWCA Civ 1288

 

There the court held that this uplift is compulsory and not a matter for judicial discretion – see my post 10% Uplift in all Cases Except where there is a Recoverable Success Fee.

 

This is of course a different 10% uplift from the one that is payable on all damages where a claimant matches or beats its own Part 36 offer.

 

This case involved the interplay between the two and also what happens when a claimant makes a Part 36 offer during appeal proceedings and matches or beats it.

 

Here, in relation to the appeal proceedings, the claimant made a Part 36 offer to accept an additional 9% Simmons v Castle general damages uplift.

 

As stated above the Court of Appeal held that there was a mandatory 10% uplift on general damages and ordered accordingly.

 

Thus the claimant had beaten at the appeal its own Part 36 offer made in the course of those appeal proceedings.

 

Consequently the court ordered the defendant to pay the claimant’s costs on an indemnity basis from the end of the relevant period, that is expiry of the time for accepting the Part 36 offer.

 

In relation to enhanced interest and a further 10% Part 36 uplift on the Simmons v Castle 10% uplift the Court of Appeal accepted that it had the power to make that order but exercised its discretion not to on the basis, contained within Part 36 itself, that it would be unjust to do so.

 

Comment

 

This reinforces the point made in Pawar v JSD Haulage Ltd [2016] EWCA Civ 551see above.

 

Lawyers should always review a Part 36 offer if a matter is appealed. This is for two reasons. Any Part 36 offer made in the previous proceedings falls away at the end of those proceedings. Secondly, as here, a party should look carefully at what it seeks to achieve on appeal and make a well-pitched Part 36 offer accordingly.

 

My only slight criticism of the court here is that in my view it should have awarded the 10% Part 36 uplift on the 10% Simmons v Castle uplift.

 

In reality the Simmons v Castle 10% is not an uplift at all but rather an uprating of general damages in the same way as the Judicial College uprates general damages and it is incorporated into the full general damages figure and should not be regarded as a bonus itself. Thus in my view the Court of Appeal should have awarded the 10% Part 36 uplift on the additional sum achieved by the claimant on appeal.

 

  1. 10% UPLIFT ON INTEREST

 

In Bolt Burdon Solicitors v Tariq & Others [2016] EWHC 1507 (QB) (22 June 2016)

 

the Queen’s Bench Division of the High Court held that where a claimant matches or beats its own Part 36 offer it is entitled to the 10% damages uplift on contractual interest as well as on the principal sum.

 

The additional amount was calculated by applying the prescribed percentage “to an amount which is… the sum awarded to the claimant by the court.”

 

Whatever the position may be in respect of interest awarded by the court a as matter of discretion, for example under Section 35A of the Senior Courts Act 1981, the court here had awarded interest at 8% as part of the sum to which the claimant was contractually entitled.

 

That was to be regarded as part of the sum awarded “as a specific sum” and had it been the intention always to exclude interest from the provisions relating to the 10% uplift then it would have been simple for the rule to have said so.

 

The court held that it was not unjust to order the defendant to pay the uplift on the interest in this case as the claimant had not made a claim for enhanced interest on the damages under CPR 36.17(4) and the parties had agreed the interest rate in the contract.

 

The provision for an uplift when a claimant matches or beats its Part 36 offer was clearly designed as a penal sanction to mark a defendant’s failure to accept a Part 36 offer when he should have done and to award the claimant for a commendable attempt to settle the case.

 

As the court said here:-

 

“10. The “additional amount” is, in effect, a further head of damages, and is intended to provide a reward of real value to a claimant who makes a successful claimant’s Part 36 offer.”

 

The court also pointed out that in CPR 36.17(4)(a), which deals with enhanced interest of up to 10% above base rate on any award where a claimant matches or beats its own Part 36 offer, the rule specifically states that that enhanced interest shall not be payable on any interest element of the award.

 

There is no such exclusion in CPR 36.17(4)(d) in relation to the 10% uplift on the award.

 

As the court said:-

 

“As a matter of statutory construction, the inclusion of the words “excluding interest” in one part of the Rule but the omission of the same words in another part, is a strong indication that there was intended to be a difference.” (Paragraph 19).

 

The High Court left open the issue of whether the 10% uplift applies to interest awarded by the court, rather than contractual interest.

 

The court also left open the issue of whether the 10% uplift applies to enhanced interest on any award. The potential effect of this is that under CPR 36.17(4)(a) a successful Part 36 claimant can get enhanced interest of 10% above base rate on the principal sum, but not on interest, but could then get a further 10% uplift on that sum under CPR 36.17(4)(d), thus achieving an overall rate of 11%, an approach rejected in

 

Watchorn v Jupiter Industries Ltd [2014] EWHC 3003 (Ch)

 

Here there was no claim for enhanced interest under CPR 36.17(4)(a) and so the court did not have to consider that matter and no issue of it being unjust to award the 10% uplift on the maximum rate of enhanced interest arose.

 

The court here suggested, correctly in my view, that Watchorn was wrongly decided as the judge appeared not to have considered the significance of the specific mention “excluding interest in sub-paragraph (4)(a), in contrast of the absence of any such mention of those words in sub-paragraph (4)(d).”

 

Comment

 

Yet another sensible, pragmatic decision on claimants’ Part 36 offers.

 

6. CAN A DEFENDANT BE BETTER OFF PAYING MORE THAN THE CLAIMANT WANTS?

 

A case to do your head in

 

In Purrunsing v A’Court & Co (a firm) and another [2016] EWHC 1528 (Ch) (1 July 2016)

 

the High Court held that in considering whether a claimant had matched or beaten its own Part 36 offer the court should calculate interest to the expiry of the Relevant Period, generally 21 days after the Part 36 offer was made.

 

To do otherwise would mean that whether or not the claimant had matched or beaten its own offer would depend upon the length of time between the offer and trial.

 

Here the claimant had made a Part 36 offer to settle the claim for £516,000.00 inclusive of interest and that offer was made on 20 May 2015.

 

Following the trial the claimant recovered £470,000.00 together with interest at the rate of 2.5% above base rate, which down to the date of the order of 14 April 2016, was £48.983.01 giving a total of £518,983.01.
The claimant submitted that as he had recovered a sum in excess of his offer he was entitled to, among other things, indemnity costs for the period from the expiry of the relevant period, that is 21 days after the Part 36 offer was made on 20 May 2015, that is from 10 June 2015.

 

The paying party submitted that it was necessary to deduct the interest awarded in relation to the period after expiry of the relevant period, that is in this case after 20 May 2015.

 

If that was done then the total substantive damages and interest to 10 June 2015 resulted in a figure less than the claimant’s offer and thus he had failed to beat or match his Part 36 offer and should not get the various uplifts, including indemnity costs. The resultant figure became £507,046.30, which was clearly below the claimant’s Part 36 offer.

 

The judge, correctly in my view, relied on CPR 36.5(4) which reads:-

 

“(4)    A Part 36 offer which offers to pay or offers to accept a sum of money will be treated as inclusive of all interest until—

 

  • the date on which the period specified under rule 36.5(1)(c) expires; or

 

  • if rule 36.5(2) applies, a date 21 days after the date the offer was made.”

 

Comment

 

In my view this decision is correct but the rule itself, as with much of Part 36, throws up other problems.

 

Let us suppose that the claimant has called the matter exactly right and offers to accept £500,000.00 and that is precisely the sum that will be awarded for substantive damages and interest to the end of the relevant period and thus the claimant will have matched its own offer and is entitled to the extra.

 

Six months pass.

 

The claimant can either withdraw that first offer on the basis that the additional interest accrued in those six months means that it is now too low but if the claimant does that then the penalties only run from any later, higher, offer.

 

If the claimant does nothing and does not withdraw the offer then it is capable of acceptance at any time and the claimant stands to get the additional benefits, including additional interest, indemnity costs and a 10% uplift on damages.

 

However the defendant is then off the hook for that additional interest as they are free to accept the offer made with the calculation of interest up to the expiry of the relevant period six months earlier.

 

Thus the defendant avoids six months interest. That can be a significant sum even now during a period of very low interest rates. As and when interest rates rise it can become a very significant sum indeed.
Furthermore it is not yet settled law that a late accepting defendant, as compared with a defendant who has had judgment entered against it, is liable for indemnity costs for the period after expiry of the relevant period.

 

No superior court has ruled on that point.

 

In Sutherland v Khan, Kingston-Upon-Hull County Court, Case number A81YM424

 

District Judge Besford, Regional Costs Judge, held that a late accepting defendant of a claimant’s Part 36 offer was liable to pay indemnity costs from the date of expiry of the time for accepting the offer.

 

In my view that decision is correct but it is still only a first instance decision, albeit by a highly respected Regional Costs Judge.

 

I deal with that case in my blog – Claimants’ Part 36 Offers: Five New Key Decisions and the whole issue of what happens when a defendant accepts late in my blog – Part 36: Does a Claimant get Indemnity Costs on Late Acceptance?

 

The decision here in the Purrunsing case should give strong support to the public policy argument that where a defendant accepts a Part 36 offer late, then the claimant should always get indemnity costs and the other uplifts.

 

The rule throws up further problems. Let us take the scenario above. Let us assume that the extra interest, that is from the end of the relevant period until today, totals £10,000.00.
Clearly a fresh offer could be made with the original offer being withdrawn which would mean that the defendant would have to pay an additional £10,000.00 in order to settle the matter by way of acceptance of that Part 36 offer. However if the defendant did that then clearly there would be no uplift on anything as the offer would have been accepted within time, that is within the relevant period.

 

However if Sutherland v Khan is right then if the defendant accepts the original offer it will be liable for indemnity costs from expiry of the relevant period as well as a 10% uplift on damages and interest on costs and damages etc.

 

Thus that will be a mathematical calculation as to which suits the claimant best. I refer to it as a mathematical calculation but of course the amount of costs that will be allowed by the court is speculation rather than calculation.

 

In fact a claimant may be best served by leaving the original lower offer unimproved as indemnity costs and a 10% uplift on damages will normally be a much higher figure than the further interest from the date of expiry of the relevant period.

 

Of course a claimant can make a fresh, higher, Part 36 offer and leave the original one on the table.

 

Bizarre as it may seem, for the same reasons set out in the last paragraph, a defendant will normally be better accepting that higher offer in time and thus avoiding the uplifts contained in CPR 36.17(4) including indemnity costs and 10% on damages etc.

 

I must confess to not understanding whether that succeeds in avoiding those consequences or not.

 

CPR 36.17(7) states:-

 

“(7)    Paragraphs (3) and (4) do not apply to a Part 36 offer—

 

  • which has been withdrawn;

 

  • which has been changed so that its terms are less advantageous to the offeree where the offeree has beaten the less advantageous offer;”

 

Clearly the offer would not have been withdrawn and therefore CPR 36.17(7) (a) does not apply.

 

However if a claimant offers to accept £500,000.00 and then says that it will take £510,000.00 clearly that offer has been changed so that its terms are less advantageous to the offeree – that is the paying party – as the offeree will now have to pay more.

 

However the offeree, in accepting that second less advantageous offer, has not “beaten the less advantageous offer” – how can an accepting party ever “beat” anything?

 

In other words if a defendant accepts a claimant’s Part 36 offer of £510,000.00, and the first offer of £500,000.00 is on the table, then as the amount paid is greater than that first offer presumably the defendant does have to pay the uplift on damages and indemnity costs and so on.

 

However that is all predicated on the basis that a late accepting defendant has to pay anything additional, as stated earlier we await a superior court decision on that point.

 

It probably never occurred to anyone that a defendant faced with different still extant claimants’ Part 36 offers who chose to accept the higher one.

 

What happens in the above scenario if the defendant, unsure of whether acceptance of £510,000.00 will trigger indemnity costs etc. from the first offer of £500,000.00, makes its own Part 36 offer in the sum of £515,000.00, which is then accepted by the claimant?

 

Thus the matter is resolved by a claimant accepting within time a defendant’s Part 36 offer.

 

Presumably then no additional interest, indemnity costs or uplift are payable even though the amount changing hands is higher than both of the claimant’s Part 36 offers still on the table.

 

Again presumably those wise J people sitting on our beloved Rules Committee did not envisage a defendant making a Part 36 offer higher than a claimant’s Part 36 offer which was still available for acceptance.

 

I have said before that Part 36 would challenge Einstein. It certainly challenges me.

 

Any thoughts from you genuinely wise people out there?

 

NEW PART 36: APRIL IS AGAIN THE CRUELEST MONTH

 

The new Part 36, effective 6 April 2015, increases the anti-claimant bias of the rule. It applies to all Part 36 offers made on or after 6 April 2015.

 

In Gulati and Others v MGN Ltd [2015] EWHC 1805 (Ch)

 

the Chancery Division of the High Court held that where a claimant’s Part 36 offer had been withdrawn and then beaten at trial it was not appropriate to award the claimant indemnity costs in the absence of otherwise unreasonable conduct which would attract an indemnity costs award in any event.

 

The court’s general costs discretion under CPR 44.3 did not justify an award of indemnity costs absent such unreasonable conduct.

 

The court distinguished the decision in The Trustees of Stokes Pension Fund v Western Power Distribution (South West) plc [2005] EWCA 854

 

where the Court of Appeal allowed an inoperative Part 36 offer – no money had been paid into court as then required – to have Part 36 effects.

 

It also refused to apply CPR 44.2(4)(c) which allows a court to take non Part 36 offers into account and give them the same effect as Part 36 offers.

 

Comment

 

This is another fundamentally flawed decision reflecting the courts’ anti-claimant bias when it comes to Part 36.

 

Here, as before, the court is equating indemnity costs orders with misconduct. That is not the case when a claimant matches or beats its own Part 36 offer; it is merely a device to give claimants an incentive to make such offers and defendants to accept such offers.

 

It is no more punitive and requiring of misconduct than the fact that a successful claimant has to pay the unsuccessful defendant’s costs if it fails to beat a defendant’s Part 36 offer.

 

By virtue of the transitional provisions set out in rule 18 of The Civil Procedure (Amendment No 8) Rules 2014, SI 2014 No 3299 (L.36) the following new provisions also apply to any Part 36 offer made before 6 April 2015, provided that a trial of any part of the claim or issue in it starts on or after that date:

 

  • CPR 36.3 – definitions;
  • CPR 36.11 – acceptance of a Part 36 offer;
  • CPR 36.12 – acceptance of a Part 36 offer in a split-trial case;
  • CPR 36.16 – restriction on disclosure of a Part 36 offer.

 

It has become more, not less, complicated and as one writer has put it “nothing fundamental has been done to blow away the fog of confusions that currently surrounds Part 36.” (Alex Sciannaca and Giles Hutt, Law Society Gazette.)

 

The whole of the rule as it has been from 6 April 2015 is set out at Schedule 1 of The Civil Procedure (Amendment No 8) Rules 2014, SI 2014 No 3299 (L.36). Thus Part 36 is now a Statutory Instrument. CPR 36.1 makes it clear that Part 36 is a self-contained code; this reflects case law.

 

“36.1.—(1) This Part contains a self-contained procedural code about offers to settle made pursuant to the procedure set out in this Part (“Part 36 offers”).”

 

This puts in to statutory form the decision in Gibbon v Manchester City Council [2010] EWCA Civ 726.

 

The rule is divided into two parts with Section I dealing with all matters except those covered by the two personal injury portals, and the subsequent Fixed Recoverable Costs Scheme.

 

Section II deals with all other matters, including personal injury claims not brought within either of the two portals/Fixed Recoverable Costs. (CPR 36.1(3)).

 

CPR 36.2 makes it clear that parties are free to make offers in any way they want, but unless those offers comply with Part 36 they will not have Part 36 consequences, but the court must consider such offers when deciding what order to make about costs (CPR 36.2(2)).

 

CPR 36.2(3) makes it clear that the Part 36 procedure extends to counterclaims, additional claims, appeals and cross-appeals, thus confirming in the rules the decision of the Court of Appeal in AF v BG [2009] EWCA Civ 757.

 

CPR 36.3 is the definition section and includes new definitions in relation to trial, trial judge, a trial in progress, when a case is decided and relevant period.

 

It reads

 

“36.3. In this Section—

  • the party who makes an offer is the “offeror”;

 

  • the party to whom an offer is made is the “offeree”;

 

  • a “trial” means any trial in a case whether it is a trial of all issues or a trial of liability, quantum or some other issue in the case;

 

  • a trial is “in progress” from the time when it starts until the time when judgment is given or handed down;

 

  • a case is “decided” when all issues in the case have been determined, whether at one or more trials;

 

  • “trial judge” includes the judge (if any) allocated in advance to conduct a trial; and

 

  • “the relevant period” means—

 

  • (i) in the case of an offer made not less than 21 days before a trial, the period specified under rule 36.5(1)(c) or such longer period as the parties agree;

 

  • (ii) otherwise, the period up to the end of such trial.””

 

CPR 36.4 confirms that Part 36 offers can be made on appeals.

 

However an offer made in the initial proceedings has costs consequences only in those proceedings and not in the appeal proceedings (CPR 36.4(1)).

 

Thus a new Part 36 offer must be made in relation to an appeal. This is in line with the decision in East West Corporation v P&O Nedlloyd BV and Utaniko Ltd [2003] EWCA Civ 174.

 

CPR 36.5 deals with the form and contents of the Part 36 offer and there is no substantive change, but a new provision makes it clear that an offer is deemed to include interest to the date of expiry of the offer (CPR 36.5(4)).

 

It is now sufficient to “make clear that [the offer] is made pursuant to Part 36” (CPR 36.5(1)(b)); it is no longer necessary to state in the body of an offer that it is “intended to have the consequences of Section I of Part 36” (old 36.2(2)(b)). Courts interpreted the old provision very strictly – see, for example, Shaw v Merthyr Tydfil County Borough Council [2014] EWCA Civ 1678.

 

However considerable formality remains, including that an offer has to spell out the costs consequences of acceptance, complete with cross references to the relevant provisions of new CPR 36.5(1)(c), 36.13 and 36.20.

 

CPR 36.7 confirms that an offer can be made at any time, including pre-issue, and that it is made when it is served on the offeree.

 

CPR 36.8 deals with clarification of a Part 36 offer and although there is a slight change in wording, there is no change in the law.

 

There are now separate rules dealing with the withdrawal of an offer or the changing of its terms.

 

The key point is that an improvement in the offer from the recipient’s point of view is neither a withdrawal, nor a variation, of the original offer but a new offer with time running from the date of service of the new offer (CPR 36.9(5)).

 

Thus Burrett v Mencap Ltd, 14 May 2014 is statutorily overturned.

 

Time-limited offers

 

An offer may now automatically be withdrawn in accordance with its own terms (36.9(4)(b)) provided the relevant period has passed. Thus it is now possible to make a Part 36 offer open for, say, 30 days and that offer is then deemed withdrawn at that point without further action or notice by the offeror.

 

An offer remains open for acceptance until withdrawn (C v D [2011] EWCA Civ 646) but that withdrawal can occur without further notice if the terms of the withdrawal are contained in the Part 36 offer itself.

 

CPR 36.10 deals with the withdrawal of an offer before the expiry of the relevant period. It also covers changing the terms to be less advantageous to the offeree.

 

Either of these actions requires the permission of the court, which must be satisfied that there is a change of circumstances and that it is in the interests of justice to grant permission.

 

The court remains able to give permission to withdraw, or vary, an offer after it has been accepted within the relevant period, so the scenario in Evans v Royal Wolverhampton Hospitals NHS Foundation Trust [2014] EWHC 3185 (QB) remains possible. The previous rule was silent on the criteria to be applied on such an application. The new rule does not allow a party to make a without notice application, nor to seek to withdraw the evidence from the other party as happened in Evans.

 

CPR 36.11 deals with acceptance of Part 36 offers and there is no substantive change in the law. The express provision in the old Part 36 that an offer could not be accepted between the end of a trial and judgment has been changed to allow such acceptance, but only with the court’s permission.

 

Split Trials

 

Where there has been a split trial, but judgment has not yet been given, a Part 36 offer cannot be accepted until seven days after judgment is handed down, unless the parties agree otherwise (36.12). Any Part 36 offer which relates only to parts of the claim or issues that have already been decided can no longer be accepted.

 

Costs Consequences of Acceptance of a Part 36 Offer

 

Important changes include:

 

  • an express reference to a party being entitled to “recoverable pre-action costs”.

 

  • an express provision that where a Part 36 offer is accepted late the court must, unless it is unjust so to do, give the claimant its costs up to the date of expiry of the relevant period and order the claimant to pay the defendant’s costs thereafter.

 

Thus the anti-claimant bias remains, a late accepting claimant is penalized twice in costs, once by being deprived of her or his own costs and secondly by having to pay the defendant’s costs from 21 days after the offer was made.

 

A late-accepting defendant suffers no penalty, either in costs or damages.

_______

____

 


 

Other effects of acceptance of a Part 36 offer

 

These are dealt with in CPR 36.14.

 

If a Part 36 offer is accepted, then the claim is stayed (36.14(1)).

 

In the case of acceptance of a Part 36 offer which relates to the whole claim, the stay is upon the terms of the offer (36.14(2)).

 

If the Part 36 offer relates to part only of the claim, acceptance results in a stay as to that part upon the terms of the offer (36.14(3)).

 

If court approval is required then the stay comes in to effect only when that approval is given (36.14(4)).

 

Any stay does not affect the power of the court to enforce the terms of the Part 36 offer (36.14(5)(a)), nor to deal with any question of costs, including interest on costs, in relation to any part of the proceedings (36.14(5)(b)).

 

The sum must be paid within 14 days unless the parties agree otherwise (36.14(6)(a)).

 

In provisional damages or periodical payment cases payment must be made within 14 days of the court order, but the court is free to vary that period (36.14(6)(b)).

 

If payment is not made on time then the claimant can enter judgment for the unpaid sum (36.14(7)).

 

Where a party alleges in a non-financial settlement that the other party has not honoured the terms of that offer, that party may apply to enforce the terms of the offer without the need for a new claim (36.14(8)).

 

Unaccepted offers

 

The provisions preventing disclosure of a Part 36 offer until after the case has been decided are contained in CPR 36.16, which contains new provisions dealing specifically with split trial, an cases where some, but not all, issues have been decided.

 

The trial judge may be told about any part of, or issue in the case that has been decided where the Part 36 offer relates only to those parts.

 

Where this situation occurs the trial judge may be told whether or not there are Part 36 offers other than those relating to decided issues, but must not be told the terms of any such other offers unless the defence is one of tender before claim, or proceedings have been stayed on acceptance of a Part 36 offer or the parties have agreed that the terms of such offer may be disclosed to the trial judge.

This overturns the definition in Beasley v Alexander [2012] EWCH 2715 (QB) where the court held that the judge could not be told of the existence of a Part 36 offer after a trial on liability until the case had been decided, that is the whole action concluded.

 

Where a party fails to file a costs budget in time the court may limit that party’s budget to court fees only. This is the notorious rule that achieved fame in the Mitchell case.

 

Apart from the obvious gross unfairness and disproportionality of the rule it neutered Part 36. A party faced with a Part 36 offer from a party where recoverable costs were limited to court fees could clearly ignore it.

 

CPR 36.23 introduces an entirely new provision whereby a court fees only offeror can recover 50% of its costs if the other party fails to beat a Part 36 offer.

 

It applies to claimants and defendants.

 

This means that even where a court imposes the no costs except court fees sanction it must now budget those costs.

 

New test of “Genuine Attempt”

 

There is a bizarre addition to the factors that a court must take in to account in considering whether it would be unjust for the usual Part 36 consequences to apply.

 

By virtue of new CPR 36.17(5)(e) the court must take in to account “whether the offer was a genuine attempt to settle the proceedings.”

 

Thus the certainty is totally removed and it becomes a lottery as to whether the court will in fact apply Part 36 in any given case. It is Carver v BAA [2008] EWCA Civ 412, repealed by Parliament, all over again.

 

Of all the stupid rules that the unelected, unaccountable Rules Committee has come up with this is one of the most stupid, albeit that technically it has been approved by Parliament. I wonder if a single Member of Parliament read the draft Statutory Instrument.

 

An offer is an offer is an offer. Parties make offers for a million and one reasons. Why on earth should the court need to look at the virtue behind the offer? How will it do this? Presumably by calling the party to give oral evidence and be cross-examined. Yet virtually all Part 36 offers are on the advice of the party’s lawyer. Whither solicitor-client privilege?

 

Is this an attempt to revive the Huck v Robson issue, which Parliament has put to bed by legislating that a party only has to match, not beat its own offer?

 

Parliament has consistently sought certainty in relation to Part 36. It statutorily repealed Carver v BAA, as well as overruling the suggestion in Huck v Robson that a 99.9% offer may not be valid for Part 36 purposes.

 

The whole Huck v Robson debate was misconcerned in any event. There is an incentive for a defendant to accept a 100%, let alone a 99.9% offer on liability. It means that that issue is concluded and therefore the claimant can get no costs for any further liability work.

 

The whole point of Part 36 is to resolve those aspects of the claim that can be resolved; liability is a rather important one.

 

Part 36 is not all or nothing. Discrete aspects can be settled, for example past specials, or loss of earnings or whatever.

 

All this will do is create further satellite litigation. A defendant who is on the wrong end of a Part 36 may as well argue that it was not a genuine attempt to settle proceedings. It has nothing to lose.

 

It is hard to see how this new rule can ever apply to defendants; by definition if a claimant has failed to beat a defendant’s offer, then that offer must have been a genuine attempt to settle the proceedings.

 

Thus this is yet another anti-claimant rule.

 

Everyone agrees that too few claimants’ Part 36 offers are being made. This rule will reduce even further the number made.

 

Personal Injury Cases

 

There is no substantive change in relation to personal injury claims alone, although the general changes dealt with above apply to all cases, including personal injury ones.

 

There are substantive changes in relation to Part 36 and the portals and Fixed Recoverable Costs, which I deal with elsewhere.

 

However the structure of Part 36 has changed with all of the personal injury material now in one section as follows:

 

  • CPR 36.18 deals with claims for future pecuniary loss and replicates existing CPR 36.5;

 

  • CPR 36.19 deals with offers to settle claims for provisional damages and repeats existing CPR 36.6;

 

  • CPR 36.20 covers costs consequences of acceptance of offers where Section IIIA of Part 45 applies, that is claims which no longer continue under the RTA Or EL/PL Pre-Action Protocols and fall into the Fixed Recoverable Costs scheme, and follows existing CPR 36.10A;

 

  • CPR 36.21 deals with costs consequences following judgment where Section IIIA of Part 45 applies, reflects current CPR 36.14A;

 

  • CPR 36.22 covers deductions of benefits, and lump sum payments and replicates current CPR36.14.

 

PORTAL AND FIXED RECOVERABLE COSTS CASES

 

These cases have their own discrete Section II and the rules considered so far in Section I do not apply to them. However most are replicated in Section II.

 

A protocol offer must be made and must be in the Court Proceedings Pack (Part B) form and contain the final total amount of each offer from both parties.

 

Protocol offers are treated as exclusive of interest, in contrast to non-protocol Part 36 offers which are deemed to include interest to the date of expiry of the offer (see above – CPR 36.5(4)).

 

As with non-portal offers the portal offer must not be commuted to the court until the claim is determined and any other offer must not be commuted at all.

 

If the claimant fails to beat the defendant’s portal offer then the court will order the claimant to pay fixed costs and interest on those costs.

 

If the claimant at least matches its own offer the defendant will pay an uplift on damages and additional interest on damages and costs.

 

In due course I will publish a detailed blog on how Part 36 works in practice in portal and Fixed Recoverable Costs Cases.

 

For the full new Part 36 see Schedule 1 of The Civil Procedure (Amendments No 8) Rules 2014, SI 2014 No 3299 (L.36).

 

PART 36 AND FIXED RECOVERABLE COSTS

 

The provisions are complicated but I set out various scenarios where claims have left the portal and fall to be dealt with under the Fixed Recoverable Costs Regime, whether or not the claim has been issued.

 

Claimant accepts defendant’s Part 36 offer within the relevant period

 

The claimant is entitled to Fixed Recoverable Costs according to the stage reached when the Notice of Acceptance was served. It follows from this that if a further stage is crossed during the 21 day period for accepting a Part 36 offer then it makes sense to wait until that stage has been crossed before serving Notice of Acceptance as the fee will then jump sharply.

 

Claimant accepts defendant’s Part 36 offer after expiry of the relevant time

 

The claimant is entitled to Fixed Recoverable Costs until the date of the expiry of the relevant period. The defendant is entitled to the difference, if any, between those Fixed Recoverable Costs payable to the claimant and what would be the Fixed Recoverable Costs as at the date of acceptance.

 

Thus if in fact no further stage has been passed between the expiry of the relevant period and acceptance there is no fee due to the defendant as there is no difference between the Fixed Recoverable Costs payable to the claimant and the Fixed Recoverable Costs to be received by the defendant.

 

Claimant fails to beat a defendant’s Part 36 offer at trial

 

The defendant is entitled to the difference between the Fixed Recoverable Costs payable to the claimant, that is up to the date of expiry of the relevant period, and the balance due to the defendant, including trial costs.

 

Claimant accepts defendant’s portal offer after the case leaves the portal, or the claimant fails to beat the defendant’s portal offer at trial

 

The claimant receives only stage 1 and stage 2 portal costs. The defendant is entitled to the difference between that sum and Fixed Recoverable Costs as at the date of the acceptance of the offer or trial.

 

Claimant obtains a Judgment at least as advantageous to the claimant as its Part 36 offer

 

The claimant gets a 10% increase in damages. Disbursements will be assessed on the indemnity basis. In relation to costs and disbursements and damages there is a potential for a higher rate of interest – up to 10% above base rate.

 

The unanswered question is whether the claimant simply gets Fixed Recoverable Costs, in which case there is little point in making a Part 36 offer, or whether the claimant will get indemnity costs, which will be based on the hourly rates in the claimant’s retainer, generally a Conditional Fee Agreement. The rules are contradictory and unclear.

 

Clearly if fixed costs continue to apply then a claimant’s Part 36 offer is more or less pointless. On the other hand if indemnity costs apply then arguably that undermines the whole concept of fixed costs.
Thus Part 36 risks undermining fixed costs just as it undermines Qualified One-Way Costs Shifting.

Part 36 in combination with anything other than open costs simply does not work and that is why it has never applied to the costs free regime of the small claims track and nor to tribunal proceedings and nor in family matters.

The whole issue will assume much greater importance if fixed costs are introduced in clinical negligence cases in October 2016 as now proposed and if they spread to other areas of work and with a higher damages maximum than £25,000.00. These horizontal and vertical extensions of fixed costs have broad support among politicians and the judiciary, confirmed recently by the Lord Chief Justice in his 2015 Annual Report to Parliament pursuant to Section 5(1) of the Constitutional Reform Act 2005;

“The judiciary has constantly pressed for the widespread adoption of fixed recoverable costs. This was one of the core recommendations in the Jackson review’s final report, but its application has thus far been restricted to a small number of areas of litigation (such as road traffic accidents). The judiciary strongly supports the application of fixed recoverable costs across the range of fast track cases, and in the lower reaches of the multi-track. This would help to ensure that litigation costs are reasonable, proportionate and that all parties can proceed with greater certainty. The judiciary hopes that the Government will give this proposal favourable consideration.”

Many would agree with that. The problem is that until we have a superior court decision on various aspects of Fixed Recoverable Costs parties are proceeding with greater uncertainty than ever, rather than with greater certainty.

I have pointed out in my courses that the law is clear, or rather the laws are clear but there is a complete conflict between two clear laws.

Part 36 states that the indemnity basis is the correct basis of assessment when a claimant matches or beats its own Part 36 offer. That is a key incentive to a claimant to make such an offer and a key penalty on a defendant for failing to accept it. It is the necessary counterpoint to the fact that a defendant whose Part 36 offer is not beaten gets costs from 21 days after its offer, even though it has lost the case overall.

However CPR 45 applies fixed costs to certain types of cases without reference to any exception being made due to Part 36.

Thrown into the mix is the fact that Part 36 specifically does not apply to small claims but there is no such specific exclusion in relation to fast track claims or fixed costs cases.

Unsurprisingly there have been two distinct lines of authority with one set of cases holding that indemnity costs apply and another set holding that fixed costs apply.

That difference of opinion has been confirmed at the first tier of appeal with Circuit Judges coming to two different conclusions.

The matter was to have been resolved by the Court of Appeal on 8 February 2016 in a case called Butler v Palmer but that case has now settled.

Examples of recent conflicting decisions at Circuit Judge level are to be found in

Smith v Taylor, HH Judge Freedman, Newcastle-upon-Tyne County Court, 9 November 2015

Dixon v Bennett, HH Judge McKenna, Birmingham County Court, 23 December 2015

In Smith v Taylor Judge Freedman held that fixed costs did not apply stating:-

“I ask rhetorically what is the point of preserving the Part 36 benefits of indemnity costs if, in reality, the claimant’s solicitor receives no more by way of cost?”

Here it was conceded that the claimant was entitled to costs on the indemnity basis from the date of expiry of the relevant period pursuant to CPR 36.17(4) (b) and the issue was what, in practical terms, costs on an indemnity basis meant in the context of case where ordinarily the fixed costs regime pursuant to CPR 45 applied.

The judge held that costs under the fixed costs regime and costs on the indemnity basis cannot and should not be construed as being one and the same and that they are separate and distinct and require “a completely different approach when costs are being assessed.”

The judge said that if the intention was that the claimant should only recover fixed costs from the defendant in the event of a successful Part 36 offer that would have been spelt out in the amendment to the rules made by CPR 36.21. The judge said:-

“It cannot merely have been oversight that 36.21(3) applies only to where a claimant fails to obtain a judgment more advantageous than the defendant’s Protocol offer.  If what was contemplated was that the claimant should be limited to fixed costs in the same way that a defendant is in circumstances where there has been a successful Part 36 offer, it would have been straightforward for the Rules Committee to add a subsection to CPR 36.21 to the effect that where the claimant obtains a judgment more advantageous than the defendant’s Protocol offerthe amount of costs ordered shall not exceed the fixed costs…  The absence of any such wording, to my mind, makes it clear that the intention is that not only that the claimant should recover costs on an indemnity basis in accordance with CPR 36.17(4) (b) but that the costs should be quantified on an indemnity basis, not merely being awarded fixed costs.”

“…given the amendments to CPR 36 in the form of CPR 36.21 which were drafted at the same time as, and in contemplation of, the Fixed Costs regime in CPR 45 that CPR 36.21 is the specific rule and takes precedence over CPR 45.29B.  In other words, it seems to me that the proper construction is that the restriction on only fixed costs being allowed in accordance with CPR 45.29B must be read as being subject to the provisions of the Part 36 regime.”

“I do not think it at all surprising that the rules provide for the defendant only to recover fixed costs following a successful Part 36 offer whereas the claimant is entitled to indemnity costs.  The starting point is that where the claimant obtains a judgment, and neither party does better than a Part 36 offer, the claimant is entitled to all of her costs of the action. If, on the other hand, the claimant does better than her Part 36 offer, she should be entitled to something on top and that is by way of indemnity costs.  Similarly, if the defendant does better than his Part 36 offer, he should be entitled to something on top and that is by way of recovering fixed costs from the claimant.  There seems to me to be no illogicality in that approach.”

The judge also pointed out that the Explanatory Memorandum to the Statutory Instrument laid before the Lord Chancellor at the same time as the Statutory Instrument states:-

“If a defendant refuses a claimant’s offer to settle and the court subsequently awards the claimant damages which are greater than or equal to the sum they were prepared to accept in settlement, the claimant will not be limited to receiving his fixed costs, but will be entitled to costs assessed on the indemnity basis in accordance with rule 36.14.”

Although that is not the law it is a strong indication that the intention of Parliament was that a claimant who is successful in her or his Part 36 offer should receive indemnity costs and “will not be limited to receiving his fixed costs”.

In Dixon v Bennet His Honour Judge McKenna fell into the trap identified by HH Judge Freedman in Smith v Taylor of referring it to being “an oddity” if a successful Part 36 Defendant was limited to fixed costs but a successful Part 36 claimant was not so limited. That misses the point that the very fact that a defendant gets any costs at all in a case that it has lost is the Part 36 benefit and absent indemnity costs a Part 36 claimant gets no such benefit, as obviously it is successful and gets costs anyway.

In my view the reasoning of Judge Freedman in Smith v Taylor is much to be preferred to that of Judge McKenna in Dixon v Bennet on this point..

In Dixon v Bennett the judge held that although the claimant was entitled to indemnity costs and in the context of fixed costs cases that simply meant fixed costs and nothing extra. The judge quoted with approval the District Judge’s finding in this matters:-

““The indemnity basis” has a specific definition under the provisions of CPR 44.3(3): “where the amount of costs is to be assessed on the indemnity basis, the court will resolve any doubt which it may have as to whether costs were reasonably incurred or were reasonable in amount in favour of the receiving party”.  In a fixed costs regime, as far as there is any doubt, the cost is fixed and therefore the difference between quantification on the standard or indemnity basis has no practical effect.  That being the case, in my judgment it follows that indemnity costs under CPR 36.17(4) (b) prima facie means that all the claimant is entitled to are those fixed costs. There is no provision to dispense with the Part 45 fixed costs regime unless I apply CPR 45.1(1) which states: “This section sets out the amounts which, unless the court orders otherwise, are to be allowed in respect of legal representatives’ charges”.  The court thus retains discretion to order otherwise.  In my judgment, if it had been intended that the occurrence on a claimant beating his own Part 36 offer was that the Part 45 fixed costs regime was not to apply, the rules would make specific provision for that. The CPR do not do so. In particular, the situation is not addressed in CPR 36.21. Therefore, in my judgment, simply because the claimant has beaten the Part 36 Offer, it does not follow and it is not appropriate to make an order that the CPR 45 fixed costs regime should not apply.”

The Circuit Judge held that the wording of CPR 45.29A is clear:-

“It states in terms that Section IIIA of Part 45 will apply where a claim is commenced under the Portal but no longer continues under the Portal. There is no ambiguity or lack of clarity in the meaning of the words used. The fixed costs regime is plainly engaged and in those circumstances there is, as it seems to me no need for the court to interpret the rule, purposively or otherwise. The court’s task is merely to apply the plain meaning of the words…”

As I have been pointing out for some years CPR 45 and CPR 36 contradict each other in relation to fixed costs.

I sympathise with the judges who have to deal with these rules.

On balance, given the statement to Parliament in relation to Part 36 and fixed costs – quoted above – and given that even under the fixed costs regime the defendant achieves the benefit of receiving costs when it has made a successful Part 36 offer, my view is that to balance that a claimant should get a benefit when making the successful Part 36 offer and that that was the intention of Parliament.

Consequently, on balance and only on balance, I prefer the decision of Judge Freedman in Smith v Taylor.

 

The claimant discontinues the claim or loses at trial

 

The starting point is that the claimant will have the benefit of Qualified One-Way Costs Shifting, subject to exceptions dealt with in my piece – Qualified One-Way Costs Shifting. Discontinuance no longer triggers and automatic liability for costs.

 

In cases where QOCS does not apply, rather than the protection is lost through misconduct, the costs order in the defendant’s favour is capped at the Fixed Recoverable Costs that would have been payable to the claimant at the stage at which the costs order is made. If the matter is discontinued this will be at the stage at which the claim was discontinued; otherwise it will be the trial costs.

As there has been no award for damages so as to calculate the Fixed Costs, there is a complicated method attributing a value to the claim that serves to calculate the Fixed Costs and this is largely based on the information contained in the Claim Form but with vehicle based damages being excluded.

 

The claimant’s claim fails and Qualified One-Way Costs Shifting protection is lost for any one of the various potential reasons

 

The defendant’s costs are not capped by reference to Fixed Recoverable Costs but will be assessed in the usual way. Given that QOCS protection is only lost essentially for misconduct the award of costs in a defendant’s favour will almost certainly be on the indemnity basis.

 

The claimant fails to beat defendant’s Part 36 offer at trial in a claim where QOCS applies

 

See my piece – Qualified One-Way Costs Shifting for full details. Basically a failure to beat a defendant’s Part 36 offer means that QOCS protection is lost but costs will not be awarded on an indemnity basis absent any other factors. Thus the defendant will get costs capped at the Fixed Recoverable Cost level for the post Part 36 work and will get the full order but will only be able to enforce that order, without leave of the court, up to the level of damages awarded to the claimant.

Given that Fixed Recoverable Costs are essentially a form of recoverable contingency fees with the costs being calculated in part on a percentage basis, the defendant’s costs should never be able to exceed the damages in any event as the Fixed Recoverable Costs at which the defendant’s costs are capped are always lower than the amount of damages.

 

The claimant has QOCS protection and accepts the defendant’s offer out of time

 

If there is no court order then there is nothing for the defendant to enforce and the traditional rules do not apply. Generally the matter would be dealt with by a Consent Order but of course if a claimant accepts a defendant’s Part 36 offer then certain consequences apply automatically without the need for an order but on the face of it the claimant still gets QOCS protection.

 

However a defendant will simply refuse to pay anything beyond Fixed Recoverable Costs up to the date of expiry less defendant’s costs capped at Fixed Recoverable Costs for the post expiry period. The claimant would then have to sue for the balance of costs and the defendant could rely on the common law doctrine of setoff.

 

In a road traffic accident matter the defendant’s counterclaim succeeds and the court makes an order in the defendant’s favour

 

The defendant’s costs are assessed by reference to Fixed Recoverable Costs in the usual way.

If the defendant’s counterclaim succeeds but there is no personal injury element in relation to that counterclaim then the defendant is limited to recovering half of type A and B stage 3 costs, that is a total of £125.00, where the case does not go to trial and half of the applicable costs where it does go to trial, that is a total of £250.00.

 

What happens in a defendant’s counterclaim in Fixed Recoverable Costs as compared with settling in the portal?

 

In Crooks v Hendricks Lovell Limited (2016) EWCA Civ 8 an important issue was raised into the relationship between Part 36 and the effect of CRU.

Early on in the proceedings the defendant had made a Part 36 offer to settle using the standard form N252 A. That offer was “£18,500.00 net of CRU and inclusive of interim payments in the sum of £18,500.00.” On the next page of the form there was a statement which says “this offer is made without regard to any liability for recoverable benefits under the Social Security (Recovery of Benefits Act) 1997” and the box was ticked. There is an alternative box which reads “this offer is intended to include any relevant deductible benefits for which I am liable under the Social Security (Recovery of Benefits Act) 1997.” But that box was not ticked. There is also a space for an “amount…. offered by way of gross compensation” but no figure was put in there.

That part 36 Offer was not withdrawn and was still open for acceptance by the time the trial arrived.

At trial the claimant recovered £29,550.00 which consisted of general damages of £4,000.00, £25,500.00 for past loss of earnings and £50.00 for miscellaneous expenses.

The defendant at the time of judgment had discharged deductible benefits which then stood at £16,267.76 but because the CRU certificate was being reviewed, the judge adjourned the consideration of the issue of costs for further submissions.

Subsequently the CRU certificate was reviewed and the deductible benefits reduced to £9,502.65.

Following submissions on costs the judge ordered that the defendant pay the claimant’s costs up to a date 21 days after the original Part 36 offer had been made and thereafter the claimant pay the defendant’s costs.

I set out below a table showing the situation before and after the review of the CRU certificate

 

  Before CRU review After CRU review
Sum awarded £29,550.00 £29,550.00
CRU £16,267.76 £9,502.65
Net sum £13,282.24 £20,047.35

 

Lord Justice Lindbolm considered the effect of the Part 36 offer in respect of CRU. He concluded that the defendant’s offer was clearly made as a figure that was net of CRU and that the key issue was the figure that the claimant actually received rather than what the defendant was offering. There was no doubt that the Part 36 was a valid offer but what the defendants were offering was the sum of £18,500.00 net of CRU and that ultimately the claimant recovered more than that Net offer and therefore had beaten the Part 36 offer by the defendant. The court therefore concluded that the claimant was entitled to all of the costs of the action and overturned the decision of the judge at first instance.

The court said it would not become involved in a speculative exercise to consider whether a claimant should have accepted the offer when it was originally put forward and appealed the CRU certificate at that time.

It is therefore vital for the defendants to be very careful when considering the impact of CRU on the offer that they are making and construct their offers accordingly.

 

 

 

In Yentob v MGN Ltd [2015] EWCA Civ 1292

the Court of Appeal upheld a judge’s decision not to impose the normal penalties when a claimant failed to beat the defendant’s Part 36 offer.

The general rule is that the normal costs consequences apply unless the court finds that it would be unjust and the court must take into account all of the circumstances of the case in deciding that issue.

 

Here the claimant brought an action against the defendant for phone hacking and at trial failed to beat the defendant’s Part 36 offer. The court declined to order the claimant to pay the defendant’s post Part 36 costs.

This was an unusual case and lawyers should assume that generally the normal costs consequences of Part 36 will apply, while keeping their eyes and minds open to possible exceptions.

Here the trial judge had held that the case was exceptional because, until the trial took place, the claimant would not know how badly he had in fact been hacked and it was unlikely that MGN would have agreed to make a statement which matched the findings made at trial and because it was not apparent until the trial that the claimant could never get disclosure of the full extent of the hacking, due to destruction of documents.

The claimant could not recover his post Part 36 costs from MGN but justice did not, in those circumstances, require him to pay their costs. There would be no order for costs in relation to the post Part 36 period.

The trial judge, with whom the Court of Appeal agreed, said:

“45 In the circumstances, I consider that the justice of the case does involve a departure from the normal rule which would otherwise entitle the defendant to their costs from the 21-day period applicable to the offer, but not to the extent of entitling Mr Yentob to his costs throughout. Mr Yentob did have, but did not take, an opportunity to clarify the position in response to the offer in the last sentence of MGN’s Part 36 offer letter, and so did not take the opportunity to avoid having this debate or perhaps the whole action. In my view, the justice of the case is met not by simply imagining Part 36 offer had never been made, but by acknowledging that in financial terms Mr Yentob ought to have accepted that offer but has lost an opportunity perhaps to have avoided the action completely, with a serious question mark as to whether the defendants would have taken it, and to say that from the date of the expiry of the relevant period under that offer (which is, I think, the wording in the rule), there should be no order as to the costs of Mr Yentob’s action. Each side will bear their own costs. That will be my order.” (Italics added by the Court of Appeal).

 

_______

_____

 

 

Our dried voices when

We whisper together

Are quiet and meaningless

T.S Eliot: The Hollow Men

 

 

 

Part 36 has been amended so that if a defendant makes a Part 36 offer before the defendant receives a fixed cost medical report, the provision that the claimant will be entitled to the fixed costs and will be responsible for the defendant’s costs for the period from the date of expiry of the relevant period to the date of acceptance will only have effect if the claimant accepts the offer more than 21 days after the defendant received the report.

 

I set out the wording of the changes as follows:-

 

“Amendments to the Civil Procedure Rules 1998

 

  1. In Part 36—

(a)in rule 36.10A—

(i)in paragraph (4), for “paragraph (5)”, substitute “paragraphs (5), (5A) and (5B)”;

(ii)in paragraph (5), for “Where” substitute “Subject to paragraphs (5A) and (5B), where”; and

(iii)after paragraph (5)(b) insert—

“(5A) In a soft tissue injury claim, if the defendant makes a Part 36 offer before the defendant receives a fixed cost medical report, paragraphs (4) and (5) will only have effect if the claimant accepts the offer more than 21 days after the defendant received the report.

(5B) In this rule, ‘fixed cost medical report’ and ‘soft tissue injury claim’ have the same meaning as in paragraph 1.1(10A) and (16A), respectively, of the RTA Protocol.”;

 

(b)in rule 36.14—

(i)in paragraph (2), for “paragraph (6)” substitute “paragraphs (6) and (7)”; and

(ii)after paragraph (6)(c), before the words in parentheses insert—

“(7) Paragraph (2) of this rule does not apply to a soft tissue injury claim to which rule 36.14A applies.”; and

 

(c)in rule 36.14A—

(i)in paragraph (2), for “paragraph (3)” substitute “paragraphs (3), (3A) and (3B)”;

(ii)in paragraph (3), for “Where” substitute “Subject to paragraphs (3A) and (3B), where”; and

(iii)after paragraph (3)(c), below the words in parentheses, insert—

“(3A) In a soft tissue injury claim, if the defendant makes a Part 36 offer or Protocol offer before the defendant receives a fixed cost medical report, paragraphs (2) and (3) will only have effect in respect of costs incurred by either party more than 21 days after the defendant received the report.

(3B) In this rule, ‘fixed cost medical report’ and ‘soft tissue injury claim’ have the same meaning as in paragraph 1.1(10A) and (16A), respectively, of the RTA Protocol.”.”

 

_____

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Further, major changes to Part 36 came in in April 2015.

 

Proportionate Costs

In Webb v Liverpool Womens’ NHS Foundation Trust [2015] EWHC 449 (QB)

the Queen’s Bench Division of the High Court held that the fact that a claimant matched or beat its own Part 36 offer at trial did not prevent the court from making a percentage costs order on the basis that the claimant had failed on some of her specific claims.

Here the claimant’s allegations fell into two main parts:-

  • that during the labour of the claimant’s mother the need for a Caesarean section was indicated at 13.50 on 25 October 1999 and on at least three subsequent occasions but, negligently, no Caesarean section was performed and instead the defendant negligently decided that the birth should be allowed to proceed to a vaginal delivery;

 

  • that that vaginal delivery was negligently managed because the midwives undertaking it failed to adopt recognised procedures to deal with the shoulder dystocia that the claimant suffered in the course of the vaginal delivery.

 

The judge found for the claimant in respect of the failure to carry out a Caesarean section at 13.50 but against the claimant in respect of the defendant’s subsequent conduct and in relation to the vaginal delivery.

The effect of this ruling is that the defendant was liable to the claimant for 100% of her damages even though she had failed in relation to certain specific allegations.

On 1 October 2014 the claimant made a Part 36 offer to settle on liability on the basis that she received  65% of the damages that would accrue on a 100% basis. That offer was rejected on 9 October 2014. There were no other Part 36 offers but on 10 October 2014 the defendant repeated in writing an offer that it had made verbally at a settlement meeting on 1 October 2014 that it would settle on the basis that the claimant receives 30% of damages.

Clearly the claimant beat her own offer. She argued that she should receive indemnity costs from the expiry of the relevant period plus enhanced interest plus enhanced damages.

The defendant argued that it would be unjust to allow the normal Part 36.14(3) consequences and that even if they were not dis-applied the court was entitled to, and should, make a proportionate costs order to reflect the claimant’s failure on many issues.

The court held that it was not unjust for the usual Part 36 consequences to apply.

The court then considered whether, in the absence of a Part 36 offer, a proportionate costs offer pursuant to CPR44.2 would have been appropriate, bearing in mind the general rule that the unsuccessful party pay the costs of the successful party.

In Day v Day [2006] EWCA Civ 415

the Court of Appeal applied the test of identifying the successful party by asking which party was writing the cheque as a result of the judgment. On that test the claimant here was the successful party and thus a proportionate costs order would be a departure from the normal rule.

In Multiplex Constructions UK Ltd v Cleveland Bridge UK Ltd [2008] EWHC 2280 TCC

the Technology and Construction Court set down propositions of general application concerning issue based orders identified from a review of previous cases.

There the court held that an issue based, or proportionate, costs order need not be confined to exceptional cases. The extent to which costs should be disallowed should be left to the evaluation of the judge “by reference to the justice and circumstances of the particular case”.

The reasonableness of taking failed points can be taken into account.

There is no automatic rule that an issue based order should be made because the successful party loses on one or more issues and indeed the mere fact that such a party was not successful on every issue cannot, of itself, justify an issue based costs order. This is so because in complex litigation including complex personal injury cases any winning party is likely to lose on one or more issues in the case.

Here the court found that the allegations were separate and not dependent upon one another and there was separate expert evidence in relation to each limb of the case.

Consequently the judge found that, absent a Part 36 offer, he would have exercised his discretion to make a proportionate costs order.

PART 36 OFFER

The claimant maintained that Part 36 is a self-contained regime and that costs have to be considered in the context of that regime and not the one created by CPR 44 and that as the claimant had beaten her own Part 36 offer that insulated her against a proportionate or issue based costs order.

The defendant argued that the court was free to make such an order and referred to the cases of Thinc Group Ltd v Jeremy Kingdom [2013] EWCA Civ 1306 and Davison v Leitch [2013] EWHC 3092 (QB) both of which suggested that Part 36 is not “all or nothing”.

By analogy the defendant argued that avoiding injustice was not limited to considering whether the successful Part 36 party receives all of the enhancements on costs; it must also permit the court to take the view that not all costs should be awarded where to do so would cause injustice.

The judge found in favour of the defendant and said that he was satisfied that the fact that there was a successful Part 36 offer did not prevent the court from making an issue based or proportionate costs order.

Consequently a proportionate costs order, limited to a percentage of the claimant’s costs would be made, with that figure to be determined at a subsequent hearing.

On the costs to be allowed the Part 36.14 enhancements would apply and a 10% uplift on damages would apply as would the enhanced interest rate on damages.

 

The court here failed to consider the key case of Fox v Foundation Piling Limited [2011] EWCA Civ 790 where the claimant claimed £280,000.00 but secured judgment for only £31,700.00 but nevertheless beat the defendant’s Part 36 offer of £23,500.00.

 

The Court of Appeal held that the claimant was the winner with Lord Justice Jackson stating that “in a personal injury action the fact that the claimant has won on some issues and lost on others along the way is not normally a reason for depriving the claimant of part of his costs… For example, the claimant may succeed on some of the pleaded particulars of negligence, but not on others.”

 

In Magical Marking Ltd and Another v Ware and Kay LLP and Others [2013] EWHC 59 (Ch) the claimant recovered just £28,000.00 of a £12 million claim in a trial lasting 13 days.

 

The judge held that the defendant had acted properly in never making a Part 36 offer, even a modest one of say £30,000.00, as acceptance of any such offer would have triggered a liability for all of the claimant’s costs. The judge ordered the successful claimant to pay 85% of the defendant’s costs.

 

 

PART 36: CLAIMANTS’ OFFERS AND COURT BIAS – ELSEVIER CONSIDERED

 

In R (on the application of MVN) v London Borough of Greenwich [2015] EWHC 2663 Admin the Administrative Division of the High Court held that the fact that the claimant matched its own Part 36 offer was not of itself sufficient to justify an award of indemnity costs. There must be some concession by the claimant.

 

Here the claimant matched its own offer in a case which involved a declaration concerning the claimant’s age and did not involve quantum.

 

The court relied on AB v CD [2011] EWHC 602 (Ch) where the court held that a request to a defendant to submit to judgment for the entirety of the relief sought by the claimant could not be an “offer to settle” within the meaning of Part 36 and that the offer must contain some genuine element of concession on the part of the claimant.

 

The court also referred to the case of East West Corporation v DKBS [2002] All ER (D) 361 where the claimants sought Part 36 indemnity costs in relation to an offer, made seven days after the letter before action, to settle for 100% of the claim.

 

That decision in any event predated the change in the law by Parliament whereby, in spite of this decision, a claimant only has to match the offer. Previously the claimant had to beat the offer to get the Part 36 bonus of indemnity costs.

 

Since then Parliament has added considerable extra bonuses, including a 10% uplift of damages for a claimant who matches or beats its own Part 36 offer.

 

Here the judge found that there was no genuine offer to settle within the meaning of CPR 36.17(5)(e) as the claimant was offering no concession.

 

In a judgment which, if followed, largely destroys the concept of claimant Part 36 offers, the court said at paragraph 40:

 

“It is not merely a case of considering whether the judgment, which has been obtained is “at least as advantageous to a claimant” as the offer made (see CPR 36.17(1)(b)” .That is a prerequisite for the application of CPR 36.17(4) at all. CPR 36.17(5) however, requires the court to look at the position, it seems to me, not only of the claimant but more generally, and in the case of CPR 36.17(5)(e) to decide whether the offer has both “give” and “take”, and then, having made that assessment, determine whether it would be unjust for the consequences referred to in CPR 36.17(4) to operate notwithstanding that CPR 36.17(1)(6) applies. It cannot, therefore, be right that the only question is whether the judgment is “at least as advantageous to the claimant” as the offer.

 

If this judgment is correct then what was the point of Parliament changing the law so that the claimant has only to match, and not beat, its own offer?

 

Absent that clear line in the sand there is no certainty at all. Is a 95% offer “genuine”? 90%? 99%?

Why should not a defendant pay indemnity costs and the extras if it fails to settle a claim at a level with which the court subsequently agrees?

 

If a defendant gets it exactly right, by offering exactly the sum which the court eventually orders then the claimant always gets punished hard in costs, possibly wiping out the whole award, yet in reality in such cases the defendant has made no concession. It has simply offered what the court ultimately awarded. A concession would involve offering more than the court ultimately awards.

Why should a claimant be in any different position?

 

Why are the courts so biased against claimants when it comes to Part 36?

 

Part 36 is far more important than any other rule and has application in virtually every civil case.

 

I support fully the proposals of Jackson L J in relation to claimants’ Part 36 offers and indeed would have gone further and made the uplift 20%.

 

So why are the courts getting claimants’ Part 36 offers hopelessly wrong and why do they think it acceptable to punish severely a claimant who fails to beat a defendant’s Part 36 offer but unacceptable to do the same to a defendant who fails to accept a claimant’s proper offer?

 

In Elsevier Limited v Robert Munro [2014] EWHC 2728 (QB) Supplementary Judgment

 

the Queen’s Bench Division of the High Court considered the costs position where a claimant matches or beats its own Part 36 offer in a non-monetary claim.

 

Here the proceedings concerned a successful application for an injunction by an employer to prevent an employee from working for a competitor during his notice period.

 

Before trial the employer had made an offer which would have allowed the employee to start work over three months earlier than the date ultimately ordered by the court.

 

Damages were claimed in the claim form but not pursued and thus the claim was a non-monetary one.

 

The parties agreed that the claimant was entitled to costs on the indemnity basis and they also agreed interest on those costs at 4.5% above base rate.

 

The remaining issue between the parties was whether the claimant was entitled to a 10% uplift on costs pursuant to CPR 36.14(3) which, insofar as relevant, reads:

 

“….where rule 36.14(b) applies, the court will, unless it considers it unjust to do so, order that the claimant is entitled to……

 

(b)          costs on the indemnity basis from the date when the relevant period expired;

 

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

 

(d)          an additional amount, which shall not exceed £75,000, calculated by applying the prescribed percentage set out below to an amount which is –

 

  • where the claim is or includes a money claim, the sum awarded to the claimant by the court;

 

(ii)           where the claim is only a non-monetary claim, the sum awarded to the claimant by the court in respect of costs”.

 

The prescribed percentage for the purposes of CPR 36.14(3)(d) is, where the award is up to £500,000, 10% of the amount awarded and, where the award is above £500,000 and up to £1 million, 10% of the first £500,000 and 5% of any amount above that figure.

 

It is important to note that the new provisions of Part 36 were made pursuant to section 55 of the Legal Aid, Sentencing and Punishment of Offenders Act 2012.  Thus Parliament thought it important enough to set this out in primary legislation, rather than leave it to the Rules Committee.

 

This legislation is simply not mentioned in the judgment and it appears that the judge was unaware of it, specifically Section 55(5) which provides that in relation to a non-monetary claim the uplift order

 

“must provide for the amount to be calculated by reference to one or more of the following –

 

“(a)        any costs ordered by the court to be paid to the claimant by the defendant in the proceedings

 

[(b)        related to mixed claims]

 

(c)           the value of any non-monetary benefit awarded to the claimant”.

 

Section 55 was implemented by The Offers to Settle in Civil Proceedings Order 2013, SI 2013 No 93 and Article 3(4)(b) reads as follows:

 

“(b)        in a non-monetary claim only, the following percentages of any costs ordered by the court to be paid to the claimant by the defendant –

 

Costs ordered to be paid to the claimant Amount to be paid by the defendant
Up to £500,000 10% of the costs ordered to be paid
Above £500,000, up to £1,000,000 10% of the first £500,000 and 5% of any costs ordered to be paid above that figure

 

(5)          The amount to be paid shall not exceed £75,000.”

 

Again the judgment makes no mention whatsoever of this Statutory Instrument or its terms, directly or indirectly.

 

Here the claim form was issued on 4 June 2014 and on 9 June 2014 the claimant made a Part 36 offer to settle the claim on the basis that the defendant would be allowed to start work with the competitor on 1 January 2015.

 

Time for accepting that offer expired on 30 June 2014 and the trial started on 9 July 2014 and ended on 16 July 2014, and the judge restrained the defendant from working until 11 April 2015.

 

Thus the judgment obtained by the claimant falls within the scope of CPR 36.14(1)(b) as being “at least as advantageous to the claimant as the proposals contained in a claimant’s Part 36 offer”.

 

The court rejected the defendant’s argument that as the pleaded claim included a claim for damages it was a CPR 36.14(3)(d)(i) claim and not a (d)(ii) claim meaning that no additional amount could be claimed in relation to costs.  The damages claim was an alternative to an injunction; the injunction having been granted, there was no damages claim.

 

At paragraph 6 the court said:

 

“6.          The question arises of what is meant by “the claim” in CPR36.14(3)(d)(i) and (ii).  If those words refer to the entire claim as advanced in a claim form or Particulars of Claim then the pleaded claim in this case is one which “includes a money claim”.  It seems to me, however, that the language of the sub-paragraph directs attention to the time at which the court is deciding whether to order payment of an additional amount and that “the claim” means the claim in respect of which the court has given the judgment which is more advantageous than the offer.  Moreover, if the Defendant’s submission was right then in any case where the principal claim is for an injunction but damages are claimed in the alternative a defendant enjoined after refusing a reasonable offer of settlement under Part 36 would have no exposure to any additional liability.  By losing on the injunction claim the defendant would eliminate any liability in damages and consequently any exposure to the additional amount.  That cannot have been the intention.”

 

The court then went on to consider whether it would be unjust to order the defendant to pay the additional amount pursuant to CPR 36.14(3)(d)(ii).

 

CPR 36.14(4) provides that in considering whether the award of an additional amount would be unjust the court “will take into account all the circumstances of the case” including four specified matters:

 

“(a)        the terms of any Part 36 offer;

 

(b)          the stage in the proceedings when any Part 36 offer was made, including in particular how long before the trial started the offer was made;

 

(c)           the information available to the parties at the time when the Part 36 offer was made; and

 

(d)          the conduct of the parties with regard to the giving or refusing to give information for the purpose of enabling the offer to be made or evaluated”.

 

At paragraph 9 and 10 the court said:

 

“9.          There is more force in some of the Defendant’s other submissions.  He says that the compressed timescale of these proceedings means that the Claimant’s offer was made close to trial, with the result that there was little time for negotiation and in any event he did not have the Claimant’s witness statements available until 30 June 2014, the last day for acceptance of the offer.  This makes any criticism of him for failing to settle less cogent, he suggests.  The proximity of the offer to the trial also means, submits the Defendant, that an order for an additional amount would have a disproportionate and unjust effect.  Unlike the provision for interest on costs the additional amount would not be tied to the timing of the offer but has an “all-or-nothing” effect.”

 

“10.        In the circumstances of this case the effect of an order for an additional amount would be twofold.  First, it would add a penal element in relation to costs incurred in the period from 1 July 2014 onwards. In addition to compensating the Claimant on the indemnity basis for costs incurred over that period, and paying interest on those costs at 4.5% above base rate, the Defendant would pay an additional sum of up to 10% of the costs awarded.  The intention of this provision was to penalise a defendant for failure to accept a reasonable offer in time. The rule clearly contemplates such consequences which are not unjust within the meaning of the rule.”

 

At paragraph 11 the court points out that a 10% uplift would impose upon the defendant a substantial additional liability in respect of costs incurred before 1 July 2014, that is by the deadline for accepting the offer.  Indeed it would involve an uplift on some costs incurred before any offer was made.

 

The court then said:

 

“The additional liability order would add 5-10% to the amount of those costs.  Its effect would be to impose a liability close to or possibly greater than that which would flow from an indemnity costs order”.

 

The judge concludes consideration of the Part 36 issue at paragraph 12:

 

“12.        It may be that in some cases it would be just to impose such a liability on a defendant.  That might be so, for instance, if a claimant made a Part 36 offer which ought to have been seen immediately as at least equal to the best outcome the defendant could reasonably expect.  That is not this case, however.  Although it failed, the Defendant had a legitimate argument for a shorter period of restraint.  Moreover, it would be unduly harsh to criticise the Defendant for failing to accept the offer promptly given the pace with which the proceedings were advancing, the pressures imposed by that pace, and the last stage during the 21 days at which he obtained sight of the Claimant’s statements.  The imposition of an additional liability would therefore involve an element of penalty that I do not consider it just to impose on this Defendant and I decline to make an order for an additional amount. ”

 

Comment

 

This whole judgment shows a woeful failure to understand Part 36, especially claimants’ offers.

 

By definition an alteration of the usual costs rule involves a “penal element.”  What could be more penal than a winning claimant being deprived of all of its damages and costs by being forced to pay all of the defendant’s post Part 36 costs on failure to beat that Part 36 offer, even in a finely balanced case?

 

Those of us of a certain pre ATE insurance vintage recall vividly cases where someone had been terribly injured but received nothing due to a failure to beat what was then a payment into court.

 

Undue harshness, talk of prompt acceptance and criticism of conduct never comes in to it when a claimant fails to beat a defendant’s Part 36 offer – the penal costs consequences are regarded as automatic.

 

The judge says “It may be that in some cases it would be just to impose such a liability on a defendant”.

 

That is hopelessly the wrong way round.  The law requires that the court “will, unless it considers it unjust to do so….”.

 

The word “will” means that it is mandatory for the court to impose the sanction “unless it considered it unjust to do so”.  Thus it is for the defendant to prove that it is unjust, not for the claimant to show that it is just.

 

The judge also seems perturbed that the 10% uplift applies to pre-Part36 offer costs.  Well that is very clearly what the legislation says.

 

Furthermore had this been a damages claim the successful claimant would get a 10% uplift on all damages.  Suppose this was a £500,000 claim and the claimant matched its offer. It gets a bonus of £50,000.  If the judge ordered £499,000 then for the sake of £1,000 the claimant fails to get £50,000.

 

That is the nature of Part 36.  A claimant who fails by a penny to beat a defendant’s Part 36 offer gets slaughtered in costs.

 

Parliament has not allowed this to be open-ended; there is a maximum uplift of £75,000 comprised of 10% on the first £500,000 and 5% on damages/costs between £500,000 and £1 million.

 

The judge’s ignorance of costs is reflected in the statement that an increase of 5% to 10% would be “close to or possibly greater than that which would flow from an indemnity costs order”.  Thus he thinks that solicitor and own client indemnity rates in commercial work are no more than 5% to 10% above recoverable between the parties rates.  Really?

 

The court here recognized that this very reform “was introduced in 2013 pursuant to the Jackson reforms because it was considered by Jackson L J that under the previous regime “the claimant was insufficiently rewarded and the defendant insufficiently penalised when the claimant had made an adequate offer”.

 

That is direct quote from the Jackson Report and thus Jackson L J, correctly in my view, used the word “penalised”, but the court here refused to apply the law because “it would add a penal element”.

 

Firstly it is not for judges to disobey Parliament and secondly what does the judge think indemnity costs are if not penal?  Or interest at up to 10% above base rate?

 

Yet again this shows that the courts are quick to punish claimants in costs re Part 36 but very reluctant to punish defendants.

 

We already have a situation where a late – accepting claimant has to pay the defendant’s costs for the period after time for acceptance has expired but where there is no penalty on a late – accepting defendant. We need a claimant’s equivalent of CPA 36.10(5).

 

The approach of the courts to claimants’ Part 36 offers is a serious problem which is undermining one of the best of the Jackson Reforms.

 

It is time for the Court of Appeal to give no-nonsense guidance on the issue and time also to increase the penalty to 20% and change the wording to:

 

“Unless the court considers it unjust to do so and considers it would cause the defendant severe financial hardship”.

 

Until then claimants and their lawyers will continue to believe that Part 36 as applied by the courts is an anti-claimant stitch up.

 

In Gulati and Others v MGN Ltd [2015] EWHC 1805 (Ch)

 

the Chancery Division of the High Court held that where a claimant’s Part 36 offer had been withdrawn and then beaten at trial it was not appropriate to award the claimant indemnity costs in the absence of otherwise unreasonable conduct which would attract an indemnity costs award in any event.

 

The court’s general costs discretion under CPR 44.3 did not justify an award of indemnity costs absent such unreasonable conduct.

 

The court distinguished the decision in The Trustees of Stokes Pension Fund v Western Power Distribution (South West) plc [2005] EWCA 854

 

where the Court of Appeal allowed an inoperative Part 36 offer – no money had been paid into court as then required – to have Part 36 effects.

 

It also refused to apply CPR 44.2(4)(c) which allows a court to take non Part 36 offers into account and give them the same effect as Part 36 offers.

 

Comment

 

This is another fundamentally flawed decision reflecting the courts’ anti-claimant bias when it comes to Part 36.

 

Here, as before, the court is equating indemnity costs orders with misconduct. That is not the case when a claimant matches or beats its own Part 36 offer; it is merely a device to give claimants an incentive to make such offers and defendants to accept such offers.

 

It is no more punitive and requiring of misconduct than the fact that a successful claimant has to pay the unsuccessful defendant’s costs if it fails to beat a defendant’s Part 36 offer.

 

However in Cashman v Mid Essex Hospital Services NHS Trust [2015] EWHC 1312 (QB)

 

the Queen’s Bench Division of the High Court held that the starting point where a claimant at least matches its own Part 36 offer is that the claimant is entitled to an award under each of the sub-paragraphs of CPR 36.14(3). Only if it is unjust to do so will the court decline to make an award.

 

CPR 36.14(3) deals with:-

 

  • interest of up to 10% above base;

 

  • indemnity costs;

 

  • interest of up to 10% above base on costs;

 

  • 10% uplift on damages.

 

Where, as here, the matter in dispute is costs, then the 10% uplift at (d) is on those costs.

 

Here a clinical negligence claim settled for £90,000.00 with costs to be assessed on the standard basis if not agreed. The receiving party submitted a bill for £262,000.00 and made a Part 36 offer of £152,500.00 and on assessment the court awarded £173,693.78.

 

The Master awarded the additional benefits under (a) to (c), but not the 10% uplift on costs under (d).

The High Court overturned that decision and ordered a 10% uplift on costs, the subject matter of the Part 36 offer.

 

The court recognised that “the rule was introduced not only to provide an incentive to a claimant to make a timely realistic Part 36 offer but also to penalise a defendant for not accepting such an offer.” (Paragraph 7)

 

Costs were not to be treated any differently from damages. A high bill which is much reduced on assessment is not a valid reason for refusing to make an additional award under CPR 36.14(3)(d).

 

It is the terms of the Part 36 offer, not the level of the original bill, which is key; otherwise the claimant is penalised for making a reasonable Part 36 offer.

 

There may be circumstances when it would be unjust to make an award under (d) but just to make awards under (a) to (c) (paragraph 23).

 

In Duncan v Churm Oxford County Court, 14 September 2014 the court ordered the claimant to pay the defendant’s costs from the date of the claimant’s original, too high, schedule of May 2013 rather than from the date of the defendant’s Part 36 offer on 14 January 2014 which was accepted by the claimant on 17 July 2014.

The schedule was for £1 million and was amended to £500,000.00 and the Part 36 offer which was accepted was for £202,500.00.

In Hertel and Artemis v Saunders and Others [2015] EWHC 2848 (Ch)

the Chancery Division of the High Court, in allowing an appeal, held that a Part 36 offer which failed to state whether it related to the whole of the claim or just part of it was not a valid Part 36 offer and therefore no costs consequences would flow from its acceptance.

Here the claimants sued a number of parties alleging that certain individuals were involved in a partnership in claiming sums due from certain companies.

The claimants applied for permission to amend the Particulars of Claim and before they were amended the defendants’ solicitors wrote a letter offering to settle and stated that it was made under Part 36.

That Part 36 offer stated that the claim as pleaded was bound to fail against the individual defendants but the offer was made on the basis of the proposed amendments. The claimant accepted.
Before the Master both parties agreed that it was a valid Part 36 offer and the Master ordered the defendants to pay the claimants’ costs, which one might have thought was the end of the matter.

However the defendants appealed arguing, contrary to their stated position before the Master, that the offer was not a Part 36 offer even though it stated that it was a Part 36 offer and was treated by the claimants as a Part 36 offer and was stated by both parties in front of the Master to be a Part 36 offer and unsurprisingly was held by the Master to be a Part 36 offer as that was not in dispute.

 

The defendants maintained that a Part 36 offer could not be construed so as to cover a case that had not in fact been pleaded or formulated into an existing action.

The High Court upheld that submission.

It is not clear from the judgment as to why the claimants did not argue estoppel; at paragraph 35 the judge specifically notes that “the Claimants do not argue that the Defendants are estopped from contending otherwise. Accordingly, I must deal with the new case on its merits.”

That may be so, but the Appeal Court is entitled, and indeed generally bound, to prevent matters being raised on appeal which were not raised at the original hearing, here that point being that the defendants’ offer was not in fact a Part 36 offer.

For all intents and purposes this was an appeal against a consent order as far as the issue of Part 36 was concerned.

It is true that the offer did not deal with the whole of the claim and therefore had, under the old CPR 36.2(2) (d) to:

“state whether it relates to the whole of the claim or to part of it or to an issue that arises in it and if so to which part or issue;”

The judge found that the Particulars of Claim had never been amended and that the defendants’ statement that they would not oppose the amendment did not amount to consent under CPR 17.1(2).

Therefore the accepted offer did not relate to any part of the claim and could not be a Part 36 offer.

The judge rejected the claimants’ submission that that did not matter as a Part 36 offer could be made at any time, including before proceedings, so the amendment or otherwise of the issued proceedings was irrelevant.

Comment

 

So the defendants make an offer which states that it is a Part 36 offer. The claimants accept on that basis. Thus both parties agree that it is a Part 36 offer.

At the hearing before the Master the defendants still agree that the Part 36 offer made by them was indeed a valid Part 36 offer but argue, for reasons particular to the case, that the usual costs consequences of a Part 36 offer should not apply. The Master rejects their submission.
The defendants then appeal claiming that it was not a Part 36 offer after all, a point they had never raised in front of the Master. Indeed they had always stated that it was a  Part 36 offer.

The High Court judge agrees and allows the appeal, and indeed orders the claimants to pay the defendants’ costs, meaning that the claimant would have been far better off not accepting the Part 36 offer but proceeding to trial.

Part 36 gets more uncertain by the day and as it is the chief disqualifier of Qualified One-Way Costs Shifting it makes the already Byzantine concept of Qualified One-Way Costs Shifting even more difficult to follow.

In NJ Rickard Ltd v Holloway, Court of Appeal, 3 November 2015, Unreported

 

the Court of Appeal held that the failure of a Part 36 offer to state that the person receiving the offer would be liable for the offeror’s costs if the offer was accepted invalidated it, meaning that the judge should have regard to CPR 44.

 

Looking afresh at the matter under CPR 44 the Court of Appeal said that the correct order was no order for costs.

 

The landlord claimant received £16,000.00 at trial having made a Part 36 offer to drop hands, that is that the landlord would drop the claim for arrears of rent and damage to the property and the tenant would drop the counter-claim for breach of quiet enjoyment. At trial the tenant received £7,000.00 on the counter-claim meaning that the net beneficiary was the landlord.

 

The first instance judge held that Part 36 consequences should apply and ordered the tenant to pay the claimant’s costs up to the end of the relevant period and on the indemnity basis with 8% interest thereafter.

 

The costs were between £85,000.00 and £100,000.00.

 

The Court of Appeal found that the claimant had taken much time on unsuccessful points and the defendant had won on important points and that the landlord had not responded to the tenant’s requests for mediation.

 

The refusal to engage in ADR was unreasonable. The appropriate order was no order for costs even though the landlord had won financially.

Comment

Claimant’s Part 36 offers are now virtually pointless given the court’s hostility to them. Costs are becoming more of a lottery than the case itself.

 

What happened to the simple, good old test of deciding who had lost by looking at the party writing the cheque?

Here the claimant offered to drop hands, the defendant refused and lost and yet the claimant was punished in costs for not mediating. Making a Part 36 offer is a far more effective way of seeking to settle a case than offering to go to mediation.

The full transcript is not yet available and it may be that there is more to this case than meets the eye, but the uncertainty around the effectiveness of claimant’s Part 36 offers is unsettling. Such a hard, technical line, is rarely taken with defendants’ Part 36 offers.

The Court of Appeal also indicated its support for fixed costs, stating that the fact that the costs were £85,000.00 to £100,000.00 made as strong a case as was possible that there should be some form of limitation on recoverable costs.

In Worthington v 039184284 Ltd (unreported) Manchester District Registry, 16 June 2015

 

the defendant accepted, out of time, the defendant’s Part 36 offer and the usual consequences would be that the defendant pays the costs to the expiry of the relevant period and the claimant pays the defendant’s costs on the standard basis thereafter.

 

Here the court found that the claimant had exaggerated the claim and that had he not done so the matter would have been resolved by June 2012.

 

The defendant made a Part 36 offer in May 2014 and that was accepted out of time.

 

The claimant argued that by leaving the offer on the table the defendant was submitting to the Part 36 process and the ordinary costs consequences should apply.

 

The judge disagreed and said that a claimant who does not accept an offer within time “necessarily puts himself at risk and knew or ought to have known that he put himself at risk of an argument as to the principle of costs.”

 

The judge accepted that at the time that he made the offer the defendant had “if not all, certainly the vast majority of the surveillance evidence to hand.”

 

Consequently rather than making the usual order that the defendant pay the costs up to the expiry of the relevant period, generally 21 days after the offer is made, with the claimant paying thereafter the judge ordered the defendant to pay the claimant’s costs up to 30 June 2012, when he thought the case should have been settled, and ordered the claimant to pay the defendant’s costs thereafter, that is for a period of two years before the defendant made the Part 36 offer.

 

To rub salt into the wound the judge ordered the claimant to pay those costs to the defendant on the indemnity basis.

 

Comment

 

A defendant, in full possession of surveillance evidence, makes a Part 36 offer, expressed to have the consequences of Part 36 and does so in May 2014 having not made a previous offer.

 

The claimant accepts it late, but it is well-established law that an unwithdrawn Part 36 offer is always capable of acceptance.

 

Why on earth should the claimant’s initial exaggeration make any difference to the usual Part 36 consequences on costs? The defendant could have made an earlier offer; the defendant could have made the offer other than under Part 36; the defendant could have withdrawn the offer.

 

The situation here is that the claimant has won the case but been ordered to pay costs for very nearly two years when it was impossible for the claimant to settle the offer by accepting a Part 36 offer, because none had been made.

 

The claimant then accepts the Part 36 offer in the full knowledge that he will get his costs up to the expiry of the relevant period and have to pay them on the standard basis thereafter. However the court does not do that, rather it orders the claimant to pay costs for two years longer than he was expecting to do so and orders them on the indemnity, not the standard basis.

 

It makes a complete mockery of Part 36.

 

Why are not defendants punished for derisory offers? If a defendant offers £10,000.00 and subsequently settles for £50,000.00 why should they not routinely be ordered to pay indemnity costs.

 

Indemnity Costs

 

A claimant who matches or beats its own Part 36 offer at trial gets amongst other things, indemnity costs. Note that proportionality does not apply to indemnity costs. This is another powerful reason for always making a Part 36 offer.

 

In Kellie and Kellie v Wheatley and Lloyd Architects Ltd [2014] EWHC 2886 (TCC)

 

the High Court was considering indemnity costs in the context of misconduct, rather than Part 36, but the principles are the same in terms of the amount awarded. There the court considered the interplay between indemnity costs and costs budgets.

 

This was a professional negligence claim which was lost and the defendant sought indemnity costs on the ground of the claimant’s conduct.

 

CPR 44.3 reads:

 

“44.3 (1)               Where the court is to assess the amount of costs (whether by summary or detailed assessment) it will assess those costs –

 

  • on the standard basis; or
  • on the indemnity basis,

 

but the court will not in either case allow costs which have been unreasonably incurred or are unreasonable in amount.

 

(2)              Where the amount of costs is to be assessed on the standard basis, the court will –

 

  • only allow costs which are proportionate to the matters in issue. Costs which are disproportionate in amount may be disallowed or reduced even if they were reasonably or necessarily incurred; and
  • resolve any doubt which it may have as to whether costs were reasonably and proportionately incurred or were reasonable and proportionate in amount in favour of the paying party.

 

(3)          Where the amount of costs is to be assessed on the indemnity basis, the court will resolve any doubt which it may have as to whether costs were reasonably incurred or were reasonable in amount in favour of the receiving party”.

 

The court pointed out that whatever was previously thought it is now clear that an indemnity costs order is significantly more valuable than a standard order.

 

The court quoted Lord Woolf in

 

Lownds v Home Office [2002] EWCA Civ 365

 

“The fact that when costs are to be assessed on an indemnity basis there is no requirement of proportionality and, in addition, that where there is any doubt, the court will resolve that doubt (as to whether costs were unreasonably incurred or were unreasonable in amount) in favour of the receiving party, means that the indemnity basis of costs is considerably more favourable to the receiving party than the standard basis of costs”.

 

Here the court said that this distinction is highlighted by the CPR and Practice Direction concerning costs management.  Practice Direction 3E paragraph 7.3 provides:

 

“When reviewing budgets, the court will not undertake a detailed assessment in advance, but rather will consider whether the budgeted costs fall within the range of reasonable and proportionate costs”.

 

CPR 3.18:

 

“In any case where a costs management order has been made, when assessing costs on the standard basis, the court will –

 

  • have regard to the receiving party’s last approved or agreed budget for each of the proceedings; and
  • not depart from such approval or agreed budget unless satisfied that there is good reason to do so”.

 

In Henry v Group Newspapers Ltd [2013] EWCA Civ 19 the Court of Appeal said:

 

“The primary function of the budget is to ensure that costs incurred are not only reasonable, but proportionate to what is at stake in the proceedings.”

 

Here the defendant’s budget had been approved at £91,700 with the judge having refused, on proportionality grounds, to approve a budget of over £140,000.

 

The amount now sought on the indemnity basis was £166,469.

 

The court thus had to consider the relevance of a costs budget when an indemnity costs order has been made and specifically disagreed with a previous decision of the High Court in

 

Elvanite Full Circle Ltd v AMEC Earth and Environment (UK) Ltd [2012] EWHC 1643 (TCC).

 

In that case the High Court held that even on an indemnity basis the starting point is the approved budget.

 

The court here in Kellie disagreed, holding that

 

“costs management orders are designed to set out the probable limits of the costs that will be proportionately incurred.  It is for that reason, and not because of any quirk of drafting, that CPR 3.18 refers specifically to standard assessment and not to indemnity assessment.  Proportionality is central to assessment on the standard basis and it trumps reasonableness.  However, proportionality is not in issue if costs are to be assessed on the indemnity basis.”

 

“I therefore find it difficult to see why logical analysis requires importing the approach in CPR 3.18 into assessment on the indemnity basis. The first reason given by Coulson J, at [29], has force if at all only if an approved or agreed budget does indeed reflect the costs that the receiving party says it expects to incur. However, the present case is an example precisely of the proper use of costs management in approving a budget at a lower figure than that proposed by the receiving party, on the very ground of proportionality. To suppose that the imposition of a budget under Part 3 would create some sort of presumption as to the limits of reasonable costs would be to ignore the fact that the approval of costs budgets is done on the basis of proportionality, not mere reasonableness. The matters referred to in connection with the first reason may, accordingly, justify having regard to the amount of costs the receiving party expected to incur, but they do not justify applying the CPR 3.18 analogously to assessment of costs on the indemnity basis. Similarly, the second reason, stated at [30], seems to me, with respect, to go further than is justified by the costs management regime. When a costs management order is made, the parties know that costs within the approved budget are likely to be considered proportionate, and costs in excess of the approved budget are likely to be considered disproportionate; in either case, the burden of justification lies on the party seeking a departure from the approved budget. But the costs management regime is not intended to give litigants an expectation that they will not incur a liability for disproportionate costs pursuant to an order for costs on the indemnity basis; any such expectation must rest on a party’s own reasonable and proper conduct of litigation. It is no objection to an order for costs on the indemnity basis that it is likely to permit the recovery of significantly larger costs than would be recoverable on an assessment on the standard basis having regard to the approved costs budget; that possibility is inherent in the different bases of assessment, and costs on the indemnity basis are intended to provide more nearly complete compensation for the costs of litigation. I accept, of course, that a party seeking to recover disproportionate costs on an assessment on the indemnity basis is required to show that those costs were reasonably incurred; though that requirement is subject to the provisions of CPR 44.3(3). That does not, however, justify the analogous use of CPR3.18, which has three disadvantages. First, it is both unnecessary and contrary to the rationale of that rule. Second, it tends to obscure the fact that the nature of the justification required of a receiving party is quite different under the two bases of assessment. Third, and consequently, it risks the assimilation of the indemnity basis of assessment to the standard basis, which is not justified by the costs management regime in the CPR. In my judgment, the proper way of addressing the concern identified by Coulson J in Elvanite at [30] is, first, by ensuring that applications for indemnity costs are carefully scrutinised and, second, by the proper application of the well understood criteria of assessment in CPR 44.3(3) to the facts of the particular case. It might also be remembered that, even if there exist grounds on which an award of indemnity costs could properly be made, such an award always remains in the discretion of the court.”

 

In neither Elvanite or Kellie was an indemnity cost order in fact made, so both judgments are obiter, that is not relevant to the decision, and therefore not binding on other courts.

 

As to payment on account the judge ordered £90,000 against the approved budget of £91,700.

 

10% uplift on damages for successful Part 36 claimants

 

The Jackson Report proposed a 10% uplift for claimants who matched or beat their own Part 36 offer and this has now become Section 55 of the Legal Aid, Sentencing and Punishment of Offenders Act 2012, implemented by The Offers to Settle in Civil Proceedings Order 2013, Statutory Instrument 2013 No 93.

 

Implementation is by the Lord Chancellor by Statutory Instrument (55(8)), and Article 2(b) of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (Commencement No 2 and Specification of Commencement Date) Order 2012 (SI 2012 No. 2412 (c.94) brought Section 55 in to force. The explanatory note to the Statutory Instrument reads:

 

“Article 2(b) brings into force section 55 of the Act. Section 55 provides for rules of court to be made in relation to civil proceedings involving a claim for money to permit a court to order an additional amount to be paid to a claimant by a defendant, where the defendant does not accept the claimant’s offer to settle, and the court gives judgment for the claimant that is at least as advantageous to the claimant as the claimant’s offer. Section 55 also confers a power on the Lord Chancellor to provide that rules of court may make similar provision in relation to civil proceedings which include a non-monetary claim.”

 

The Offers to Settle in Civil Proceedings Order 2013 prescribes the percentage uplifts in various types of case.

 

Money only claims

 

Article 2 prescribes the uplift on damages in money only claims as follows:

 

Amount awarded by the court                                   Prescribed percentage

 

Up to £500,000                                                                  10% of the amount awarded

 

Above £500,000, up to £1 million                               10% of the first £500,000 and 5% of the amount awarded above that figure

 

Above £1 million                                                               7.5% of the first £1 million and 0.001% of the amount awarded above that figure

 

This is as expected, with the addition of 0.001% of damages over £1 million, that is one-one thousandth of a per cent, or £10 for ever extra £1 million. There must be a reason for this, but it eludes me.

 

Mixed claims, that is monetary and non-monetary benefits

 

Article 3(4)(a) provides:

 

Amount awarded by the court                                   Amount to be paid by the defendant

 

Up to £500,000                                                                  10% of the amount awarded

 

Above £500,000, up to £1 million                               10% of the first £500,000 and 5% of the amount awarded above that figure

 

By Article 3(5) the maximum is specifically stated to be £75,000.

 

Non-monetary only claims

 

Article 3(4)(b) provides for an uplift on costs not damages in such cases:

 

Costs ordered to be paid to the claimant              Amount to be paid

 

Up to £500,000                                                                  10%

 

Above £500,000 and up to £1 million                        10% of the first £500,000 and 5% of any costs above that

 

By Article 3(5) the maximum is specifically set at £75,000.

 

Those Rules must make provision as to the calculation of the value of a non-monetary benefit awarded to a claimant (Article 3(3)(b)), a hospital pass if ever there was one.

 

Part 36 & Litigants in Person

 

The massive increase in the number of litigants in person and the ever increasing complexity of CPR 36 are causing the courts problems; in particular the court has to consider to what extent a solicitor should explain to a litigant in person what a Part 36 offer is and the consequences of accepting or not accepting such an offer.

 

In Kunaka v Barclays Bank [2010] EWCA Civ 1035

 

the Court of Appeal gave guidance.

 

There a claimant acting in person accepted the defendant’s Part 36 offer three months late and the defendant bank had not pointed out to the claimant the consequences of late acceptance.
There the Court of Appeal held that it had to take into account that the claimant was a litigant in person and ordered that there be no order as to costs from 21 days after the date when the offer was made with the claimant recovering costs up until then. Thus the lack of explanation by Barclays Bank meant that they did not get post expiry costs as would usually be the case.
The issue was considered in May 2015 by a District Judge in Liverpool County Court in a personal injury claim where a claimant had been represented pre-issue but had become a litigant in person.

 

She claimed £1.4 million and tried to increase the value of the claim to over £4 million but ultimately accepted, in April 2015, the defendant’s Part 36 offer of £50,000.00 which had been made one year earlier but she disputed that she should pay costs for the 11 months between expiry of the offer and acceptance.

 

The defendant’s letter making the Part 36 offer set out the costs consequences in detail and both counsel and solicitor for the defendant attempted, without success, on more than one occasion to discuss settlement with the claimant. The defendant’s solicitor then sent a five page letter to the claimant setting out clearly and plainly how the claim would be valued at trial, the defendant’s view of the likely outcome and the consequences of accepting the defendant’s offer late and of not beating it.

 

The defendant’s solicitor invited the claimant to contact him and gave her his direct dial telephone offer.

 

She rejected the offer.

 

At a costs hearing the judge commented that although the CPR applied equally to litigants in person and represented parties he was well aware that Part 36 was complex. However the defendant’s solicitor had made every effort to explain the costs consequences and therefore it was just to make the normal order with regard to costs.

 

Thus the claimant was ordered to pay the defendant’s costs incurred from 21 days after the offer and also the costs of the costs hearing.

 

It is most important that when faced with a litigant in person the solicitor acting for the other party does absolutely everything possible to ensure that the litigant in person is fully aware of the consequences of Part 36 offers and the consequences both of acceptance and rejection.

 

CASE LAW

 

In Watchorn v Jupiter Industries Limited [2014] EWHC 3003 (Ch) the Chancery Division of the High Court set out the approach to be taken when a claimant matches or beats its own offer at trial.

 

Here the claimant was awarded £360,000.00 at trial having made a Part 36 offer of £325,000.00.

Costs were ordered on the indemnity basis.

 

Interest on costs from 21 days after the Part 36 offer was awarded at 10% above base rate, the highest rate allowed.

 

Interest on damages was also awarded at 10% above base rate, again the highest rate allowed.

The court awarded a 10% uplift on damages but held that that uplift applied to damages before the 10% interest was added, pointing out that otherwise the real uplift would be 11%.

 

In summary the claimant got:-

 

  • indemnity costs;

 

  • 10% above base rate interest on those costs;

 

  • 10% above base rate interest on damages;

 

  • 10% uplift on those damages but no uplift on the interest.

 

Comment

This is how claimants’ Part 36 offers are supposed to work.

 

 

 

Additional Damages

 

In Downing v Peterborough and Stamford Hospitals NHS Foundation Trust [2014] EWHC 4216 (QB)

 

the High Court awarded the claimant the current maximum of £75,000.00 additional damages for matching or beating its own Part 36 offer.

 

The High Court held that it was obliged to make such an order unless it considers it “unjust” to do so.

 

The High Court also ordered indemnity costs and had this to say:-

 

“60. Mr Porter [counsel for the defendant] referred to the indemnity costs provision as “punitive” in character. In one sense he is right, but one must be careful in the use of language in this context. It is quite clear that this rule, which obviously has legislative sanction, was not intended to “punish” only conduct which is deemed in some way morally reprehensible or which was in breach of a rule or statutory requirement. A decision was taken, as a matter of public policy, to impose sanctions in order to encourage and facilitate the settlement of litigation and, correspondingly, to avoid parties incurring the costs involved in going to trial and also to save court time. Indemnity costs are, therefore, bound sometimes to be payable under CPR 36.14(3)(b) because an assessment of the merits proves not to have been justified or simply because an informed guess as to the outcome turns out to be wrong.

 

  1. It is elementary that a judge who is asked to depart from the norm, on the ground that it would be “unjust” not to do so, should not be tempted to make an exception merely because he or she thinks the regime itself harsh or unjust. There must be something about the particular circumstances of the case which takes it out of the norm.”

 

“62… The Defendant’s advisers made a particular judgment call which turned out (at least at first instance) to have been wrong. Such an award does not carry with it any implied criticism of their professional skill or of their conduct. It is just one of the consequences imposed by the rules. I rule, accordingly, that costs should be assessed from the relevant date on the indemnity basis and, further, that there should be interest on those costs at 10% above base rate under CPR 36.14(3)(c).”

 

In RXDX v Northampton Borough Council [2015] EWHC 2938 (QB)

the Queen’s Bench Division of the High Court applied some, but not all, of the punitive awards in CPR 36.14(3), which sets out the sums that the court will order “unless it considers it unjust”:-

(a)          interest on the whole or part on 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 on the indemnity basis from the date on which the relevant period expires;

 

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

 

(d)          an additional amount which shall not exceed £75,000.00…”

 

The claimant beat its offer to accept an 80% – 20% liability split at a split trial on liability.

The judge prepared a draft costs order providing for indemnity costs and interest, but no uplift in damages and no additional interest on damages.

The claimant submitted that the judge was not free to apply on some elements; it was a complete code and “a complete menu all of whose courses must be delivered”.

The judge rejected that argument and held that he should consider each individual sub-paragraph and whether its application would be unjust in the circumstances of the case.

 

Comment

 

The courts finally seem to be realising that the law as passed by Parliament is just that and that when a claimant matches or beats its Part 36 offer then they must get indemnity costs and must get the 10% enhancement on damages and should get interest at 10% above base rate unless it is “unjust” to do so.

 

Damages in claims in the Intellectual Property Enterprise Court are capped at £500,000.00.

 

In Abbott v Design and Display Ltd [2014] EWHC 3243 (IPEC)

 

that court held that the 10% increase in damages where a Claimant matches or beats its own Part 36 offer is not included within that cap and thus can be awarded over and above the limit of £500,000.00.

 

The court said:-

 

“…the “additional amount” has nothing to do with compensating a Claimant for any wrong committed by the Defendant in the substantive dispute. Along with other provisions in CPR36.14(3) it is solely intended to serve as an incentive to encourage claimants to make, and defendants to accept, appropriate Part 36 offers. That incentive is every bit as important to effective procedure in the IPEC as it is in other courts. The court has a discretion not to apply the provisions of CPR36.14(3) where the court considers that it will be unjust to do so. In my judgment that also allows the court to apply only some of those provisions and not others, as may be appropriate to the case. However the principle to be maintained in relation to CPR36.14(3) is that it should be applied in a way such as to generate a vigorous incentive to make and accept claimant’s Part 36 offers.”

 

However the court held that it had no power to exceed the cost cap; in other words it will not be possible to award indemnity costs if the limit has been reached by standard or scale costs.

 

Claimant’s Part 36 Offers on Liability

 

A claimant now only has to match its own offer at trial, or on judgment being entered, to achieve the very significant claimant’s Part 36 bonuses as set out in CPR 36.14.  CPR 36.14 (3) provides:

 

“Subject to paragraph (6), where rule 36.14 (1) (b) applies, the court will, 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 for some or all of the period starting with the day on which the relevant period expired;

 

  • his 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.”

 

CPR 36.14 (6) covers situations where a Part 36 offer has been withdrawn; has been changed so that its terms are less advantageous to the offeree, and the offeree has beaten the less advantageous offer; or has made less than 21 days before trial (unless the court has abridged the relevant period).

 

Consequently if a claimant makes a liability offer of 100% and then has judgment entered on that basis, or succeeds on a 100% liability at trial, then the claimant is clearly entitled to those extras.

 

In Hamed v Mills and Tottenham Hotspur Football Club and Others [2015] EWHC 387 (QB)

 

the High Court ordered indemnity costs against the first defendant from the date of the expiry of a liability offer whereby the claimant offered to resolve liability on the basis of 95% liability of the defendants and where the offer was not beaten at trial but rather on the third day of the trial the defendant conceded full liability.

 

Furthermore the offer had only been made to Doctor Mills and not Tottenham Hotspur Football Club.

 

Ultimately the Football Club were found to be liable for 70% of the costs and Doctor Mills for 30%.

 

The High Court ordered Doctor Mills not only to pay his costs on an indemnity basis from the expiry of the Claimant’s Part 36 offer on liability but to pay the difference between the claimant’s costs on a standard basis and the claimant’s costs on an indemnity basis on the other 70% of the costs ordered to be paid by the Football Club and in relation to the period after the expiry of the Part 36 offer.

 

However by virtue of The Offers to Settle in Civil Proceedings Order 2013 SI 2013 No 93 the claimant now also gets 10% additional damages in those circumstances.

 

Does a claimant get that 10% uplift on damages where it has matched or beaten its own offer on liability?

 

Thus for example a claimant offers to accept 95% and wins at trial.  Does the claimant get a 10% uplift on the 95% bringing it to 104.5%?  Or in the case of a 100% offer does the claimant get 110%?

 

The answer appears to be yes and in the Jolly case that I deal with below, simply dealing with CPR 36.14 and not the 10% damages uplift which was not then enforced, the court assumed that a claimant matching or beating its liability offer at trial, or on judgment being entered, would achieve all of the bonuses.  For reasons set out in that case, these were not awarded as judgment had not been entered.

 

However it must follow that the damages uplift would also apply where a claimant matches or beats its own liability offer.

 

Gordon Exall takes the same view.  On 16 August 2013, commenting on a blog, he said:-

 

“I think the 10% additional damages apply.  CPR 36.14 (b) deals with the situation where “judgment against the defendant is at least as advantageous to the claimant as proposals contained in a claimant’s Part 36 offer”.

 

If a claimant beats its own offer on liability then it has obtained a more advantageous offer and the new laws (10% extra damages etc.) come into effect.  The extra 10% may have to be assessed at a later date if the trial is on liability.”

 

In fact of course a claimant only has to match, not beat, its own offer and this is still very widely misunderstood and indeed in the Jolly case the offer made on liability was 99%.

 

I have recently heard of a barrister adamantly insisting that a claimant was not allowed to make a liability offer above 90%.  That is absolute nonsense.

 

A further additional point is whether the claimant gets indemnity costs in relation to all work done.  Thus a claimant offers to accept liability on a 100% basis and the defendant does not accept that offer.  There is then a huge amount of work done on quantum as well as on liability.  The claimant wins the case on a full liability basis.

 

My view is that the claimant gets indemnity costs on all of the work from 21 days after the date of the Part 36 offer as it has achieved a judgment against the defendant” at least as advantageous to the claimant as the proposals contained in a claimant’s Part 36 offer”.

 

All claimants should always make a Part 36 offer on liability on the day that the case comes into the office.

 

As we await the long talked about amendments to Part 36 there remains an un-level playing field; it is far harder for a claimant to get the benefits of matching or beating its own Part 36 offer as compared with the claimant’s liability when failing to beat a defendant’s Part 36 offer.

 

The key difference is that a claimant has just 21 days to accept a defendant’s offer; late acceptance triggers adverse costs from the end of that 21 day period as well as loss of recovery of own costs.

 

In contrast a defendant can accept as late as it wants without penalty.  The claimant bonuses – 10% damages increase, indemnity costs and additional interest on everything – only come in to play when judgment is entered for the claimant and indeed CPR 36.14 is entitled “Costs consequences following judgment.”

 

This itself is a slight softening of the old CPR 36.21 in the 1998 rules where the claimant had to beat its own offer – now it only has to match it – and had to do so at trial; judgment being entered was not sufficient under the old rules.

 

In Jolly v Harsco Infrastructure Ltd [2012] EWHC 3086 (QB)

 

the Queen’s Bench Division of the High Court considered the position where a defendant accepted the claimant’s offer on liability outside the 21 day period.

 

The claimant claimed the additional benefits, but the defendant pointed out, correctly, that these were not available to the claimant as judgment had not been entered.  Consequently the claimant applied for judgment to be entered.

 

The claimant accepted that there was no specific power to enter judgment in these circumstances, and accepted that there are situations where it would not be appropriate to enter judgment following acceptance of a Part 36 offer.  An example would be where the parties compromise a claim with a money offer, but without acceptance of liability.  The claimant submitted that here there was no valid reason not to implement the agreed liability apportionment by entering judgment with damages to be assessed.  CPR 36.11, which stays an action when an offer is accepted, did not preclude the court from entering judgment.

 

Here the acceptance had been late and the court found that CPR 36.10 and 36.11 applied and said:-

 

“13. If Part 36 is a self-contained code, and the claimant wishes to take advantage of its provisions, it seems to me that she is confined by its terms.  The defendant has accepted the claimant’s Part 36 offer outside the period of 21 days specified in CPR 36.2(2) (c), but before its withdrawal.  The applicable regime is therefore CPR 36.10, “Costs consequences of acceptance of a Part 36 offer” and CPR 36.11, “The effect of acceptance of a Part 36 offer”.  As we have seen CPR 36.10(5) provides for certain costs consequences where paragraph (4) (b) applies, unless the court orders otherwise.

 

  1. In principle CPR Part 36.10 (5) would appear to apply in this case but the claimant is entitled to argue for a different order and the court may agree. CPR 36.11 provides that a stay operates. As we have seen under CPR 36.11 (5) (b) the stay does not affect the power of the court to order costs.  Nothing in the self-contained code which is Part 36 provides for judgment to be entered in the situation.  Mr Steinberg [counsel for the claimant] could point to no specific power in the CPR.  To my mind the change in terminology from the 1998 version of Part 36 does not fill the gap.  What has happened in this case is that the issue of liability has been compromised by the late acceptance of a Part 36 offer.  The defendant has not consented to judgment being entered.  There is no power for me to enter judgment under Part 36.  In my judgment the appropriate order should follow CPR 36.10 and 36.11, and CPR 36.14 is not applicable.  The issue of liability should be stayed upon the terms of the claimant’s offer and the question of the costs relating to that issue (including the basis of the assessment of those costs) should be postponed to be dealt with under CPR 36.10 (4) and (5) or under the general discretion under CPR 44.3.”

 

Thus the court was not ruling out making an indemnity award of costs.

 

Secret Applications by NHS

 

In Evans v Royal Wolverhampton Hospitals NHS Foundation Trust [2014] EWHC 3185 QB

 

Mr Justice Leggatt overturned the first instance decision to allow a defendant to withdraw its Part 36 offer and to set aside the claimant’s acceptance of that offer in circumstances where the claimant was not notified of the application.

 

At paragraph 55 the judge held…

 

“(i)    It was not permissible to allow the defendant to withdraw its Part 36 offer and to set aside the claimant’s purported acceptance of that offer on an application made without notice to the claimant, and the ex parte order dated 7 August 2014 must therefore be set aside;

 

(ii)    The defendant cannot rely in opposition to the claimant’s application to enter judgment or in support of a request to adjourn the hearing on evidence or arguments not disclosed to the claimant and to which the claimant has no opportunity to respond;

 

(iii)   It follows that, unless the defendant serves the evidence and discloses the arguments on which it wishes to rely in opposition to the claimant’s application forthwith, the claimant is entitled to enter judgment pursuant to CPR 36.11(7).”

 

Here the defendant had made a secret application to withdraw a Part 36 offer and persuaded the original court that the reasons for the application, and evidence upon which it was based, should be withheld from the claimant.

 

This was a clinical negligence case. On 3 July 2014 the defendant made a Part 36 offer of £325,000.00 and on 23 July 2014 at 11.25am served a notice of withdrawal of the offer. As this was within 21 days of the offer having been made the defendant needed the court’s permission to withdraw it.

 

At 12.45pm on the same day, still within the 21 day period, the claimant accepted the offer.

 

The defendant did not pay up and the claimant applied for judgment pursuant to CPR 36.11(7) –

 

“If the accepted sum is not paid within 14 days or such other period as has been agreed the offeree may enter judgment for the appeal sum.”

 

Unbeknownst to the claimant the defendant made a without notice – ex parte in old money – application to withdraw the offer. The judge, remarkably in Mr Justice Leggatt’s view, “breath-taking, bizarre, strangest case I have ever read on procedure” in Mr Gordon Exall’s view, gave permission to withdraw the offer and dispensed with the requirement that the application notice and evidence be served on the claimant.

 

The judge who made the order held that the court had jurisdiction to permit the defendant to withdraw its Part 36 offer after a claimant had accepted it, but adjourned the question of whether the claimant was entitled to see the evidence upon which the order was made to a High Court judge.

 

Mr Justice Leggatt sets out how matters developed:-

 

“13. On 13 August 2014 the claimant received a copy of this order (which I will call “the ex parte order”). However, as sanctioned by paragraph 5 of the ex parte order, the claimant was not served with the application notice or the evidence which had been relied on in support of the defendant’s application. Nor was the claimant given any note or other record of what had been said at the hearing. Even now, the claimant and her representatives do not know the basis on which the ex parte order was made. The only information provided to them has been a redacted version of the defendant’s skeleton argument for the hearing on 7 August 2014. This contains a submission that there was a change of circumstances which justified permitting the defendant to withdraw its offer. However, in the copy disclosed to the claimant the parts of the skeleton argument which presumably explained the nature of this alleged change of circumstances have been blanked out.”

 

“17. I have not seen the defendant’s application notice dated 24 July 2014 nor the evidence relied on in support of its application for permission to withdraw its Part 36 offer; nor have I been told the grounds on which the defendant contends that there had been a change of circumstances which made it just to give such permission. The defendant has asked me to consider this material without it being disclosed to the claimant. The claimant objects to that course.”

 

The claimant relied on three recent decisions of the Supreme Court which considered the requirements for natural justice and faced with that submission the defendant conceded that the claimant could, and should, see the evidence and know the basis on which the order was made. The defendant asked for an adjournment.

 

Matters then proceeded as follows, and I quote from the judgment of Mr Justice Leggatt:-

 

“31. Before granting an adjournment, however, the court would need to be satisfied that there is a sufficient reason to do so. Mr Counsell submitted that, for this limited purpose, it is permissible for the court to consider evidence and argument which has not been disclosed to the claimant. In support of this contention he relied on the passages in the judgment of Lord Hope in the Al-Rawi case at para 72 [Al Rawi v Security Service [2012] 1 AC 531] and in the Bank Mellat case at para 81 [Bank Mellat v Her Majesty’s Treasury (No. 2) [2014] AC 700] which I have quoted above and on the similar distinction between ancillary matters and questions of substantive rights drawn in the BSkyB case [R (BSKyB Limited) v Central Criminal Court [2014] AC 885]. He submitted that the adjournment which the defendant is seeking is a procedural matter which does not engage the fundamental principles of open and natural justice. In due course the claimant can see the defendant’s evidence and the substantive questions raised by the applications can then be argued and decided in accordance with an open and fair procedure.

 

  1. Mr Samuel responded to the effect that justice delayed is justice denied. The claimant is at present being kept out of money which, if her acceptance of the defendant’s Part 36 offer was valid, she should have been paid by 6 August 2014. He submitted that the delay that has already occurred, and any further delay, affects her substantive rights and is causing her, as a severely disabled person, real prejudice. In these circumstances any application to adjourn the hearing can itself only properly be conducted on the basis that the grounds and evidence relied on in seeking an adjournment are disclosed to the claimant.

 

  1. The question which I found difficult when listening to the oral argument and which led me to reserve judgment is whether I should look at the defendant’s evidence solely for the purpose of deciding whether there is any merit in the application for an adjournment. On the one hand it seemed to me unfair to follow a procedure, for any purpose at all, which involves putting the parties on an unequal footing. But on the other hand I felt a concern that, without knowing the reasons which are said by the defendant to require an adjournment, I cannot say whether they are insufficient. I also felt a concern that it might be unfair to require the defendant to disclose the reasons to the claimant, or for the court to refuse to consider them unless they are disclosed, when it is the defendant’s case that such disclosure would itself defeat the reasons why an adjournment is required.

 

  1. On consideration, however, I have come to the clear conclusion that these concerns are misplaced and that I can and should reject the application for an adjournment without considering any evidence or argument which the defendant has refused to disclose to the claimant.”

 

Mr Justice Leggatt then launched into a strong attack on the way the matter had been handled and stressed the importance of full disclosure and went on to say at paragraph 49:-

 

“I conclude that it would be unlawful and improper for the court to receive evidence or argument from the defendant in support of a request for an adjournment without the claimant knowing the contents of that evidence and argument.”

 

The judge also said:

 

“It is difficult to see how it could ever be compatible with natural justice to determine a question of substantive legal right against a party to litigation at a hearing held without notice to that party…” (Paragraph 38).

 

“I cannot accept that it was or could have been appropriate in this case for the defendant to apply to the court for permission to withdraw its Part 36 offer and to have the claimant’s purported acceptance of the offer set aside without giving notice of the application to the claimant.” (Paragraph 39).

 

“ It was all the more wrong in my view when such permission was given and the claimant’s purported acceptance of the Part 36 offer was set aside at a hearing from which the claimant was excluded, to conceal from the claimant the grounds on which that order had been made.  I am not aware of any precedent for such procedure and none was cited. This is unsurprising as the procedure seems to me to represent a denial of justice.” (Paragraph 43).

 

As far as I am aware neither the claimant nor any of the judges dealing with this matter are any the wiser as to what the reasons lay behind the extraordinary behaviour of the Royal Wolverhampton Hospitals NHS Foundation Trust and its lawyers.

 

Part 36 & Contribution Proceedings

 

In Chief Constable of Hampshire Constabulary v Southampton City Council [2014] EWCA Civ 1541

 

the Court of Appeal held that the two year time limit for bringing a claim for a contribution under the Civil Liability (Contribution) Act 1978 ran from the date of acceptance of a Part 36 offer, not from the date of the subsequent court order.

 

It ruled that previous decisions holding that date of settlement, not the date of the consent order, was the relevant date were good law.

 

It rejected an argument that, because costs still had to be assessed the “amount to be paid” had not been determined.

 

Section 10(4) of the Limitation Act 1980 focuses on the sum which the Defendant agrees to pay for the actual damage caused, not any ancillary liability for costs, even though that liability can be subject to a contribution claim under the 1978 Act.

 

Non-Part 36 Offer

 

In Sugar Hut Group Ltd and Others v AJ Insurance [2014] EWHC 3775

 

the Commercial Court of the Queen’s Bench Division of the High Court reduced the successful claimant’s costs by 25% as they had failed to succeed on several heads of damages.

 

In one discreet area the defendant made a non-Part 36 offer which the claimant beat. However adding that to the total offer by the defendant produced a figure which the claimant failed to beat, although no Part 36 offers were made.

 

The claimant was also slow to give disclosure and pursued an unduly high claim for business interruption, leading to an overall figure below what the defendant would have paid. Consequently the defendant was awarded its costs from the date of the non-Part 36 offer.

 

The judge was very careful to distinguish previous cases and to make it clear that he was not reintroducing the “near miss” rule as in Carver v BAA, which had been overturned by Parliament. He recognised the danger that it may be seen that way.

 

The non-Part 36 offer made by the Defendant clearly showed that the defendant was prepared to value the loss of profit at £600,000.00, and it said so in the offer, and that is more than the judge awarded at the hearing.

 

The case contains a detailed examination of previous case law in relation to this matter and also in relation to depriving a successful claimant of part of its costs when it had lost on various issues.

 

CPR 44.2(5)(b) provides that the conduct of the parties includes “…whether it was reasonable for a party to… pursue or contest a particular allegation or issue…”

 

The court held that it was not reasonable for the claimants to pursue the claim for lost profit given the background set out above.

 

In making the reduction in costs the court also reflected the fact that the claimant had exaggerated its claim.
CPR 44.2(5)(d) expressly provides that the conduct of the parties which the court must have regard to under CPR 44.2(4)(a) includes whether “a claimant who has succeeded in the claim in whole or in part, exaggerated its claim”.

 

In Haynes v Department for Business, Innovation and Skills [2014] EWHC 643(QB)

 

the Queen’s Bench Division of the High Court confirmed that in cases involving multiple defendants, an individual defendant may, on acceptance of a Part 36 offer, be liable for non-specific common costs in addition to the costs attributable to the proceedings against it.

 

In Burrett v Mencap Ltd, 14 May 2014

 

DJ Ackroyd considered the position when a Part 36 offer is varied, rather than withdrawn with a fresh offer being made.

 

Here the defendant made a Part 36 offer of £15,000.00 to settle a personal injury claim but after reviewing video evidence reduced it to £2,500.00 by variation and the claimant accepted it within 21 days of the variation.

 

The wording of the revised offer was:-

 

“We hereby change the terms of our client’s Part 36 offer dated 19 July pursuant to CPR 36.3.6.”

 

Was the client entitled to costs up to the date of acceptance or was the defendant entitled to costs from the time for accepting the original, higher offer?

 

The judge found in favour of the defendant, holding that the costs consequences ran from the date of the first offer; there was nothing in the rules and no cases that indicated any entitlement to additional time when an offer is varied.

 

Given this finding a defendant intending to reduce an offer should do so by way of variation, rather than by withdrawing the original offer and replacing it with a lower offer.

 

Likewise a claimant who wishes to increase a claimant’s Part 36 offer. An accepting defendant would then face indemnity costs and increased interest from the date of the original, lower offer.

 

Ms Burrett was granted leave to appeal to the Court of Appeal but did not pursue the appeal.

 

CPR 36.5 to 36.7 read:-

 

“(5) Before expiry of the relevant period, a Part 36 offer may be withdrawn or its terms changed to be less advantageous to the offeree, only if the court gives permission.

 

(6) After expiry of the relevant period and provided that the offeree has not previously served notice of acceptance, the offeror may withdraw the offer or change its terms to be less advantageous to the offeree without the permission of the court.

 

(7) The offeror does so by serving written notice of the withdrawal or change of terms on the offeree.”

 

In Sutton Jigsaw Transport Ltd v Croydon London Borough Council – Queens Bench Division 27 February 2013

 

the claimant purported to accept the defendant’s Part 36 offer during an adjournment on the first day of the trial, first orally then by a hand written note given to the defendant. Two minutes after receiving the hand written note the defendant sent a fax to the claimant’s solicitors with written notice that the offer was withdrawn.
The court held that the offer had not been validly accepted.

 

CPR36.9(1) provides that a Part 36 offer is accepted by serving written notice on the offeror and CPR6.22(3) allows personal service of documents except for when an address for service has been provided. Here the claimant had not served written notice of acceptance on the defendant’s address for service before the offer was formally withdrawn.

 

The court refused the claimant’s application to dispense with service, or for retrospective substituted service, as this would have given it an unfair advantage over the defendant who had complied with the rules.

 

Here the claimant needed the court’s permission to accept the offer as the trial had already started, but the same principles would apply in a case where the court’s permission is not required.

 

In Magical Marking Ltd v Ware and Kay LLP [2013] EWHC 636 (Ch) the Claimant recovered £28,000.00 after a three week trial of a £10 million claim, and the defendant was awarded 85% of its costs.

 

The defendant had not made a Part 36 offer and the court held that that decision was reasonable given the automatic liability for the claimant’s costs had a Part 36 offer been accepted.

 

The court referred to the Court of Appeal decision in Medway PCT v Marcus [2011] EWCA Civ 750

 

which made the same point. In that case that claimant had a conditional fee agreement with a recoverable success fee and a recoverable After-the-Event insurance premium. The effect of a defendant’s Part 36 offer would have been to expose the defendant to a costs liability of several hundred thousand pounds even if the offer accepted had been £30,000, which was the eventual value of the claim.

 

In Fox v Foundation Piling Ltd [2011] EWCA Civ 790 the claim was for £280,000 but the claimant obtained judgment for £31,700, thus beating the defendant’s Part 36 offer of £23,500. The court held that the claimant was the winner and thus entitled to full costs. At paragraph 48 Jackson LJ said

 

“in a personal injury action the fact that the claimant has won on some issues and lost on other issues along the way is not normally a reason for depriving the claimant of part of his costs: … For example, the claimant may succeed on some of the pleaded particulars of negligence, but not on others.”

 

In Dumcum v Churm Oxford County Court 12 September 2014, HHJ Harris QC

 

exercised the court’s discretion to vary the usual costs consequences of accepting a defendant’s Part 36 offer in circumstances where the claimant had grossly exaggerated the claim.

 

The claimant commenced proceedings in 2011 and on 31 May 2013 served a Schedule of Loss claiming Special Damages of £1 million.

 

In January 2014 the claimant revised that Schedule of Loss, dropping it to £500,000.00.
The defendant then made a Part 36 offer of £202,500.00 on 14 January 2014 which was accepted in July 2014.

 

As this was after the expiry of the relevant period the starting point, unless the court ordered otherwise, was that the claimant was entitled to the costs of proceedings to the date of expiry of the relevant period and the defendant was entitled to costs thereafter.

 

In SG (a minor) v Hewitt [2012] EWCA Civ

 

the Court of Appeal held that CPR 36.10(4)(b) should be interpreted consistently with CPR 36.14(2) so that the court should make the usual order unless that would be “unjust in all the circumstances”.

 

Applying that, and authorities such as Hullock v East Riding County Council [2009] EWCA Civ 1039, the judge here held that when it can be properly inferred that the case would have settled much sooner had the claimant been reasonable then that fact should be reflecting costs. The original claim here was likely to have greatly inhibited the prospect of an early settlement and it would be unjust for the defendant to bear the costs incurred when the claimant was seeking to recover five times what she eventually settled for.

 

Accordingly the judge ordered that the claimant pay all of the defendant’s costs from the date of service of the initial exaggerated Schedule of Loss.

 

This problem has not been addressed in the new post April 2015 Part 36.

 

Knowledge of level of costs is key when considering making or accepting a Part 36 offer, but there is no entitlement to such information.

 

In Mehjoo v Harben Barker (A firm) [2013] EWHC 1669 (QB)

 

the defendant complained that it did not know the claimant’s costs and therefore could not judge the offer. The Queen’s Bench Division of the High Court held that the defendant was not entitled to the information under Part 36 but suggested that CPR 36.8 be amended so that the clarification process covered costs information.

 

That would assist those in receipt of a Part 36 offer but would not help defendants considering making such an offer.

 

In Thinc Group Ltd v Kingdom [2013] EWCA Civ 1306 the potential paying party asked for such costs information so as to assess the Part 36 offer, but there was no response.

 

The Court of Appeal held that that failure to respond could properly be taken in to account in deciding not to make the usual costs order.

 

An offer purported to be under Part 36 and which makes an inclusive offer dealing with damages and costs is in fact not a valid Part 36 offer, but rather a Calderbank offer, which can be taken into account under CPR 44.3.

 

There is a tension here in that although the court can take any offer into account it should not turn offers that fail to comply with Part 36 into Part 36 offer – see

 

Hammersmith Properties (Welwyn) Ltd v Saint-Gobain Ceramics and Plastics Ltd [2013] EWHC 2227 (TCC)

 

In Sycamore Bidco Ltd v Breslin [2013] EWHC 583 (Ch)

 

the court expressed the view that the defendant could have made a counter-offer under Part 36 offering to pay the damages sum claimed but less than all of the costs.

 

In Bellway Homes Ltd v Seymour (Civil Engineering Contractors) Ltd [2013] EWHC 1890 (TCC)

 

the court suggested that is was open to the parties to agree when using Part 36 that the issue of costs be left to the court.

 

Neither of these suggestions reflect the wording of Part 36 and both appear to be inconsistent with the decision of the Court of Appeal in

 

Gibbon v Manchester City Council [2010] EWCA Civ 726

 

to the effect that Part 36 is a self-contained code whose rules must be followed and which is not bound by ordinary common law principles.

 

In Procter and Gamble v Svenska Cellulosa Aktiebolaget SCA [2012] EWHC 2839 (Ch)

 

the claimant made a claimant’s offer, expressed to be under Part 36, but offering to forego its own Part 36.10 entitlement to costs and indeed to pay the defendant’s costs. Here the judge said:-

 

“I do not accept that it is impossible for a claimant to comply with Part 36 unless he requires to be paid his costs…”

 

Again this appears to conflict with the clear wording of Part 36.

 

Costs

 

With effect from 1 April 2013 the old CPR 47.19 dealing with offers in costs only proceedings has gone and Part 36 now covers all costs proceedings. This is not without its problems – see Provisional Assessment.

 

The 10% uplift for a receiving party matching or beating its own Part 36 offer applies in detailed costs proceedings, including provisional assessment which is a subset of detailed assessment.

 

Costs belong to the client, and therefore in order to charge this extra 10% the solicitor – client retainer must expressly allow for this. In a Conditional Fee Agreement funded cases, this should be in the CFA itself.

 

It should be noted that the anti-claimant bias of Part 36 remains; a claimant only gets the enhancement if judgment is given at a hearing and thus a defendant is free to accept a claimant’s Part 36 offer years out of time with no penalty, whereas a claimant who accepts a defendant’s Part 36 offer out of time pays every penny of costs of both sides from the minute after the expiry date for accepting the offer.

 

The 10% claimant’s uplift is a curious beast.  In reality it is a punishment of the defendant quantified by reference to damages, except that if there is no monetary award, then the 10% is calculated by reference to costs.

 

In reality it is a costs penalty.  Whether it is damages or costs, they belong to the client, and specific provision must be made in the contract with the client if any charge is to be made.

 

If the contract provides for the solicitor to take up to 25% of damages over and above recoverable costs, then clearly 25% may be taken, provided that this does not cause the solicitor to fall foul of the rules in relation to success fees, and provided it is justified by the amount of work done.  This will always need careful retrospective analysis – see CFA Analysis Form re The Underwoods Method.

 

Note that if the claimant has matched or beaten his or her own Part 36 offer, then there should not be much “fat” in the difference between solicitor and own client costs and recoverable costs as indemnity costs, that is solicitor and own client costs, should be awarded in such a scenario.

 

Thus it will be much more likely that the success fee, with all of its restrictions, will need to be utilized.  This begs the question as to what element of the 10% uplift falls into the Allowable Damages Pool.  Clearly the 10% on general damages and specials to date fall in to the pool, but so also should future specials, as the rule preventing success fee deduction from this element is to ensure that the claimant is not deprived of, say, a quarter of future care.

 

In reality this 10% is a bonus, a windfall, and is not required to fund future care costs.

 

In practice a client who has won and matched or beaten their own Part 36 offer and achieved this bonus is unlikely to complain, but some guidance from the courts would be welcome.

 

The problem is that the description of specified damages in Article 5 of The Conditional Fee Agreements Order 2013 neither includes, nor excludes this type of award from the Allowable Damages Pool.  A similar problem arguably arises in relation to bereavement damages.

 

Article 5(2) reads:

 

“(2)        The description of damages specified for the purposes of section 58(4B)(d) of the Act are-

 

  • general damages for pain, suffering and loss of amenity; and

 

  • damages for pecuniary loss, other than future pecuniary loss,

 

net of any sums recoverable by the Compensation Recovery Unit of the Department for Work and Pensions”.

 

It will be seen that the Article states what does form the Allowed Damages Pool, rather than simply listing exclusions. Thus it is not clear whether any part of bereavement damages may be taken by way of a success fee.  This problem is largely avoided by using the Underwoods Method.

 

An issue also arises in relation to Part 36 offers in detailed assessment proceedings (see below).

 

It must be noted carefully that the 10% Part 36 uplift is additional to, and separate from, the Simmons v Castle 10% uplift on general damages. There are obvious problems in relation to the interplay between the two.

 

Supposing a claimant offered £10,000.00 pre 1 April 2013 and a defendant offered £9,500.00, also pre 1 April 2013, and in June 2013 the court awards £9,200.00, uprated by 10% to £10,120.00.

 

Has the claimant beaten its own offer, thus qualifying for indemnity costs, or has the claimant failed to beat the defendant’s offer, thus incurring liability for all of the defendant’s costs from 21 days after the defendant’s offer?

 

Why should a defendant who made an offer above what a court would have ordered not get the Part 36 benefits? In the scenario set out above salt will be rubbed in to the defendant’s wound as he will have to pay indemnity costs as well!

 

Of course it can be argued that any defendant could have increased its Part 36 offer by 10%, but why should a defendant pay over the odds in relation to a regime that was not yet in?

 

In any event that is not a complete solution.

 

Supposing a defendant in a clinical negligence case made an offer of £200,000.00 in August 2010 and, in October 2012, increased that to £220,000.00 and in June 2013 the court awards £190,000.00 uprated to £209,000.00.

 

The defendant has at each stage offered more than the claim is worth, but presumably will only get costs protection from the Part 36 offer made in October 2012. Thus, entirely unfairly, the defendant will have to pay both its own costs and the claimant’s costs for the two years plus between August 2010 and October 2012, even though throughout that period there was on offer a sum which should have been accepted.

 

Actually it is even worse. The Offers to Settle in Civil Proceedings Order 2013, S.I. 2013 No 93, implementing Section 55 of LASPO allows for a damages uplift where a claimant matches or beats its own Part 36 offer.

 

This 10% is wholly separate from the 10% general damages uplift. It applies in all cases, contract as well as tort, and to special damages as well as general damages, although subject to a cap of £75,000.00 in relation to the additional award.

 

Let us revisit the clinical negligence case above. In August 2010 the defendant makes a Part 36 offer of £440,000.00 to include general damages and special damages. As we have seen the correct level of general damages is £190,000.00. Let us assume that £250,000.00 is the correct level of special damages.

 

However this time the defendant has not increased its offer to reflect the proposed general damages uplift.

 

On 9 March 2013 the claimant makes a Part 36 offer of £445,000.00.

 

In June 2013 the court awards £190,000.00 general damages and £250,000.00 special damages, total, in old money, of £440,000.00.

 

The general damages are uprated by 10% to £209,000.00, giving a new total of £459,000.00, which means that the claimant has beaten its Part 36 offer made just 9 weeks earlier, and in the certain knowledge that the judgment would be given after 1 April 2013.

 

In fact it is much more complicated than that.  Part 36 offers usually encompass both general damages and special damages in one sum.  However it is only general damages, not special damages, that will receive the 10% uprating, so in each case the court, having made its award, will need to dissect any Part 36 offer – claimant’s as well as defendant’s – to see precisely how much of the offer related to general damages, to see who has beaten what.

 

Law is often said to be a matter of chance but courts should not be casinos, and it is never a good idea to make the outcome of a case dependent upon the date that judgment is given.

 

Part 36 in Costs Proceedings

 

CPR 47.19 was scrapped with effect from 1 April 2013 and now Part 36 applies to detailed assessment proceedings, but the old CPR 47.19 applies where detailed assessment proceedings were commenced before 1 April 2013, and this is achieved by the Civil Procedure (Amendment) Rules 2013 at s.22(1).

 

“The provision made by rule 47.20(1) to (5) and (7) in the Schedule (liability for costs of detailed assessment proceedings) does not apply to detailed assessments commenced before 1 April 2013 and in relation to such detailed assessments, rules 47.18 and 47.19 as they were in force immediately before 1 April 2013 apply instead.”

 

Where a Part 47.19 offer was made prior to 1 April 2013, but notice of commencement was not served until 1 April 2013 or after, then the new Part 36 provisions apply, but it is not clear what happens in relation to a successful CPR 47.19 offer made before 1 April 2013 in such circumstances.

 

Clearly a paying party should not repeat the offer post 1 April 2013 as a Part 36 offer as acceptance would deprive the paying party of any right to any costs of detailed assessment and entitles the receiving party to all costs up to acceptance, including those incurred after the reasonable CPR 47.19 offer was made.

 

Thus this throws up similar problems to the Simmons v Castle uplift dealt with above.

 

A paying party is probably best to leave the CPR 47.19 offer in place and to rely on the court to exercise its discretion.

 

The presumption remains that a receiving party is entitled to costs of the assessment.  New CPR 47.20(3) states:

 

“In deciding whether to make some other order, the court must have regard to all the circumstances, including-

 

  • the conduct of all the parties;

 

  • the amount, if any, by which the bill of costs has been reduced; and

 

  • whether it was reasonable for a party to claim the costs of a particular item or to dispute that item”.

 

The paying party should seek to persuade the court that “all the circumstances” include a successful pre-Jackson CPR 47.19 offer.

 

CPR 47.19 offers have disappeared and Part 36 applies, incorporated into detailed assessment proceedings by virtue of CPR 47.20(4), the whole of CPR 47.20 is set out at the end of this piece, and the relevant part now reads:-

 

“Costs consequences following detailed assessment

 

36.14

(1) Subject to rule 36.14A, this rule applies where upon judgment being entered –

  • a claimant fails to obtain a judgment more advantageous than a defendant’s Part 36 offer; or
  • judgment against the defendant is at least as advantageous to the claimant as the proposals contained in a claimant’s Part 36 offer.

 

(1A) For the purposes of paragraph (1), in relation to any money claim or money element of a claim, ‘more advantageous’ means better in money terms by any amount, however small, and ‘at least as advantageous’ shall be construed accordingly.

 

(2) Subject to paragraph (6), where rule 36.14(1)(a) applies, the court will, unless it considers it unjust to do so, order that the defendant is entitled to –

  • costs from the date on which the relevant period expired; and
  • interest on those costs.

 

(3) Subject to paragraph (6), where rule 36.14(1)(b) applies, the court will, 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(GL)for some or all of the period starting with the date on which the relevant period expired;
  • hiscosts 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(GL); and
  • an additional amount, which shall not exceed £75,000, calculated by applying the prescribed percentage set out below to an amount which is –
    • (i) where the claim is or includes a money claim, the sum awarded to the claimant by the court; or
    • (ii) where the claim is only a non-monetary claim, 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 up to £1,000,000 10% of the first £500,000 and 5% of any amount above that figure

 

Subparagraph (d)(i) appears to be drafted widely enough to cover a claim for costs. The successful receiving party therefore gets a 10% uplift on whatever the bill is assessed at plus the other benefits listed at (a) to (c).

 

The fact that the Judge does not make the final calculations also causes obvious problems with Part 36, specifically how does the Judge know whether a party has succeeded in relation to a Part 36 offer?

 

If the Judge does not know who or who has not won on Part 36, then how does the Judge know what decision to make in relation to the costs of the assessment?

 

A receiving party who matches or beats its own Part 36 offer receives a 10% uplift on costs, up to a maximum uplift of £75,000, calculated in the same way as the Part 36 uplift on damages. Care needs to be taken in drafting the retainer to ensure that you entitle yourself to this sum, as costs belong to the client and an additional sum cannot be charged in the absence of clear agreement.

 

Offers

 

Contrary to what some commentators have said, there is no requirement on a paying party to make an offer, either under Part 36 or otherwise.

 

The new Practice Direction 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, (my italics) that party offers to pay in settlement of the total costs claimed. The paying party may also make an offer under Part 36.”

 

Thus there is no requirement to make an offer; if there was, then the words “if any” would be superfluous.

 

I have not come across anyone who can explain to me what is the purpose of the open offer, but those drafting the Civil Procedure Rules and the Practice Directions move in mysterious ways.

 

Clearly the right to make a Calderbank offer in costs proceedings – that is an offer “without prejudice save as to the costs of assessment” remains as CPR 36.1(2) reads:

 

“Nothing in this Section prevents a party making an offer to settle in whatever way he chooses, but if the offer is not made in accordance with rule 36.2, it will not have the consequences specified in rules 36.10, 36.11 and 36.14.”

 

Will a party who wins on its open offer ever not be awarded the costs of the detailed assessment?

 

Practice Direction 14.3(d) to CPR 47.15 states that when a party request a provisional assessment, it must file with the court:

 

“the offers made (those marked “without prejudice save as to costs” or made under Part 36 must be contained in a sealed envelope, marked “Part 36 or similar offers” but not indicating which party or parties have made them).”

 

Thus it is clear that the rules envisage offers other than those under Part 36 being relevant to the costs of assessment.

 

The drafters of the new rules appear not to understand the difference between an offer that is “without prejudice save as to the costs of assessment” and one made “without prejudice save as to costs.”

 

Costs Practice Directions

 

Practice Direction 47 reads:

“14.3 In cases falling within rule 47.15, when the receiving party files a request for a detailed assessment hearing, that party must file—

(a) the request in Form N258;

(b) the documents set out at paragraphs 8.3 and 13.2 of this Practice Direction;

(c) an additional copy of the bill, including a statement of the costs claimed in respect of the detailed assessment drawn on the assumption that there will not be an oral hearing following the provisional assessment;

(d) the offers made (those marked “without prejudice save as to costs” or made under Part 36 must be contained in a sealed envelope, marked “Part 36 or similar offers”, but not indicating which party or parties have made them);

(e) completed Precedent G (points of dispute and any reply).

 

Note that a receiving party which makes a Part 36 offer that is not beaten at assessment, including provisional assessment which is a subject of detailed assessment, is entitled to a 10% uplift on costs.

 

Costs belong to the client and therefore in order to charge the extra 10% the solicitor – client retainer must expressly allow for this.  In a CFA funded case this should be in the CFA.

 

Carver v BAA plc reversed

With effect from 1 October 2011 CPR 36 was amended with a new Rule 36.14(1A) reading:

 

“For the purposes of paragraph (1), in relation to any money claim or money element of a claim, “more advantageous” means better in money terms by any amount, however small, and “at least as advantageous” shall be construed accordingly.”

 

The effect of this rule change is formally to overturn the decision in

 

Carver v BAA plc [2008] EWCA Civ 412 [2008] 3 All ER 911

 

obviously wrong but understandable, insofar as it survived the conjoined cases of

 

Gibbon v Manchester City Council and

L G Blower Ltd v Reeves [2010] EWCA Civ 726

 

It is worded this way to deal with claimants’ offers where the claimant needs to secure a result “at least as advantageous” as his or her own offer to achieve the benefits of making a successful Part 36 offer and defendants’ offers where a claimant needs to secure a result “more advantageous” than the defendant’s Part 36 offer to avoid the adverse costs consequences of failing to beat a defendant’s Part 36 offer.

 

This was one of the first proposals in the Jackson Report to be implemented.

 

The amendment was effected by the 57th update to the Civil Procedure Rules.

 

In a separate Part 36 development in relation to the road traffic portal, Paragraph 7.55 has been amended to make it clear that there is a difference between open offers and Part 36 offers.

 

Where damages have not been agreed in Stage 2 and the case is about to proceed to Stage 3, the protocol requires the claimant to send to the defendant the Court Proceedings Pack (Part A and Part B).

 

Part A of the pack contains the final open offers of each party, after assessing damages the district judge opens the sealed envelope containing Part B, which gives the final Part 36 offers of each party. This is for the purpose of deciding costs.

 

PORTALS AND PART 36

 

CPR 36.21 envisages three scenarios in relation to costs consequences following a Stage 3 hearing:

 

  • where the claimant fails to beat the defendant’s protocol offer then the claimant must pay the defendant’s Stage 3 costs as well as not recovering its own Stage 3 costs;

 

  • where the claimant beats the defendant’s offer but does not match its own offer the defendant pays the claimant’s Stage 3 costs;

 

  • where the claimant beats the defendant’s offer and matches or beats its own offer the defendant pays:

 

  • the claimant’s Stage 3 costs;
  • interest on those Stage 3 costs at a rate not exceeding 10% above base rate;
  • 10% additional damages;
  • interest on all damages at a rate not exceeding 10% above base rate running from the first business day after the court proceedings pack (part A and part B) was sent to the defendant.

 

FIXED RECOVERABLE COSTS AND PART 36

 

Section 1 of Part 36 remains in force for non-portal cases and also applies to cases which exit either of the portals.

 

A new CPR 36.10A provides that where a claimant accepts a Part 36 offer within the relevant period the defendant will pay the claimant’s costs up to the stage reached when the offer is accepted.

 

This is clearly open to abuse.   A defendant makes an offer which the claimant intends to accept but during the 21 day acceptance period another stage is due to be passed.  The claimant delays acceptance thus triggering an additional fee as the next stage is passed.

 

Where a defendant’s Part 36 offer is accepted after the relevant period the claimant gets the appropriate fixed costs applicable at the date of expiry of the relevant period, and the claimant pays the defendant’s costs from expiry to acceptance.

 

Where a claimant accepts the defendant’s protocol offer after the claim has exited the portal the claimant gets Stage 1 and 2 costs but pays the defendant’s costs from expiry to acceptance.

 

Judgment

 

A new CPR 36.14A deals with the position on judgment, rather than acceptance of an offer, but the principles are exactly the same, save that the claimant who matches his or her own offer at trial gets indemnity costs, not fixed recoverable costs, from the date of expiry of the period for accepting the offer.

 

Defendants’ costs are capped, not fixed, by reference to the level of the claimants’ fixed recoverable costs.

 

Some scenarios

 

  1. The Claimant accepts the Defendant’s Part 36 offer within time.

 

The Claimant is entitled to fixed costs based on the date of service of the notice of acceptance – see CPR36.10A (2). Clearly it may be in the Claimant’s interest to accept the offer towards the end of the relevant period if that is after a further trigger point increasing costs, for example the case is allocated or is listed during the period for accepting the offer.

 

This can be particularly dramatic if the Part 36 offer is made before proceedings are issued and the Claimant then issues proceedings and accepts the Part 36 offer as there is a very sharp jump in fixed costs upon the occasion of issuing proceedings.

 

There is a potential argument that that is an abuse of process but the rules do not deal with that and a Claimant could always argue that he or she had decided not to accept the offer and then issued the proceedings and then changed his or her mind.

 

  1. The Claimant accepts the Defendant’s Part 36 offer out of time.

 

The Claimant is entitled to fixed costs until the date of the expiry of the relevant period and the Defendant is entitled to the difference if any between those fixed costs payable to the Claimant and the fixed costs that would have been payable at the date of acceptance of the offer.

 

Thus if the Claimant accepts late but no further trigger points have been passed then the Claimant will not have to pay the Defendant anything. If however a further trigger point is passed, for example allocation which increases the fixed costs by say £800.00 in that particular case, then a Claimant must account to the Defendant for £800.00, effectively as a set off against fixed costs – see CPR36.10A(4).

 

  1. The Claimant fails to beat the Defendants Part 36 offer at trial.

 

The position is as above, that is that the Defendant is entitled to the difference, if any, between the fixed costs payable to the Claimant at the expiry of the period for accepting the offer and the fixed costs payable at the end of the trial. Thus this will always include the fixed advocacy costs unless the trial takes place within the period for accepting the Part 36 offer – see CPR36.14A(2).

 

  1. The Claimant accepts the Defendant’s protocol offer after the case leaves the protocol.

 

The Claimant is entitled to stage 1 and stage 2 protocol costs only. The Defendant is entitled to the difference between that sum and the fixed costs in Section IIIA  calculated at the date of acceptance of the offer – see CPR36.10A(5).

 

  1. The Claimant fails at trial to beat the Defendant’s protocol offer.

 

The Claimant is entitled only to stage 1 and stage 2 protocol costs and the Defendant is entitled to the difference between that sum and the fixed costs following trial – see CPR36.14A(3).

 

  1. The Claimant matches or beats at trial its own Part 36 offer.

 

Damages will automatically be increased by 10% and this will cause a slight increase in the fixed costs, as those are partly dependent upon the amount of damages awarded.

 

Interest on those costs may be awarded at up to 10% above base rate.

 

Disbursements will be dealt with on an indemnity basis.

 

The area of uncertainty is as to whether the Claimant matching or beating its own Part 36 offer frees the case from fixed costs and results in costs being dealt with on an open basis and indeed on the indemnity basis.

 

The rules do not clearly say that but others, including District Judge Suzanne Burn, who sits on the Rules Committee, take the view that in such circumstances costs are open and on the indemnity basis.

 

  1. The Claimant discontinues the claim.

 

By definition, at present, a portal/fixed recoverable costs claim must be a personal injury claim as the system does not apply to any other type of claim.

 

If there was no potential recoverable additional liability, that is a success fee or After-the-Event insurance premium, then Qualified One-Way Costs Shifting applies and that is not defeated by discontinuance of a claim. Consequently no costs would be awarded.

 

If it is a case where there was a potential recoverable additional liability then Qualified One-Way Costs Shifting does not apply.

 

In those circumstances the order for costs in the Defendant’s favour will not exceed the fixed costs that would have been payable to the Claimant at the stage at which the costs order was made – see CPR45.29F(2).

 

Fixed costs are in part calculated on the value of the claim and as, by definition, on discontinuance there has been no award of damages, CPR45.29F(4) provides for a complicated method of attributing a value to the claim so as to enable a fixed costs calculation to be made. This is largely based on the information contained in the claim form, although any claim for vehicle based damages is excluded.

 

  1. A Claimant’s claim fails at trial.

 

The position is as above, that is that in the absence of a recoverable additional liability the Claimant will not pay costs as he or she will be protected by Qualified One-Way Costs Shifting.

 

If QOCS does not apply then the basis for calculating the Defendant’s costs is as set out above.

 

Note that in relation to either discontinuance or failure at trial where there was a potential additional liability recoverable the Claimant could now argue that in fact that sum was never recoverable due to the views of the Supreme Court expressed in the case of Coventry and others v Lawrence and another (No 2) [2014] UKSC 46, and that consequently  Qualified One-Way Costs Shifting applies and there can be no adverse costs liability.

 

  1. The Claimant’s claim fails and one of the exceptions to Qualified One-Way Costs Shifting applies, for example the claim is struck out on certain specified grounds under CPR44.15 or the claim is found to be fundamentally dishonest under CPR44.16.

 

In these circumstances the Defendant’s costs are not limited by reference to fixed costs but will be assessed in the usual manner applying CPR44.3.

 

If one of the exceptions to QOCS is satisfied this always involves serious criticism of the Claimant’s behaviour and it is very likely that the open costs order will be for costs on the indemnity basis.

 

  1. In a road traffic accident case the Defendant’s counterclaim to which the Road Traffic Accident Protocol applies succeeds and the court makes an order in the Defendant’s favour.

 

The Defendant’s costs are assessed by reference to section III A of CPR45 in the same way as a Claimant’s costs would be have been dealt with.

 

Where a Defendant’s counterclaim succeeds but there is no personal injury element then the Defendant is limited to recovering half of the relevant type A and B stage three costs, that is £125.00 if the case does not go to trial and £250.00 where it does.

 

  1. Note that clause 49 of the Criminal Justice and Courts Bill, currently before Parliament, requires a court to dismiss the whole of a personal injury claim if it is satisfied on the balance of probabilities that the Claimant has been fundamentally dishonest in relation to the primary claim or a related claim.

 

The court must record the amount of damages it would otherwise have awarded and any costs order then made against the Claimant must take into account the foregone damages.

 

Thus if the Claimant would have won, but for the fundamental dishonesty, and would have received £5,000.00 and the Defendant’s costs of the whole action are £7,000.00 then the Claimant has to pay to the Defendant the sum of £2,000.00.

 

Nothing is stated directly in the bill but it is presumed that in such cases fixed costs have no application and obviously Qualified One-Way Costs Shifting has no application as that is defeated by fundamental dishonesty, the term used in both the rules and clause 49 of the bill.

 

Qualified One Way Costs Shifting – Defamation and Privacy

 

Costs protection in defamation and privacy claims: the Government’s proposals

 

Annex D

 

“69.        The effect of “Part 36” offers is an important consideration.  A claimant who does not accept the defendant’s Part 36 offer to settle, but does not ultimately beat that offer will, on the standard Part 36 offer basis, be liable for the defendant’s additional costs incurred after the time of the offer that the claimant did not accept and failed to beat.  Those additional costs may be recovered by the defendant, but only by set-off up to the level of damages awarded (on the same basis as costs of “bad applications in good cases”)”.

 

 

CPR 36 is by far the most important rule and the whole post 6 April 2015 rule appears here:-

 

 

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PART 36 OFFERS TO SETTLE

Contents of this Part

Title                                                                                                                                       Rule number

Scope of this Part                                                                                                             Rule 36.1

Section 1 – Part 36 Offers to Settle

 

GENERAL

Scope of this Section                                                                                                      Rule 36.2

Definitions                                                                                                                          Rule 36.3

Application of Part 36 to appeals                                                                               Rule 36.4

 

MAKING OFFERS

Form and content of a Part 36 offer                                                                         Rule 36.5

Part 36 offers – defendant’s offer                                                                            Rule 36.6

Time when a Part 36 offer is made                                                                           Rule 36.7

 

CLARIFYING, WITHDRAWING AND CHANGING THE TERMS OF OFFERS

Clarification of a Part 36 offer                                                                                     Rule 36.8

Withdrawing or changing the terms of a Part 36 offer generally                  Rule 36.9

Withdrawing or changing the terms of a Part 36 offer before the expiry of the relevant period                                                                                                                                                   Rule 36.10

ACCEPTING OFFERS

Acceptance of a Part 36 offer                                                                                     Rule 36.11

Acceptance of a Part 36 offer in a split-trial case                                                 Rule 36.12

Costs consequences of acceptance of a Part 36 offer                                      Rule 36.13

Other effects of acceptance of a Part 36 offer                                                    Rule 36.14

Acceptance of a Part 36 offer made by one or more, but not all, defendants

Rule 36.15

UNACCEPTED OFFERS

Restriction on disclosure of a Part 36 offer                                                            Rule 36.16

Costs consequences following judgment              Rule 36.17

 

PERSONAL INJURY CASES

Personal injury claims for future pecuniary loss                                                  Rule 36.18

Offer to settle a claim for provisional damages                                                   Rule 36.19

Costs consequences of acceptance of a Part 36 offer where Section IIIA of Part 45 applies                                                                                                                                                            Rule 36.20

Costs consequences following judgment where Section IIIA of Part 45 applies

Rule 36.21

Deduction of benefits and lump sum payments                                                 Rule 36.22

 

MISCELLANEOUS

Cases in which the offeror’s costs have been limited to court fees            Rule 36.23

Section II – RTA Protocol and EL/PL Protocol Offers to Settle

Scope of this Section                                                                                                      Rule 36.24

Form and content of a Protocol offer                                                                      Rule 36.25

Time when a Protocol offer is made                                                                        Rule 36.26

General provisions                                                                                                          Rule 36.27

Restrictions on disclosure of a Protocol offer                                                       Rule 36.28

Costs consequences following judgment                                                                              Rule 36.29

Deduction of benefits                                                                                                    Rule 36.30

Scope of this Part

 

36.1.—(1) This Part contains a self-contained procedural code about offers to settle made pursuant to the procedure set out in this Part (“Part 36 offers”).

 

(2) Section I of this Part contains general rules about Part 36 offers.

 

(3) Section II of this Part contains rules about offers to settle where the parties have followed the Pre-Action Protocol for Low Value Personal Injury Claims in Road Traffic Accidents (“the RTA Protocol”) or the Pre-Action Protocol for Low Value Personal Injury (Employers’ Liability and Public Liability) Claims (“the EL/PL Protocol”) and have started proceedings under Part 8 in accordance with Practice Direction 8B.

 

SECTION I Part 36 Offers to Settle

GENERAL

Scope of this Section

 

36.2—(1) This Section does not apply to an offer to settle to which Section II of this Part applies.

 

(2) Nothing in this Section prevents a party making an offer to settle in whatever way that party chooses, but if the offer is not made in accordance with rule 36.5, it will not have the consequences specified in this Section.

 

(Rule 44.2 requires the court to consider an offer to settle that does not have the costs consequences set out in this Section in deciding what order to make about costs.)

 

(3) A Part 36 offer may be made in respect of the whole, or part of, or any issue that arises in—

 

(a)a claim, counterclaim or other additional claim; or

 

(b)an appeal or cross-appeal from a decision made at a trial.

 

(Rules 20.2 and 20.3 provide that counterclaims and other additional claims are treated as claims and that references to a claimant or a defendant include a party bringing or defending an additional claim.)

 

Definitions

 

36.3.  In this Section—

 

(a)the party who makes an offer is the “offeror”;

 

(b)the party to whom an offer is made is the “offeree”;

 

(c)a “trial” means any trial in a case whether it is a trial of all issues or a trial of liability, quantum or some other issue in the case;

 

(d)a trial is “in progress” from the time when it starts until the time when judgment is given or handed down;

 

(e)a case is “decided” when all issues in the case have been determined, whether at one or more trials;

 

(f)“trial judge” includes the judge (if any) allocated in advance to conduct a trial; and

 

(g)“the relevant period” means—

 

(i)in the case of an offer made not less than 21 days before a trial, the period specified under rule 36.5(1)(c) or such longer period as the parties agree;

 

(ii)otherwise, the period up to the end of such trial.

Application of Part 36 to appeals

 

36.4.—(1) Except where a Part 36 offer is made in appeal proceedings, it shall have the consequences set out in this Section only in relation to the costs of the proceedings in respect of which it is made, and not in relation to the costs of any appeal from a decision in those proceedings.

 

(2) Where a Part 36 offer is made in appeal proceedings, references in this Section to a term in the first column below shall be treated, unless the context requires otherwise, as references to the corresponding term in the second column—

 

Term                                                                                     Corresponding term

Claim                                                                                     Appeal

Counterclaim                                                                     Cross-appeal

Case                                                                                      Appeal proceedings

Claimant                                                                              Appellant

Defendant                                                                          Respondent

Trial                                                                                        Appeal hearing

Trial judge                                                                           Appeal judge

 

MAKING OFFERS

Form and content of a Part 36 offer

 

36.5.—(1) A Part 36 offer must—

 

(a)be in writing;

 

(b)make clear that it is made pursuant to Part 36;

 

(c)specify a period of not less than 21 days within which the defendant will be liable for the claimant’s costs in accordance with rule 36.13 or 36.20 if the offer is accepted;

 

(d)state whether it relates to the whole of the claim or to part of it or to an issue that arises in it and if so to which part or issue; and

 

(e)state whether it takes into account any counterclaim.

 

(Rule 36.7 makes provision for when a Part 36 offer is made.)

 

(2) Paragraph (1)(c) does not apply if the offer is made less than 21 days before the start of a trial.

 

(3) In appropriate cases, a Part 36 offer must contain such further information as is required by rule 36.18 (personal injury claims for future pecuniary loss), rule 36.19 (offer to settle a claim for provisional damages), and rule 36.22 (deduction of benefits).

 

(4) A Part 36 offer which offers to pay or offers to accept a sum of money will be treated as inclusive of all interest until—

 

(a)the date on which the period specified under rule 36.5(1)(c) expires; or

 

(b)if rule 36.5(2) applies, a date 21 days after the date the offer was made.

Part 36 offers – defendant’s offer

 

36.6.—(1) Subject to rules 36.18(3) and 36.19(1), a Part 36 offer by a defendant to pay a sum of money in settlement of a claim must be an offer to pay a single sum of money.

 

(2) A defendant’s offer that includes an offer to pay all or part of the sum at a date later than 14 days following the date of acceptance will not be treated as a Part 36 offer unless the offeree accepts the offer.

Time when a Part 36 offer is made

 

36.7.—(1) A Part 36 offer may be made at any time, including before the commencement of proceedings.

 

(2) A Part 36 offer is made when it is served on the offeree.

 

(Part 6 provides detailed rules about service of documents.)

 

CLARIFYING, WITHDRAWING AND CHANGING THE TERMS OF OFFERS

Clarification of a Part 36 offer

 

36.8.—(1) The offeree may, within 7 days of a Part 36 offer being made, request the offeror to clarify the offer.

 

(2) If the offeror does not give the clarification requested under paragraph (1) within 7 days of receiving the request, the offeree may, unless the trial has started, apply for an order that the offeror do so.

 

(Part 23 contains provisions about making an application to the court.)

 

(3) If the court makes an order under paragraph (2), it must specify the date when the Part 36 offer is to be treated as having been made.

Withdrawing or changing the terms of a Part 36 offer generally

 

36.9.—(1) A Part 36 offer can only be withdrawn, or its terms changed, if the offeree has not previously served notice of acceptance.

 

(2) The offeror withdraws the offer or changes its terms by serving written notice of the withdrawal or change of terms on the offeree.

 

(Rule 36.17(7) deals with the costs consequences following judgment of an offer which is withdrawn.)

 

(3) Subject to rule 36.10, such notice of withdrawal or change of terms takes effect when it is served on the offeree.

 

(Rule 36.10 makes provision about when permission is required to withdraw or change the terms of an offer before the expiry of the relevant period.)

 

(4) Subject to paragraph (1), after expiry of the relevant period—

 

(a)the offeror may withdraw the offer or change its terms without the permission of the court; or

 

(b)the offer may be automatically withdrawn in accordance with its terms.

 

(5) Where the offeror changes the terms of a Part 36 offer to make it more advantageous to the offeree—

 

(a)such improved offer shall be treated, not as the withdrawal of the original offer; but as the making of a new Part 36 offer on the improved terms; and

 

(b)subject to rule 36.5(2), the period specified under rule 36.5(1)(c) shall be 21 days or such longer period (if any) identified in the written notice referred to in paragraph (2).

Withdrawing or changing the terms of a Part 36 offer before the expiry of the relevant period

 

36.10.—(1) Subject to rule 36.9(1), this rule applies where the offeror serves notice before expiry of the relevant period of withdrawal of the offer or change of its terms to be less advantageous to the offeree.

 

(2) Where this rule applies—

 

(a)if the offeree has not served notice of acceptance of the original offer by the expiry of the relevant period, the offeror’s notice has effect on the expiry of that period; and

 

(b)if the offeree serves notice of acceptance of the original offer before the expiry of the relevant period, that acceptance has effect unless the offeror applies to the court for permission to withdraw the offer or to change its terms—

 

(i)within 7 days of the offeree’s notice of acceptance; or

 

(ii)if earlier, before the first day of trial.

 

(3) On an application under paragraph (2)(b), the court may give permission for the original offer to be withdrawn or its terms changed if satisfied that there has been a change of circumstances since the making of the original offer and that it is in the interests of justice to give permission.

 

ACCEPTING OFFERS

Acceptance of a Part 36 offer

 

36.11.—(1) A Part 36 offer is accepted by serving written notice of acceptance on the offeror.

 

(2) Subject to paragraphs (3) and (4) and to rule 36.12, a Part 36 offer may be accepted at any time (whether or not the offeree has subsequently made a different offer), unless it has already been withdrawn.

 

(Rule 21.10 deals with compromise, etc. by or on behalf of a child or protected party.)

 

(Rules 36.9 and 36.10 deal with withdrawal of Part 36 offers.)

 

(3) The court’s permission is required to accept a Part 36 offer where—

 

(a)rule 36.15(4) applies;

 

(b)rule 36.22(3)(b) applies, the relevant period has expired and further deductible amounts have been paid to the claimant since the date of the offer;

 

(c)an apportionment is required under rule 41.3A; or

 

(d)a trial is in progress.

 

(Rule 36.15 deals with offers by some but not all of multiple defendants.)

 

(Rule 36.22 defines “deductible amounts”.)

 

(Rule 41.3A requires an apportionment in proceedings under the Fatal Accidents Act 1976(6) and Law Reform (Miscellaneous Provisions) Act 1934(7).)

 

(4) Where the court gives permission under paragraph (3), unless all the parties have agreed costs, the court must make an order dealing with costs, and may order that the costs consequences set out in rule 36.13 apply.

Acceptance of a Part 36 offer in a split-trial case

 

36.12.—(1) This rule applies in any case where there has been a trial but the case has not been decided within the meaning of rule 36.3.

 

(2) Any Part 36 offer which relates only to parts of the claim or issues that have already been decided can no longer be accepted.

 

(3) Subject to paragraph (2) and unless the parties agree, any other Part 36 offer cannot be accepted earlier than 7 clear days after judgment is given or handed down in such trial.

Costs consequences of acceptance of a Part 36 offer

 

36.13.—(1) Subject to paragraphs (2) and (4) and to rule 36.20, where a Part 36 offer is accepted within the relevant period the claimant will be entitled to the costs of the proceedings (including their recoverable pre-action costs) up to the date on which notice of acceptance was served on the offeror.

 

(Rule 36.20 makes provision for the costs consequences of accepting a Part 36 offer in certain personal injury claims where the claim no longer proceeds under the RTA or EL/PL Protocol.)

 

(2) Where—

 

(a)a defendant’s Part 36 offer relates to part only of the claim; and

 

(b)at the time of serving notice of acceptance within the relevant period the claimant abandons the balance of the claim,

 

the claimant will only be entitled to the costs of such part of the claim unless the court orders otherwise.

 

(3) Except where the recoverable costs are fixed by these Rules, costs under paragraphs (1) and (2) are to be assessed on the standard basis if the amount of costs is not agreed.

 

(Rule 44.3(2) explains the standard basis for the assessment of costs.)

 

(Rule 44.9 contains provisions about when a costs order is deemed to have been made and applying for an order under section 194(3) of the Legal Services Act 2007(8).)

 

(Part 45 provides for fixed costs in certain classes of case.)

 

(4) Where—

 

(a)a Part 36 offer which was made less than 21 days before the start of a trial is accepted; or

 

(b)a Part 36 offer which relates to the whole of the claim is accepted after expiry of the relevant period; or

 

(c)subject to paragraph (2), a Part 36 offer which does not relate to the whole of the claim is accepted at any time,

 

the liability for costs must be determined by the court unless the parties have agreed the costs.

 

(5) Where paragraph (4)(b) applies but the parties cannot agree the liability for costs, the court must, unless it considers it unjust to do so, order that—

 

(a)the claimant be awarded costs up to the date on which the relevant period expired; and

 

(b)the offeree do pay the offeror’s costs for the period from the date of expiry of the relevant period to the date of acceptance.

 

(6) In considering whether it would be unjust to make the orders specified in paragraph (5), the court must take into account all the circumstances of the case including the matters listed in rule 36.17(5).

 

(7) The claimant’s costs include any costs incurred in dealing with the defendant’s counterclaim if the Part 36 offer states that it takes it into account.

Other effects of acceptance of a Part 36 offer

 

36.14.—(1) If a Part 36 offer is accepted, the claim will be stayed.

 

(2) In the case of acceptance of a Part 36 offer which relates to the whole claim, the stay will be upon the terms of the offer.

 

(3) If a Part 36 offer which relates to part only of the claim is accepted, the claim will be stayed as to that part upon the terms of the offer.

 

(4) If the approval of the court is required before a settlement can be binding, any stay which would otherwise arise on the acceptance of a Part 36 offer will take effect only when that approval has been given.

 

(5) Any stay arising under this rule will not affect the power of the court—

 

(a)to enforce the terms of a Part 36 offer; or

 

(b)to deal with any question of costs (including interest on costs) relating to the proceedings.

 

(6) Unless the parties agree otherwise in writing, where a Part 36 offer that is or includes an offer to pay or accept a single sum of money is accepted, that sum must be paid to the claimant within 14 days of the date of—

 

(a)acceptance; or

 

(b)the order when the court makes an order under rule 41.2 (order for an award of provisional damages) or rule 41.8 (order for an award of periodical payments), unless the court orders otherwise.

 

(7) If such sum is not paid within 14 days of acceptance of the offer, or such other period as has been agreed, the claimant may enter judgment for the unpaid sum.

 

(8) Where—

 

(a)a Part 36 offer (or part of a Part 36 offer) which is not an offer to which paragraph (6) applies is accepted; and

 

(b)a party alleges that the other party has not honoured the terms of the offer,

 

that party may apply to enforce the terms of the offer without the need for a new claim.

Acceptance of a Part 36 offer made by one or more, but not all, defendants

 

36.15.—(1) This rule applies where the claimant wishes to accept a Part 36 offer made by one or more, but not all, of a number of defendants.

 

(2) If the defendants are sued jointly or in the alternative, the claimant may accept the offer if—

 

(a)the claimant discontinues the claim against those defendants who have not made the offer; and

 

(b)those defendants give written consent to the acceptance of the offer.

 

(3) If the claimant alleges that the defendants have a several liability(GL) to the claimant, the claimant may—

 

(a)accept the offer; and

 

(b)continue with the claims against the other defendants if entitled to do so.

 

(4) In all other cases the claimant must apply to the court for permission to accept the Part 36 offer.

 

UNACCEPTED OFFERS

Restriction on disclosure of a Part 36 offer

 

36.16.—(1) A Part 36 offer will be treated as “without prejudice except as to costs”.

 

(2) The fact that a Part 36 offer has been made and the terms of such offer must not be communicated to the trial judge until the case has been decided.

 

(3) Paragraph (2) does not apply—

 

(a)where the defence of tender before claim has been raised;

 

(b)where the proceedings have been stayed under rule 36.14 following acceptance of a Part 36 offer;

 

(c)where the offeror and the offeree agree in writing that it should not apply; or

 

(d)where, although the case has not been decided—

 

(i)any part of, or issue in, the case has been decided; and

 

(ii)the Part 36 offer relates only to parts or issues that have been decided.

 

(4) In a case to which paragraph (3)(d)(i) applies, the trial judge—

 

(a)may be told whether or not there are Part 36 offers other than those referred to in paragraph (3)(d)(ii); but

 

(b)must not be told the terms of any such other offers unless any of paragraphs (3)(a) to (c) applies.

Costs consequences following judgment

 

36.17.—(1) Subject to rule 36.21, this rule applies where upon judgment being entered—

 

(a)a claimant fails to obtain a judgment more advantageous than a defendant’s Part 36 offer; or

 

(b)judgment against the defendant is at least as advantageous to the claimant as the proposals contained in a claimant’s Part 36 offer.

 

(Rule 36.21 makes provision for the costs consequences following judgment in certain personal injury claims where the claim no longer proceeds under the RTA or EL/PL Protocol.)

 

(2) For the purposes of paragraph (1), in relation to any money claim or money element of a claim, “more advantageous” means better in money terms by any amount, however small, and “at least as advantageous” shall be construed accordingly.

 

(3) Subject to paragraphs (7) and (8), where paragraph (1)(a) applies, the court must, unless it considers it unjust to do so, order that the defendant is entitled to—

 

(a)costs (including any recoverable pre-action costs) from the date on which the relevant period expired; and

 

(b)interest on those costs.

 

(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.

 

(5) In considering whether it would be unjust to make the orders referred to in paragraphs (3) and (4), the court must take into account all the circumstances of the case including—

 

(a)the terms of any Part 36 offer;

 

(b)the stage in the proceedings when any Part 36 offer was made, including in particular how long before the trial started the offer was made;

 

(c)the information available to the parties at the time when the Part 36 offer was made;

 

(d)the conduct of the parties with regard to the giving of or refusal to give information for the purposes of enabling the offer to be made or evaluated; and

 

(e)whether the offer was a genuine attempt to settle the proceedings.

 

(6) Where the court awards interest under this rule and also awards interest on the same sum and for the same period under any other power, the total rate of interest must not exceed 10% above base rate.

 

(7) Paragraphs (3) and (4) do not apply to a Part 36 offer—

 

(a)which has been withdrawn;

 

(b)which has been changed so that its terms are less advantageous to the offeree where the offeree has beaten the less advantageous offer;

 

(c)made less than 21 days before trial, unless the court has abridged the relevant period.

 

(8) Paragraph (3) does not apply to a soft tissue injury claim to which rule 36.21 applies.

 

(Rule 44.2 requires the court to consider an offer to settle that does not have the costs consequences set out in this Section in deciding what order to make about costs.)

 

PERSONAL INJURY CLAIMS

Personal injury claims for future pecuniary loss

 

36.18.—(1) This rule applies to a claim for damages for personal injury which is or includes a claim for future pecuniary loss.

 

(2) An offer to settle such a claim will not have the consequences set out in this Section unless it is made by way of a Part 36 offer under this rule.

 

(3) A Part 36 offer to which this rule applies may contain an offer to pay, or an offer to accept—

 

(a)the whole or part of the damages for future pecuniary loss in the form of—

 

(i)a lump sum;

 

(ii)periodical payments; or

 

(iii)both a lump sum and periodical payments;

 

(b)the whole or part of any other damages in the form of a lump sum.

 

(4) A Part 36 offer to which this rule applies—

 

(a)must state the amount of any offer to pay or to accept the whole or part of any damages in the form of a lump sum;

 

(b)may state—

 

(i)what part of the lump sum, if any, relates to damages for future pecuniary loss; and

 

(ii)what part relates to other damages to be paid or accepted in the form of a lump sum;

 

(c)must state what part of the offer relates to damages for future pecuniary loss to be paid or accepted in the form of periodical payments and must specify—

 

(i)the amount and duration of the periodical payments;

 

(ii)the amount of any payments for substantial capital purchases and when they are to be made; and

 

(iii)that each amount is to vary by reference to the retail prices index (or to some other named index, or that it is not to vary by reference to any index); and

 

(d)must state either that any damages which take the form of periodical payments will be funded in a way which ensures that the continuity of payments is reasonably secure in accordance with section 2(4) of the Damages Act 1996(9) or how such damages are to be paid and how the continuity of their payment is to be secured.

 

(5) Rule 36.6 applies to the extent that a Part 36 offer by a defendant under this rule includes an offer to pay all or part of any damages in the form of a lump sum.

 

(6) Where the offeror makes a Part 36 offer to which this rule applies and which offers to pay or to accept damages in the form of both a lump sum and periodical payments, the offeree may only give notice of acceptance of the offer as a whole.

 

(7) If the offeree accepts a Part 36 offer which includes payment of any part of the damages in the form of periodical payments, the claimant must, within 7 days of the date of acceptance, apply to the court for an order for an award of damages in the form of periodical payments under rule 41.8.

 

(Practice Direction 41B contains information about periodical payments under the Damages Act 1996.)

 

Offer to settle a claim for provisional damages

 

36.19.—(1) An offeror may make a Part 36 offer in respect of a claim which includes a claim for provisional damages.

 

(2) Where the offeror does so, the Part 36 offer must specify whether or not the offeror is proposing that the settlement shall include an award of provisional damages.

 

(3) Where the offeror is offering to agree to the making of an award of provisional damages, the Part 36 offer must also state—

 

(a)that the sum offered is in satisfaction of the claim for damages on the assumption that the injured person will not develop the disease or suffer the type of deterioration specified in the offer;

 

(b)that the offer is subject to the condition that the claimant must make any claim for further damages within a limited period; and

 

(c)what that period is.

 

(4) Rule 36.6 applies to the extent that a Part 36 offer by a defendant includes an offer to agree to the making of an award of provisional damages.

 

(5) If the offeree accepts the Part 36 offer, the claimant must, within 7 days of the date of acceptance, apply to the court for an award of provisional damages under rule 41.2.

Costs consequences of acceptance of a Part 36 offer where Section IIIA of Part 45 applies

 

36.20.—(1) This rule applies where a claim no longer continues under the RTA or EL/PL Protocol pursuant to rule 45.29A(1).

 

(2) Where a Part 36 offer is accepted within the relevant period, the claimant is entitled to the fixed costs in Table 6B, Table 6C or Table 6D in Section IIIA of Part 45 for the stage applicable at the date on which notice of acceptance was served on the offeror.

 

(3) Where—

 

(a)a defendant’s Part 36 offer relates to part only of the claim; and

 

(b)at the time of serving notice of acceptance within the relevant period the claimant abandons the balance of the claim,

 

the claimant will be entitled to the fixed costs in paragraph (2).

 

(4) Subject to paragraphs (5), (6) and (7), where a defendant’s Part 36 offer is accepted after the relevant period—

 

(a)the claimant will be entitled to the fixed costs in Table 6B, Table 6C or Table 6D in Section IIIA of Part 45 for the stage applicable at the date on which the relevant period expired; and

 

(b)the claimant will be liable for the defendant’s costs for the period from the date of expiry of the relevant period to the date of acceptance.

 

(5) Subject to paragraphs (6) and (7), where the claimant accepts the defendant’s Protocol offer after the date on which the claim leaves the Protocol—

 

(a)the claimant will be entitled to the applicable Stage 1 and Stage 2 fixed costs in Table 6 or Table 6A in Section III of Part 45; and

 

(b)the claimant will be liable for the defendant’s costs from the date on which the Protocol offer is deemed to have been made to the date of acceptance.

 

(6) In a soft tissue injury claim, if the defendant makes a Part 36 offer before the defendant receives a fixed cost medical report, paragraphs (4) and (5) will only have effect if the claimant accepts the offer more than 21 days after the defendant received the report.

 

(7) In this rule, “fixed cost medical report” and “soft tissue injury claim” have the same meaning as in paragraph 1.1(10A) and (16A) respectively of the RTA Protocol.

 

(8) For the purposes of this rule a defendant’s Protocol offer is either—

 

(a)defined in accordance with rules 36.25 and 36.26; or

 

(b)if the claim leaves the Protocol before the Court Proceedings Pack Form is sent to the defendant—

 

(i)the last offer made by the defendant before the claim leaves the Protocol; and

 

(ii)deemed to be made on the first business day after the claim leaves the Protocol.

 

(9) A reference to—

 

(a)the “Court Proceedings Pack Form” is a reference to the form used in the Protocol; and

 

(b)“business day” is a reference to a business day as defined in rule 6.2.

 

(10) Fixed costs shall be calculated by reference to the amount of the offer which is accepted.

 

(11) Where the parties do not agree the liability for costs, the court must make an order as to costs.

 

(12) Where the court makes an order for costs in favour of the defendant—

 

(a)the court must have regard to; and

 

(b)the amount of costs ordered must not exceed,

 

the fixed costs in Table 6B, Table 6C or Table 6D in Section IIIA of Part 45 applicable at the date of acceptance, less the fixed costs to which the claimant is entitled under paragraph (4) or (5).

 

(13) The parties are entitled to disbursements allowed in accordance with rule 45.29I incurred in any period for which costs are payable to them.

Costs consequences following judgment where section IIIA of Part 45 applies

 

36.21.—(1) Where a claim no longer continues under the RTA or EL/PL Protocol pursuant to rule 45.29A(1), rule 36.17 applies with the following modifications.

 

(2) Subject to paragraphs (3), (4) and (5), where an order for costs is made pursuant to rule 36.17(3)—

 

(a)the claimant will be entitled to the fixed costs in Table 6B, 6C or 6D in Section IIIA of Part 45 for the stage applicable at the date on which the relevant period expired; and

 

(b)the claimant will be liable for the defendant’s costs from the date on which the relevant period expired to the date of judgment.

 

(3) Subject to paragraphs (4) and (5), where the claimant fails to obtain a judgment more advantageous than the defendant’s Protocol offer—

 

(a)the claimant will be entitled to the applicable Stage 1 and Stage 2 fixed costs in Table 6 or 6A in Section III of Part 45; and

 

(b)the claimant will be liable for the defendant’s costs from the date on which the Protocol offer is deemed to be made to the date of judgment; and

 

(c)in this rule, the amount of the judgment is less than the Protocol offer where the judgment is less than the offer once deductible amounts identified in the judgment are deducted.

 

(“Deductible amount” is defined in rule 36.22(1)(d).)

 

(4) In a soft tissue injury claim, if the defendant makes a Part 36 offer or Protocol offer before the defendant receives a fixed cost medical report, paragraphs (2) and (3) will only have effect in respect of costs incurred by either party more than 21 days after the defendant received the report.

 

(5) In this rule “fixed cost medical report” and “soft tissue injury claim” have the same meaning as in paragraph 1.1(10A) and (16A) respectively of the RTA Protocol.

 

(6) For the purposes of this rule a defendant’s Protocol offer is either—

 

(a)defined in accordance with rules 36.25 and 36.26; or

 

(b)if the claim leaves the Protocol before the Court Proceedings Pack Form is sent to the defendant—

 

(i)the last offer made by the defendant before the claim leaves the Protocol; and

 

(ii)deemed to be made on the first business day after the claim leaves the Protocol.

 

(7) A reference to—

 

(a)the “Court Proceedings Pack Form” is a reference to the form used in the Protocol; and

 

(b)“business day” is a reference to a business day as defined in rule 6.2.

 

(8) Fixed costs must be calculated by reference to the amount which is awarded.

 

(9) Where the court makes an order for costs in favour of the defendant—

 

(a)the court must have regard to; and

 

(b)the amount of costs ordered shall not exceed,

 

the fixed costs in Table 6B, 6C or 6D in Section IIIA of Part 45 applicable at the date of judgment, less the fixed costs to which the claimant is entitled under paragraph (2) or (3).

 

(10) The parties are entitled to disbursements allowed in accordance with rule 45.29I incurred in any period for which costs are payable to them.

Deduction of benefits and lump sum payments

 

36.22.—(1) In this rule and rule 36.11—

 

(a)“the 1997 Act” means the Social Security (Recovery of Benefits) Act 1997(10);

 

(b)“the 2008 Regulations” means the Social Security (Recovery of Benefits)(Lump Sum Payments) Regulations 2008(11);

 

(c)“recoverable amount” means—

 

(i)“recoverable benefits” as defined in section 1(4)(c) of the 1997 Act; and

 

(ii)“recoverable lump sum payments” as defined in regulation 1 of the 2008 Regulations;

 

(d)“deductible amount” means—

 

(i)any benefits by the amount of which damages are to be reduced in accordance with section 8 of, and Schedule 2 to the 1997 Act(12) (“deductible benefits”); and

 

(ii)any lump sum payment by the amount of which damages are to be reduced in accordance with regulation 12 of the 2008 Regulations (“deductible lump sum payments”); and

 

(e)“certificate”—

 

(i)in relation to recoverable benefits, is construed in accordance with the provisions of the 1997 Act; and

 

(ii)in relation to recoverable lump sum payments, has the meaning given in section 29 of the 1997 Act, as applied by regulation 2 of, and modified by Schedule 1 to, the 2008 Regulations.

 

(2) This rule applies where a payment to a claimant following acceptance of a Part 36 offer would be a compensation payment as defined in section 1(4)(b) or 1A(5)(b)(13) of the 1997 Act.

 

(3) A defendant who makes a Part 36 offer must, where relevant, state either—

 

(a)that the offer is made without regard to any liability for recoverable amounts; or

 

(b)that it is intended to include any deductible amounts.

 

(4) Where paragraph (3)(b) applies, paragraphs (5) to (9) will apply to the Part 36 offer.

 

(5) Before making the Part 36 offer, the offeror must apply for a certificate.

 

(6) Subject to paragraph (7), the Part 36 offer must state—

 

(a)the gross amount of compensation;

 

(b)the name and amount of any deductible amounts by which the gross amount is reduced; and

 

(c)the net amount of compensation.

 

(7) If at the time the offeror makes the Part 36 offer, the offeror has applied for, but has not received, a certificate, the offeror must clarify the offer by stating the matters referred to in paragraph (6)(b) and (c) not more than 7 days after receipt of the certificate.

 

(8) For the purposes of rule 36.17(1)(a), a claimant fails to recover more than any sum offered (including a lump sum offered under rule 36.6) if the claimant fails upon judgment being entered to recover a sum, once deductible amounts identified in the judgment have been deducted, greater than the net amount stated under paragraph (6)(c).

 

(Section 15(2) of the 1997 Act provides that the court must specify the compensation payment attributable to each head of damage. Schedule 1 to the 2008 Regulations modifies section 15 of the 1997 Act in relation to lump sum payments and provides that the court must specify the compensation payment attributable to each or any dependant who has received a lump sum payment.)

 

(9) Where—

 

(a)further deductible amounts have accrued since the Part 36 offer was made; and

 

(b)the court gives permission to accept the Part 36 offer,

 

the court may direct that the amount of the offer payable to the offeree shall be reduced by a sum equivalent to the deductible amounts paid to the claimant since the date of the offer.

 

(Rule 36.11(3)(b) states that permission is required to accept an offer where the relevant period has expired and further deductible amounts have been paid to the claimant.)

 

MISCELLANEOUS

Cases in which the offeror’s costs have been limited to court fees

 

36.23.—(1) This rule applies in any case where the offeror is treated as having filed a costs budget limited to applicable court fees, or is otherwise limited in their recovery of costs to such fees.

 

(Rule 3.14 provides that a litigant may be treated as having filed a budget limited to court fees for failure to file a budget.)

 

(2) “Costs” in rules 36.13(5)(b), 36.17(3)(a) and 36.17(4)(b) shall mean—

 

(a)in respect of those costs subject to any such limitation, 50% of the costs assessed without reference to the limitation; together with

 

(b)any other recoverable costs.

SECTION IIRTA Protocol and EL/PL Protocol Offers to Settle

Scope of this Section

 

36.24.—(1) Where this Section applies, Section I does not apply.

 

(2) This Section applies to an offer to settle where the parties have followed the RTA Protocol or the EL/PL Protocol and started proceedings under Part 8 in accordance with Practice Direction 8B (“the Stage 3 Procedure”).

 

(3) A reference to the Court Proceedings Pack Form is a reference to the form used in the relevant Protocol.

 

(4) Nothing in this Section prevents a party making an offer to settle in whatever way that party chooses, but if the offer is not made in accordance with this Section, it will not have any costs consequences.

Form and content of a Protocol offer

 

36.25.—(1) An offer to settle which is made in accordance with this rule is called a Protocol offer.

 

(2) A Protocol offer must—

 

(a)be set out in the Court Proceedings Pack (Part B) Form; and

 

(b)contain the final total amount of the offers from both parties.

Time when a Protocol offer is made

 

36.26.—(1) The Protocol offer is deemed to be made on the first business day after the Court Proceedings Pack (Part A and Part B) Form is sent to the defendant.

 

(2) In this Section “business day” has the same meaning as in rule 6.2.

General provisions

 

36.27.  A Protocol offer—

 

(a)is treated as exclusive of all interest; and

 

(b)has the consequences set out in this Section only in relation to the fixed costs of the Stage 3 Procedure as provided for in rule 45.18, and not in relation to the costs of any appeal from the final decision of those proceedings.

 

Restrictions on the disclosure of a Protocol offer

 

36.28.—(1) The amount of the Protocol offer must not be communicated to the court until the claim is determined.

 

(2) Any other offer to settle must not be communicated to the court at all.

Costs consequences following judgment

 

36.29.—(1) This rule applies where, on any determination by the court, the claimant obtains judgment against the defendant for an amount of damages that is—

 

(a)less than or equal to the amount of the defendant’s Protocol offer;

 

(b)more than the defendant’s Protocol offer but less than the claimant’s Protocol offer; or

 

(c)equal to or more than the claimant’s Protocol offer.

 

(2) Where paragraph (1)(a) applies, the court must order the claimant to pay—

 

(a)the fixed costs in rule 45.26; and

 

(b)interest on those fixed costs from the first business day after the deemed date of the Protocol offer under rule 36.26.

 

(3) Where paragraph (1)(b) applies, the court must order the defendant to pay the fixed costs in rule 45.20.

 

(4) Where paragraph (1)(c) applies, the court must order the defendant to pay—

 

(a)interest on the whole of the damages awarded at a rate not exceeding 10% above base rate for some or all of the period starting with the date specified in rule 36.26;

 

(b)the fixed costs in rule 45.20;

 

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

 

(d)an additional amount calculated in accordance with rule 36.17(4)(d).

Deduction of benefits

 

36.30.  For the purposes of rule 36.29(1)(a) the amount of the judgment is less than the Protocol offer where the judgment is less than that offer once deductible amounts identified in the judgment are deducted.

 

(“Deductible amount” is defined in rule 36.22(1)(d).)”

 

 

PRACTICE DIRECTION 36A – OFFERS TO SETTLE

This Practice Direction supplements CPR Part 36

Contents of this Practice Direction
Title
FORMALITIES OF PART 36 OFFERS AND OTHER NOTICES UNDER THIS PART
APPLICATION FOR PERMISSION TO WITHDRAW A PART 36 OFFER
ACCEPTANCE OF A PART 36 OFFER

FORMALITIES OF PART 36 OFFERS AND OTHER NOTICES UNDER THIS PART

1.1

A Part 36 offer may be made using Form N242A.

1.2

Where a Part 36 offer, notice of acceptance or notice of withdrawal or change of terms is to be served on a party who is legally represented, the document to be served must be served on the legal representative.

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APPLICATION FOR PERMISSION TO WITHDRAW A PART 36 OFFER

2.1

Rule 36.3(4) provides that before expiry of the relevant period a Part 36 offer may only be withdrawn or its terms changed to be less advantageous to the offeree with the permission of the court.

2.2

The permission of the court must be sought –

(1) by making an application under Part 23, which must be dealt with by a judge other than the judge (if any) allocated in advance to conduct the trial, unless the parties agree that such judge may hear the application;

(2) at a trial or other hearing, provided that it is not to the trial judge or to the judge (if any) allocated in advance to conduct the trial, unless the parties agree that such judge may hear the application.

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ACCEPTANCE OF A PART 36 OFFER

3.1

Where a Part 36 offer is accepted in accordance with rule 36.9(1) the notice of acceptance must be served on the offeror and filed with the court where the case is proceeding.

3.2

Where the court’s permission is required to accept a Part 36 offer, the permission of the court must be sought –

(1) by making an application under Part 23, which must be dealt with by a judge other than the judge (if any) allocated in advance to conduct the trial, unless the parties agree that such judge may hear the application;

(2) at a trial or other hearing, provided that it is not to the trial judge or to the judge (if any) allocated in advance to conduct the trial, unless the parties agree that such judge may hear the application.

3.3

Where rule 36.9(3)(b) applies, the application for permission to accept the offer must –

(1) state

(a) the net amount offered in the Part 36 offer;

(b) the deductible amounts that had accrued at the date the offer was made;

(c) the deductible amounts that have subsequently accrued; and

(2) be accompanied by a copy of the current certificate.

 

PRACTICE DIRECTION 36B – 36B

This Practice Direction supplements CPR Part 36

Contents of this Practice Direction
Title Number
Offers and Payments made before 6th April 2007 Para. 1.1
Permission of the court Para. 2.1
Payments into court made before 6th April 2007 Para. 3.1
Offers remaining open for acceptance Para. 4.1
Offers made before commencement of proceedings Para. 5.1

From 6th April 2007, new rules came into force concerning offers to settle, and Part 36, as it was in force immediately before 6th April 2007, was substituted by a new Part 36.

Rule 7 of the Civil Procedure (Amendment No.3) Rules 2006 that brought those new rules into force and replaced the previous rules contained some provisions that dealt with how the rules are to apply to offers and payments into court made before 6th April 2007.

This Practice Direction explains how those provisions will operate.

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Offers and Payments made before 6th April 2007

1.1

Paragraph (2) of rule 7 provides that where a Part 36 offer or Part 36 payment was made before 6th April 2007, if it would have had the consequences set out in the rules of court contained in Part 36 as it was in force immediately before 6th April 2007, it will have the consequences set out in rules 36.10, 36.11 and 36.14 after that date.

1.2

This provision makes clear that a Part 36 offer or Part 36 payment that was valid before 6th April 2007, will continue to be a valid Part 36 offer under the rules in force from 6th April 2007, and will have the consequences set out in those rules, specifically in relation to costs and the effect of acceptance.

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Permission of the court

2.1

Paragraph (3) of rule 7 provides that where a Part 36 offer or Part 36 payment was made before 6th April 2007, the permission of the court is required to accept that offer or payment, if permission would have been required under the rules of court contained in Part 36 as it was in force immediately before 6th April 2007.

2.2

This provision preserves the requirement to obtain the permission of the court to accept an offer as it existed under the rules in force immediately before 6th April 2007. Therefore, if permission would have been required before 6th April 2007, it will be required after that date. But, if permission would not have been required because the parties have been able to agree liability for costs, or if a further offer has been made triggering a new period for acceptance, permission will not be required after 6th April 2007.

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Payments into court made before 6th April 2007

3.1

Paragraph (4) of rule 7 provides that rule 37.3 will apply to a Part 36 payment made before 6th April 2007 as if that payment into court had been made under a court order.

3.2

Rule 37.3 applies to all payments under Part 37, including payments into court under order, and permission is required to take the money out of court.

3.3

By applying rule 37.3 to payments into court made before 6th April 2007, this provision preserves in particular the requirement that permission be obtained to withdraw such payment.

3.4

But, rule 37.3 also provides that money may be taken out of court without the court’s permission where a Part 36 offer (including an offer underlying a Part 36 payment) is accepted without needing the permission of the court and the defendant agrees that the sum may be paid out in satisfaction of the offer. Paragraph 3.4 of the Practice Direction to Part 37 makes provision about how to take money out of court.

3.5

This exception to the permission requirement preserves the right under rule 37.2, as it was in force immediately before 6th April 2007, to treat a payment into court made under order or by way of a defence of tender before claim as a Part 36 payment.

3.6

This provision has the effect that a Part 36 payment made before 6th April 2007 may be taken out of court simply by filing a request for payment if the offer underlying the Part 36 payment is accepted without needing permission. In those circumstances, it may be assumed that the defendant agrees to the money being used in satisfaction of the sum offered, and the requirement in paragraph 3.4 of the Practice Direction to Part 37 to file a Form 202 will not apply.

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Offers remaining open for acceptance

4.1

Paragraph (5) of rule 7 provides that the rules of court contained in Part 36 as it was in force immediately before 6th April 2007 shall continue to apply to a Part 36 offer or Part 36 payment made less than 21 days before 6th April 2007.

4.2

This provision preserves those rules in their entirety in relation to offers and payments made less than 21 days before 6th April 2007 for the period that they are expressed to remain open for acceptance.

4.3

Paragraph (6) of rule 7 provides that paragraph (5) ceases to apply at the expiry of 21 days from the date that the offer or payment was made, unless the trial has started within that period.

4.4

This provision has the effect that once the 21 day period has expired, the new regime (including the modifications at paragraphs (2), (3) and (4) of rule 7) will apply to the offer or payment.

4.5

If the trial has started within the 21 day period, the rules that were in force before 6th April 2007 will continue to apply to the offer or payment.

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Offers made before commencement of proceedings

5.1

Paragraph (7) of rule 7 deals with the position where, before 6th April 2007, a person made an offer to settle before commencement of proceedings which complied with the provisions of rule 36.10 as it was in force immediately before 6th April 2007.

5.2

The court will take that offer into account when making any order as to costs. This preserves the discretion of the court to take into account an offer made before commencement of proceedings as it existed before 6th April 2007.

5.3

The permission of the court will be required to accept such an offer after proceedings have been commenced. This preserves the position under rule 36.10(4) as it was in force immediately before 6th April 2007.

5.4

If proceedings are commenced after 6th April 2007, the requirement to pay money into court in respect of a defendant’s money offer under rule 36.10(3)(a) (as it was in force before 6th April 2007) will not an apply to a defendant’s money offer made before the proceedings were commenced.

 

 


 

Liability for costs of detailed assessment proceedings

 

47.20

 

  • The receiving party is entitled to the costs of the detailed assessment proceedings except where –

 

  • the provisions of any Act, any of these Rules or any relevant practice direction provide otherwise;

 

or

 

  • the court makes some other order in relation to all or part of the costs of the detailed assessment proceedings.

 

  • Paragraph (1) does not apply where the receiving party has pro bono representation in the detailed assessment proceedings but that party may apply for an order in respect of that representation under section 194(3) of the 2007 Act.

 

  • In deciding whether to make some other order, the court must have regard to all the circumstances, including –

 

  • the conduct of all the parties;

 

  • the amount, if any, by which the bill of costs has been reduced; and

 

  • whether it was reasonable for a party to claim the costs of a particular item or to dispute that item.

 

  • The provisions of Part 36 apply to the costs of detailed assessment proceedings with the following modifications –

 

  • ‘claimant’ refers to ‘receiving party’ and ‘defendant’ refers to ‘paying party’;

 

  • ‘trial’ refers to ‘detailed assessment hearing’;

 

  • a detailed assessment hearing is “in progress” from the time when it starts until the bill of costs has been assessed or agreed;

 

  • for rule 36.14(7) substitute “If such sum is not paid within 14 days of acceptance of the offer, or such other period as has been agreed, the receiving party may apply for a final costs certificate for the unpaid sum.”;

 

  • a reference to ‘judgment being entered’ is to the completion of the detailed assessment, and references to a ‘judgment’ being advantageous or otherwise are to the outcome of the detailed assessment.

 

  • The court will usually summarily assess the costs of detailed assessment proceedings at the conclusion of those proceedings.

 

  • Unless the court otherwise orders, interest on the costs of detailed assessment proceedings will run from the date of default, interim or final costs certificate, as the case may be.

 

  • For the purposes of rule 36.17, detailed assessment proceedings are to be regarded as an independent claim.


 

REFERENCES

 

 

Statutes

 

Legal Aid, Sentencing and Punishment of Offenders Act 2012

 

 

Statutory Instruments

 

Civil Procedure Rules 1998, S.I. 1998/3132

 

Conditional Fee Agreements Order 2013

 

Legal Aid, Sentencing and Punishment of Offenders Act 2012 (Commencement No 2 and Specification of Commencement Date) Order 2012 (SI 2012 No. 2412 (c.94)

 

Offers to Settle in Civil Proceedings Order 2013, SI 2013 No 93

 

 

Case Law

 

Bellway Homes Ltd v Seymour (Civil Engineering Contractors) Ltd [2013] EWHC 1890 (TCC)

 

Bolt Burdon Solicitors v Tariq & Others [2016] EWHC 1507 (QB) (22 June 2016)

 

Carver v BAA plc [2008] EWCA Civ 412 [2008] 3 All ER 911

 

Cashman v Mid Essex Hospital Services NHS Trust [2015] EWHC 1312 (QB)

 

Elsevier Limited v Robert Munro [2014] EWHC 2728 (QB)

 

Elvanite Full Circle Ltd v AMEC Earth and Environment (UK) Ltd [2012] EWHC 1643 (TCC)

 

Fox v Foundation Piling Limited [2011] EWCA Civ 790

 

Gibbon v Manchester City Council [2010] EWCA Civ 726

 

Hammersmith Properties (Welwyn) Ltd v Saint-Gobain Ceramics and Plastics Ltd [2013] EWHC 2227 (TCC)

 

Henry v Group Newspapers Ltd [2013] EWCA Civ 19

 

Kellie and Kellie v Wheatley and Lloyd Architects Ltd [2014] EWHC 2886 (TCC)

 

Lowin v W Portsmouth and Co Ltd, 20 June 2016

 

Lownds v Home Office [2002] EWCA Civ 365

 

Magical Marking Ltd v Ware and Kay LLP [2013] EWHC 636 (Ch)

 

Medway PCT v Marcus [2011] EWCA Civ 750

 

Mehjoo v Harben Barker (A firm) [2013] EWHC 1669 (QB)

 

Pawar v JSD Haulage Ltd [2016] EWCA Civ 551

 

Procter and Gamble v Svenska Cellulosa Aktiebolaget SCA [2012] EWHC 2839 (Ch)

 

Purrunsing v A’Court & Co (a firm) and another [2016] EWHC 1528 (Ch) (1 July 2016)

 

Simmons v Castle (no 2) [2012] EWCA Civ 1288

 

Summers v Bundy [2016] EWCA Civ 126

 

Sutherland v Khan, Kingston-Upon-Hull County Court, Case number A81YM424

 

Sycamore Bidco Ltd v Breslin [2013] EWHC 583 (Ch)

 

Thinc Group Ltd v Kingdom [2013] EWCA Civ 1306

 

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Written by kerryunderwood

November 24, 2015 at 8:55 am

Posted in Uncategorized

6 Responses

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