Kerry Underwood

PART 36 – IMPORTANT RECENT CASES

with 13 comments


There have been a number of important recent cases in relation to Part 36, all of them in favour of claimants and this is a welcome corrective to what many perceived as an anti-claimant bias in relation to Part 36.

 

In particular the courts appeared to be slow to realise that a defendant’s failure to accept a claimant’s Part 36 offer when the claimant went on to match or beat that offer was meant to be met with a severe penalty in costs just as a claimant’s failure to beat a defendant’s Part 36 offer is severely penalised in costs.

 

95% liability offer

 

In Jockey Club Racecourse Ltd v Willmott Dixon Construction Ltd [2016] EWHC 167 (TCC)

 

the Technology and Construction Court of the High Court held that where a claimant had made an offer to settle the matter on the basis of 95% liability and then succeeded on a full liability basis by settlement the claimant was entitled to indemnity costs in the usual way.

 

It was irrelevant that a court was unlikely to make a 95%/5% liability split.

 

Here the claim arose out of alleged defects in the design and construction of a new grandstand at Epsom Racecourse.

 

In addition to the 95% liability offer the claimant had amended its Particulars of Claim after making that offer by making some amendments to its case on liability and by claiming the full costs of replacing the roof rather than the cost of repairs.

 

The judge held that it did not make any material difference that the Particulars of Claim had been amended after the Part 36 offer was made as the offer related solely to liability and not quantum and liability issues had been resolved in the claimant’s favour, ultimately here by consent.

 

It was not necessary for a Part 36 offer to reflect an outcome that would be possible at trial.

 

There was no reason why the claimant should not be entitled to indemnity costs from the earliest date by which the defendant could reasonably have put itself in a position to make an informed assessment of the case on liability.

 

Here the court found that that was four months after the date of the offer and thus ordered that the claimant should receive standard costs up to that date and indemnity costs thereafter.

 

Comment

 

A sensible and correct decision. Parliament has said that a claimant is required to match or beat its own offer in order to get indemnity costs and other benefits, such as a 10% uplift on damages. There is no reason at all for the courts to put a gloss on the clear words and intention of Parliament, but unfortunately many have been doing so and this is a welcome decision.

 

No “Near Miss” Rule

 

In Sugar Hut Group Ltd and Others v AJ Insurance Services (a Partnership) [2016] EWCA Civ 46

 

the Court of Appeal overturned a costs order obtained by a defendant after a quantum trial, holding that when exercising his discretion under CPR 44.2, the trial judge had erred in taking account of the defendant’s Part 36 offer, which the claimant had beaten at trial.

 

The judge had ordered the claimant to pay the defendant’s costs from 21 days after the date of the offer as he considered it unreasonable conduct on the claimant’s behalf to pursue a claim for business interruption losses for a higher amount than that which was in the defendant’s offer.

 

However the Court of Appeal noted that the defendant had not made a freestanding offer in relation to the business interruption losses.

 

The Court of Appeal also said that it could not be misconduct or unreasonable conduct, simply to pursue a claim in an amount greater than that at which it is valued by the other side. Something more was required. Here, while certain parts of the business interruption claim failed at trial, there was no finding at trial that the claim had been exaggerated in any way so as to engage CPR 44.2(5)(d).

 

Furthermore the Court of Appeal held that in depriving the claimant of some of its costs up to the expiry of the Part 36 offer – the court had only awarded the claimant 70% of its costs for that period – and requiring the claimant to pay the defendant’s costs after the expiry of the Part 36 offer, the judge had penalised the claimant twice for the same shortcoming.

 

The Court of Appeal held that the Part 36 offer was irrelevant as it had been beaten. In fact it had been beaten by a comfortable margin but that was not relevant either as there was no “near miss” rule regarding Part 36 offers. They were either beaten or they were not.

 

The claimant’s failure to succeed in all of its claim was adequately reflected in the order that the claimant be deprived of 30% of those costs of the claim for the entire period of the claim.

 

Indemnity costs in fixed costs cases

 

In Broadhurst v Tan and Taylor v Smith [2016] EWCA Civ 94 (23 February 2016)

 

the Court of Appeal held that a claimant who matches or beats its own Part 36 offer in a fixed costs case gets indemnity costs, as well as the other enhancements such as a 10% increase in damages etc. and in addition to fixed costs.

 

This resolves the issue between the two different lines of authority, both entirely justifiable on the wording of the different rules, one saying that fixed costs were just that and an indemnity costs order made no difference, and one holding that Part 36 and its provision for indemnity costs trumped CPR 45.29B, which deals with fixed costs.

 

Indemnity costs on claimant’s late acceptance

 

In ABC v Barts Health NHS Trust [2016] EWHC 500 (QB)

 

the claimant accepted the defendant’s offer eight months late and 14 days before trial.

 

The Queen’s Bench Division of the High Court ordered the defendant to pay the claimant’s costs up to the date of expiry of the Part 36 offer in the usual way and it also ordered the claimant to pay the defendant’s costs from the date of expiry to acceptance.

 

However it ordered those costs payable by the claimant to be paid on the indemnity, rather than the standard, basis.

 

Comment

 

I have no problem with this decision on the facts of the case but it brings into sharp focus the issue of whether a claimant should get indemnity costs on a defendant’s late acceptance of a claimant’s Part 36 offer.

 

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Written by kerryunderwood

February 29, 2016 at 1:58 pm

Posted in Uncategorized

13 Responses

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  1. Hi Kerry, I would appreciate your view as to whether we can import the Broadhurst decision into CPR 47.15 where the Receiving Party beats their own Part 36 offer. I appreciate that £1.5k is expressed to be a cap but it appears that the same should apply in cases of Provisional Assessment as in Fixed Costs there is a tension between Pt 36 and Pt 47.

    Kevyn Thompson

    February 29, 2016 at 4:06 pm

    • Kevyn

      Very good point! Need to check carefully the wording in Part 36 in relation to Part 47. It is worth noting that Part 36 is expressly stated to apply to fixed costs cases and the Explanatory Memorandum to the statutory instrument says so – it appears that the Rules Committee never got round to amending CPR 45.

      Kerry

      kerryunderwood

      February 29, 2016 at 4:10 pm

      • CPR 47.20(4) imports the provisions of Part 36 in toto into DA proceedings subject to a change in terminology. So to my mind a Receiving Party beating their own offer is entitled to their costs on the indemnity basis and by reason of Broadhurst the cap in 47.15 is disapplied as the fixed costs in CPR 45 were. Depends on who has the guts and the readies to run this to the Court of Appeal

        Kevyn Thompson

        February 29, 2016 at 4:26 pm

      • Seems to put it beyond doubt. So run it to the Court of Appeal, make a Part 36 offer and earn some fees!

        kerryunderwood

        February 29, 2016 at 4:29 pm

      • Dear Kerry
        From time to time we receive drop hands offers from Defendants which they put forward as a Part 36 offer. On the face of it they seem meaningless. Are we missing a trick?
        If we fail at trial or if the case changes and we are instructed to discontinue, are the defendants go to say we should have accepted their offer, having failed to do so they are now entitled to costs for failing to better their Part 36?

        Is this some way of getting round QOCS?

        if not why bother making the offer in the 1st place?

        John Bennett

        July 15, 2016 at 12:22 pm

      • John

        I agree. It does not succeed in getting round QOCS as what Part 36 does is to punish a claimant who fails to beat a Part 36 offer by allowing the paying party to set off post Part 36 costs due to it against pre Part 36 coasts due to the claimant and then damages. So, drop hands rejected obviously means that even an award of £1 beats it and if there is no award then there is nothing for costs due to the defendant to be set off against. Costs are always awarded against an unsuccessful personal injury claimant; QOCS prevents enforcement unless one of the exceptions – fundamental dishonesty being the main one – applies.

        With Part 36 it is not QOCS that comes in to play or is disapplied – it is the law of set-off, both under the CPR and at common law. So it could be argued that by dropping hands the client gets the benefit of not having a costs order against them, albeit an unenforceable one.

        In practice I suspect that the defendants are relying on the lack of knowledge – and therefore the fear – that many claimant lawyers have about QOCS, or rather the exceptions.

        No, you are not missing a trick :-0

        Kerry

        kerryunderwood

        July 15, 2016 at 5:42 pm

  2. I have now considered this in detail and I am sure that you are right, that is the £1,500 maximum in provisional assessment goes out of the window if a receiving party matches or beats its offer. Following the logic of Broadhurst such a party will get the fixed costs AND indemnity costs.

    New blog in the morning.

    Kerry

    kerryunderwood

    February 29, 2016 at 6:57 pm

  3. […] PART 36 – IMPORTANT RECENT CASES […]

  4. […] deal with this case in my blog Part 36 – Important Recent Cases. This point was actually decided by the court at a Case Management Conference as the quantum […]

  5. […] 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 […]

  6. […] 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 […]

  7. Hello
    I act in relation to an application for a new commercial Lease (Section 26 LTA 1954). Part 8 proceedings. The response is that they wish to grant a lease but what my client feels are very onerous terms. The Directions Hearing is listed for November, the other side refused to agree a stay for discussion about the new terms. They have now sent me an offer to grant a lease on their terms. Headed “Calderbank offer- without prejudice as to costs”. It is time limited and it requires, as part of the deal, for my client to pay their client’s costs (their client is a very large brewery). At the end it says “”if your client fails to do better than this settlement offer at Trial we intend to seek an Order requiring your client to pay our client’s costs from the expiry of the deadline together with interest on those costs from the date until payment”. I think I am missing something because this sounds like they are trying to get Part 36 consequences from a non-Part 36 offer? Is this possible?
    Your guidance would be much appreciated and thank you in advance.

    Angela

    Angela Titley-Vial

    October 25, 2016 at 10:10 am

    • Angela

      I agree. It is not a valid Part 36 offer as a Part 36 offer cannot contain conditions as to costs; the consequences under Part 36 itself must flow. Having said that Part 36 itself provides that an offer can be made in any way and the court may take in to account any offer, however made, when considering costs.

      I suggest that you make a valid Part 36 offer.

      Kerry

      kerryunderwood

      October 25, 2016 at 1:30 pm


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