Archive for March 2017
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This is all dealt with in my Personal Injury Reforms course this May, which can be booked here
Accepting a defendant’s higher offer
A claimant makes a Part 36 offer of £3,000.00 and this is not accepted within time.
A year later the defendant makes a Part 36 offer of £4,000.00, even though the claimant’s original offer of £3,000.00 remains available for acceptance.
What is the claimant then to do?
On the face of it, the answer is obvious – the claimant accepts an offer which is £1,000.00 more than their own unwithdrawn offer, which is still capable of acceptance.
However accepting a defendant’s Part 36 offer appears to restrict the claimant to ordinary costs, that is on the standard basis, or in a fixed costs case – fixed costs- whereas if the defendant had simply accepted the claimant’s one year old offer, for a lower sum, the defendant then risks being ordered to pay indemnity costs for the whole of the period of late acceptance.
The difference between fixed or standard costs and indemnity costs may well exceed the extra damages that the defendant is offering.
If the claimant does not accept the defendant’s offer then the defendant is free to accept the earlier offer and although the claimant’s solicitor stands to get more costs the client loses out and it is hard to see how such a course of action could be justified.
If the claimant solicitor immediately withdraws its own offer, so that the defendant cannot accept it, and then declines to accept the defendant’s offer, then it is back to square one with the claimant being at risk of failing to beat the defendant’s Part 36 offer but the defendant being at no risk of indemnity costs because there is no claimant’s offer on the table.
This is now happening quite a lot and the issue needs to be addressed, especially as fixed costs spread to other areas of work and to cases with a higher value.
As this happens there may be a very considerable advantage in the defendants making a Part 36 offer slightly above the claimant’s Part 36 offer.
Accepting a claimant’s lower offer
Of course this can work the other way round.
A defendant makes a Part 36 offer of £4,000.00 and a year later the claimant makes a Part 36 offer of £3,000.00 and if the defendant accepts that sum then the claimant avoids the adverse costs consequences of accepting a defendant’s offer late and also gets its costs for that one year period.
Wording along the following lines would deal with the problem:
“Where a claimant accepts a defendant’s Part 36 offer which is at least as high as its own outstanding Part 36 offer then the consequences shall be the same in terms of costs and additional damages etc. as if the defendant had accepted late the claimant’s offer save that the level of damages shall be that in the defendant’s offer.
Where a defendant accepts a claimant’s Part 36 offer which is lower than or equal to the defendant’s earlier unwithdrawn Part 36 offer then the costs consequences shall be the same as if the claimant had accepted the defendant’s offer late, save that the amount of damages will be that in the claimant’s lower offer.”
Set-off on late acceptance
A claimant accepts a defendant’s Part 36 offer late and thus is liable for the defendant’s costs from the date of expiry of the Part 36 offer to the date of late acceptance.
There is no time limit in relation to the defendant paying the claimant’s pre-Part 36 costs and therefore the defendant can withhold all the costs until its own post Part 36 costs are quantified.
However, in those circumstances, is the paying party allowed to withhold damages by way of set-off against post Part 36 expiry costs? A paying party would wish to do so if it expects its post Part 36 costs to be greater than the claimant’s pre Part 36 costs.
CPR 36.6(2) provides:
“(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.”
The general rule is that a paying party must make payment within 14 days of acceptance of the offer and there appears to be no provision for a paying party to withhold damages, as compared with costs, by way of potential set-off.
Part 36 offer v non-Part 36 offer
A defendant makes a non-Part 36 offer early on of £5,000.00 and very much later the claimant, who has ignored the offer, makes a Part 36 offer of £5,000.00 which the defendant accepts.
Does the defendant have to pay all of the costs or can they successfully argue that they should only pay costs up to the time of their non-Part 36 offer, relying on CPR 44.2 (4)(c) which says that the court must take into account any admissible offer to settle made by a party which is drawn to the court’s attention, and which is not an offer to which costs consequences under Part 36 apply?
In my view when, in those circumstances, the defendant accepts the Part 36 offer then they accept the costs consequences and therefore have to pay the claimant’s costs.
Had there been no offer by the claimant and therefore no acceptance by the defendant then the defendant’s offer could have been taken into account by the court in determining the issue of costs.
However on the defendant’s acceptance of the claimant’s offer, albeit in the same sum, then the court will not be dealing with the principle of costs.
Part 36 is of extreme complexity but CPR 36.2 reads:
“(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.)”
CPR 36.13 reads, where appropriate:
“(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.)”
Thus that rule applies whether it is the claimant’s offer, or the defendant’s offer, which is accepted as the reference there is to the offeror and not the claimant or defendant whereas other provisions refer to the claimant or defendant.
My view is that a valid Part 36 offer must trump a non-Part 36 offer. If it were otherwise then a defendant can make an offer that has no legal consequences but then seek to rely on it to avoid the costs consequences of the claimant’s valid Part 36 offer.
To interpret the provisions in any other way would render Part 36 largely meaningless, but there is a tension between CPR 36 and the general provisions on costs.
This has arisen in a number of cases, including the key issue of whether a claimant is entitled to indemnity costs on late acceptance by a defendant generally and whether a claimant is entitled to indemnity costs on obtaining judgment in a fixed costs case.
The latter point has been found in claimants’ favour in the Court of Appeal case of Broadhurst v Tan and Taylor v Smith  EWCA Civ 94 (23 February 2016).
Thus my view is that the defendant does indeed have to pay all of the costs.
Withdrawing Part 36 offer by email
In Thompson v (1) Reeve (2) The Motor Insurance Bureau (3) Mid Essex Hospital Services NHS Trust, Queen’s Bench Division of the High Court, Claim number HQ14P03864 20 March 2017
Master Yoxall allowed CPR 3.10 to be used to rectify the claimant’s admitted error in withdrawing a Part 36 offer by email where the parties receiving the notice had not indicated in writing that they were willing to accept service by email.
Thus the Claimant’s withdrawal of the Part 36 offer was deemed valid, which meant that it was not capable of acceptance by the defendants.
The situation arose due to the recent change in the discount rate.
So the MIB and the NHS Trust – both state/quasi state bodies sought to use a technicality to avoid a very severely and negligently injured child from getting the correct level of damages.
It would be nice if the NHSLA and the MIB behaved other than in this way.
Proposed amendment to the Civil Procedure Rules
“ Any body which does not consent to service by email shall recover no costs and should always be liable to pay costs on the indemnity basis.”
Please see my related blogs:-
ATE and security for costs
the court ordered the claimants to give details of funders under the court’s inherent jurisdiction ancillary to CPR 25.14.
An application for security might face difficulty as the trial was imminent, but the court could not say it was so unrealistic or hopeless that the defendants should not have disclosure.
The court refused to order that details of ATE insurance be given.
This was sought under its case management powers and the judge concluded that the documents were not needed for case management purposes.
He was also concerned it could lead to further satellite litigation.
However, he expressed some reservations about whether there was sufficient funding and, in light of that, suggested there should be more transparency about the ATE insurance.
The decision provides detailed guidance regarding such applications, including that:
- It was not a condition of making an order for disclosure of funders ancillary to CPR 25.14, that the applicant had unequivocally determined to bring an application for security once details were revealed. However, the applicant must, at least, demonstrate that its putative application for security was a real possibility and had realistic grounds, and was not being suggested simply for some tactical purpose.
- In an appropriate case, the court’s case management powers under CPR 3.1 did extend to requiring disclosure of an ATE policy when this was necessary to enable the court to exercise its case management function. However, whether a party will be able to enforce damages and costs orders is not a matter which affects case management. Generally, an ATE policy, which does not impact on the issues in the case, will not be relevant. But there may be exceptions, for example, where the ATE policy has been deployed in the proceedings to influence or impact on a decision. That may be especially likely in group litigation.
- It was unlikely that privilege attached to an ATE policy.
ATE and Third Party Rights
the Commercial Court, part of the High Court but shortly to be the Business and Property Court, held that After-the-Event insurers were entitled to deny liability to a third party on the basis that their own insured had breached the policy.
Following litigation between the insured and the third party, the insured was ordered to pay some of the third party’s costs, but went into liquidation without making payment.
Relying on the statutory scheme in the Third Parties (Rights against Insurers) Act 1930, the third party commenced proceedings directly against the insurers, who denied liability, alleging that the insured had breached a number of policy conditions precedent to liability relating to, among other things, obligations to co-operate in any claim and provide information.
The decision is an interesting example of the court’s approach to the interpretation of conditions in an insurance contract. In particular, although the policy included a general “Due Observance” condition, which sought to create conditions precedent, the court examined each of the individual conditions in order to determine whether they could be construed as conditions precedent.
The decision is also a reminder that, for the purpose of the 1930 Act, the transfer of rights to a third party is subject to the defences available to insurers against the insured.
Although, under the Third Parties (Rights against Insurers) Act 2010, a third party is also in no better position under the insurance contract than the insured, and, generally, an insurer is able to raise any defence against the third party that would have been available to it against an insured, there are some exceptions.
For example, an insurer cannot allege non-performance by the insured where the third party has fulfilled the relevant policy conditions.
In the circumstances, had the 2010 Act applied, it might have been possible for the third party, upon the insured’s insolvency, to comply with the policy conditions by promptly sending, directly to insurers, all communications relating to settlement offers and the detailed assessment proceedings.
However, in practice, this will only be possible where the third party has succeeded in obtaining the relevant policy information from the insured or its agents in time to enable it to comply with any conditions.
the Senior Courts Costs Office considered the costs in a clinical negligence case which had settled for £3,250.00.
At an oral hearing the Master broadly upheld his decision made on provisional assessment that the costs claimed of £72,320.85 were disproportionate and should be reduced to £24,604.40.
This included a reduction in the After-the-Event insurance premium from £31,976.49 to £2,120.00 and experts’ fees from £18,036.00 to £9,000.00.
All of the work was post 1 April 2013 and therefore governed by the new rule on proportionality which means that even if work is reasonably and necessarily done it can still be disproportionate.
The Master criticised the claimant’s solicitors for not planning the necessary work and the way to approach the matter, given that they knew that this was a low value claim which, at its highest, was worth £5,000.00.
Here the court quoted with approval the passage from HH Judge Alton in Birmingham County Court on 22 June 2000 in an unnamed case, itself approved by the Court of Appeal in Jefferson v National Freight Carriers Plc  EWCA Civ 2082:
“In modern litigation, with the emphasis on proportionality, it is necessary for parties to make an assessment at the outset of the likely value of the claim and its importance and complexity, and then to plan in advance the necessary work, the appropriate level of person to carry out the work, the overall time which will be necessary and appropriate to spend on the various stages in bringing the action to trial, and the likely overall cost. While it is not unusual for costs to exceed the amount in issue, it is, in the context of modern litigation such as the present case, one reason for seeking to curb the amount of work done, and the cost by reference to the need for proportionality.” (Paragraph 19 of the judgment).
Here the Master said that that was even more relevant today as the rules regarding proportionality are now much more onerous.
The Master also held that additional liabilities, here the ATE premium, fall to be considered in the context of proportionality in relation to post 1 April 2013 cases.
ATE premiums remain recoverable in clinical negligence cases in relation to the costs of medical reports relating to liability and/or causation.
These are governed by the Recovery of Costs Insurance Premiums in Clinical Negligence Proceedings (No. 2) Regulations 2013.
The Master had this to say:
“Furthermore, it is often the case that the fee claimed for a medical report includes the fee charged by a medical agency. I query whether any attempt is made by the solicitors or the insurers when calculating the premium, to distinguish between the actual cost of the report and the fee paid to the medical agency.”
On 8 February 2017 I posted a blog – NEW MIB UNTRACED DRIVERS SCHEME: INSURERS AT IT AGAIN.
I was highly critical of clause 10(1) which I refer to as “a deliberate exclusion of solicitors from the process at the beginning.”
Following that blog that agreement dated 10 January 2017 and made between the Secretary of State for Transport and the Motor Insurers Bureau, which was due to come in on 1 March 2017, was revoked even before it came into force.
A fresh agreement dated 28 February 2017 has been entered into and the offending part of clause 10(1) has been removed.
The MIB only published the replacement scheme on 2 March 2017, that is one day after it came into effect.
This followed some interesting comments and exchanges on my blog by Paul Ryman-Tubb, which you can see on the original blog.
In particular on 24 February 2017 Paul Ryman-Tubb accused me of writing an article which lacked accuracy but refused to say in what respects it was inaccurate.
Presumably Mr Ryman-Tubb knew at that stage that the MIB and the Government were in fact going to agree with my point and amend their agreement accordingly.
Apart from demonstrating the power of blogs this shows the importance of never letting the Government, insurers, consumer groups or anyone else get away with seeking to remove lawyers from the process.
Lawyers stand between civilization and tyranny.
Please see my related blogs: