Kerry Underwood

PART 36: TWO NEW CASES: THINK ABOUT YOUR OFFER!

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Part 36: Dishonest Conduct No Reason to Depart From Usual Costs Order

In Tuson v Murphy [2018] EWCA Civ 1461 (22 June 2018)

the Court of Appeal held that a claimant who accepted a Part 36 offer after the expiry of the relevant period was not liable for costs incurred before the expiry of the relevant period even though she was dishonest and misleading.

The offer was unconditional and unwithdrawn and was made by the defendant with full knowledge of the claimant’s dishonesty.

This was a personal injury claim which included a claim for loss of earnings.

Three months after issuing proceedings, the claimant tried to develop a business franchise, but she abandoned it as it was losing money, and she failed to disclose this in her evidence and to the employment expert appointed  in relation to her loss of earnings claim.

After becoming aware of this, the defendant made a Part 36 offer, which was accepted by the claimant two months after the expiry of the relevant period.

The usual order would be that the claimant would get costs up to the expiry of the relevant period, but not afterwards, and would have to pay the defendant’s costs from the expiry of the relevant period onwards.

However, here, the first instance court ordered the claimant to pay the defendant’s costs from the point at which it could be said that the claimant had started to mislead the defendant.

The claimant appealed and the Court of Appeal allowed the appeal and substituted the usual order of the defendant paying the claimant’s costs up to the expiry of the relevant period with the claimant paying the defendant’s costs thereafter.

The Court of Appeal considered CPR 36.13(5) and the circumstances in which it may be unjust to make the usual costs order.

 

The Court of Appeal considered

 

Tiuta plc (In Liquidation) v Rawlinson & Hunter (A Firm) [2016] EWHC 3480 (QB)

 

and endorsed the approach of the court there, namely that if nothing emerges after the claimant’s acceptance of a Part 36 offer to show that the defendant’s assessment of the risks and benefits in making the offer is significantly upset, contradicted or misinformed, then it will be highly unlikely that applying the usual costs order will be unjust.

The court said there was a difference between the situation where the facts known to the defendant’s advisers at the time of the Part 36 offer did not change significantly during the period after the offer was made, but before the delayed acceptance, and the situation where the facts known to the defendant’s advisers when the Part 36 offer was made were upset or undermined by subsequent events, or subsequently discovered facts.

The judgment is also a reminder of the value of Calderbank offers, outside the framework of Part 36, which can be made in this type of situation, or indeed any other type of atypical situation.

Comment

This was a pre-2015 case. In a case issued after the implementation of Section 57 of the Criminal Justice and Courts Act 2015, the whole claim would have been dismissed on the basis of fundamental dishonesty.

Had the claimant accepted within the relevant period, then there could have been no argument – she would have been entitled to costs in any event.

The key for all parties in relation to Part 36 is certainty, and this decision is a sensible and correct one.

Obviously I have no idea why the defendants made a Part 36 offer, rather than a Calderbank offer, but I do know that generally many litigation lawyers have a woeful lack of knowledge and understanding of Part 36, which is an exceptionally complexed rule.

 

In Tiuta the court said:

 

“…the authorities have repeatedly emphasised the importance of remembering that the part 36 regime is there to provide a clarity and balance for the encouragement of the resolution of claims that would otherwise be litigated through to a trial.”

 

Part 36 Offers: You Need to Track Them and Use Form N242a !

I have long advised that in every case every lawyer should have a separate document setting out all Part 36 offers in a case and that document, and any offers, should be reviewed each month as part of a regular file review.

Those of you working electronically only will need to find your own systems, but I suspect it is the lack of paper staring lawyers in the face which is causing some of these problems.

A particularly graphic case is

Hogg v Newton, Teesside County Court, 18 May 2018.

This was a road traffic accident and on 8 May 2012 it was put onto the portal and the Claim Notification Form stated that the claimant was hiring a vehicle – in fact on credit hire – as well as claiming for personal injury.

On 12 February 2013 the claimant’s solicitors made a Part 36 offer of “£1,600 in full and final settlement of this claim.”

That Part 36 offer was made by letter and elsewhere within the letter it stated that the offer was for “the whole of our client’s claim”.

In March 2014, the personal injury element of the claim was settled for £650, leaving the balance of the claimant’s offer at £950, that is £1,600 less the £650 agreed for the personal injury part of the claim.

The claimant instructed fresh solicitors and in March 2016 they issued proceedings with a damages claim of over £125,000, of which the credit hire claim amounted to over £122,000.

The defendants then accepted the original, unwithdrawn Part 36 offer and paid the balance of £950 and applied to the court for a declaration that the claim had been compromised.

The District Judge granted the application, and rejected the claimant’s argument that the reference to the whole of the claim should be read as meaning with the exception of credit hire, and the judge also rejected the argument that the offer lapsed on settlement of the personal injury element of the claim.

The claimant appealed and sought to argue a fresh ground, namely that the offer was not a Part 36 offer at all, having failed to comply with the CPR, as well as its original arguments.

The Circuit Judge agreed with the District Judge that the natural meaning of “the whole of our client’s claim” was just that and included the claim for credit hire.

The Circuit Judge also upheld the District Judge’s finding that settlement of part of a claim did not revoke a Part 36 offer, and noted that the offer had never been withdrawn, and that the claimant was free to withdraw the offer at any time after the expiry of the relevant period.

The Circuit Judge also rejected the fresh argument that the offer was not a genuine Part 36 offer.

The Circuit Judge allowed this point to be argued and he found that the reference in the letter to the claimant “seeking the full sanctions available under Part 36” was sufficient and that a reasonable person, or insurer, would have read the relevant passage as being part of a valid Part 36 offer.

It was not necessary specifically to include within the offer the phrase that the offer is intended to have the consequences of section 1 of Part 36, even though this is required by CPR 36.2(2)(b).

The statement that the defendant had “21 days to respond to this offer” was sufficient and the offer did not need to set out the full text of CPR 36.2(2)(c).

 

Comment

This decision is correct and illustrates a number of important points.

Firstly always, but always, use the HMCTS Form N242A, rather than trying to write your own Part 36 offer.

Completion of the official, approved form of Part 36 offer eliminates any chance of not getting the wording right.

Time and time again I am instructed by solicitors where the matter in issue is whether an offer made in a letter, rather than on Form N242A, is a valid offer.

Secondly, have a separate and clear document listing Part 36 offers, their terms and dates and review these offers each month as part of the file review.

Thirdly, take care in considering whether the offer is indeed intended to compromise the whole claim, or only part of it.

It is proper and acceptable to seek to compromise just part of the claim; indeed that is part of the purpose of Part 36 that discrete matters, such as special damages to date or whatever, can be resolved, so as to narrow down the issues.

Far too many firms take a cavalier attitude towards Part 36, which is unquestionably the most important rule in the book.

 

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Written by kerryunderwood

July 5, 2018 at 11:06 am

Posted in Uncategorized

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