Kerry Underwood

SUCCESSFUL PART 36 CLAIMANT DENIED UPLIFT – A MAD DECISION

with 12 comments


The matters dealt with in this piece are examined in great detail in my three volume, 1,300 page book Personal Injury Small Claims, Portals and Fixed Costs – price £50 and available from Underwoods Solicitors here.

Kerry Underwood offers consultancy services in relation to this and other matters and details are here.

In

JLE (a child by her mother and litigation friend, ELH) v Warrington & Halton Hospitals NHS Foundation Trust [2018] EWHC B18 (Costs)

a High Court Master held that the Part 36 bonuses should be considered separately, so that it may be just for the claimant to get some of the advantages, but unjust to get others.

This was an assessment of the claimant’s costs in a clinical negligence case, and thus the effective party was the claimant’s solicitor in the costs proceedings.


The claimant’s bill totalled £615,751.51 and the claimant made a Part 36 offer of £425,000, including interest, which offer was not accepted.

The Master assessed the costs at £421,089.16, but with interest this came to £431,813.05, that is £6,813.05 more than the claimant’s offer on a submitted bill of £615,000, that is the offer was beaten by around 1% of the value of the bill.

It was accepted that the fact that it was only the interest that meant that the claimant beat its own offer was irrelevant.

The defendant contended that the issue of whether it was unjust to award the additional 10% – around £43,000 – should be considered separately to the other Part 36 bonuses and the Master agreed.

The Master held that it was appropriate to disallow the 10% uplift under CPR 36.17(4)(d) as it was disproportionate to the margin by which the offer was beaten.

This is in spite of the clear definition of “more advantageous” in CPR 36.17(2) as “better in money terms by any amount, however small”.

CPR 36.17(4) provides that where a claimant matches or beats its own Part 36 offer, unless it considers it unjust, it must order the defendant to pay:

  • interest on the sum awarded;

  • costs on the indemnity basis from expiry of the relevant period;

  • interest on those cost;

  • an additional amount of 10% of the first £500,000 awarded and 5% of any amount above that, subject to a maximum of £75,000.

Comment

An absurd anti-claimant decision, not the first by this Master, who was responsible for the Mitchell relief from sanctions fiasco.

It is simply inconceivable that the Master, or any other judge, would have applied the principle the other way around.

Thus a defendant makes a Part 36 offer of £50,000, and the trial judge awards £50,000, so the claimant has failed to beat the defendant’s Part 36 offer.

Imagine a judge saying that as it was so close it would be disproportionate to disallow the claimant’s costs from expiry of the offer and disproportionate to award the defendant its costs from expiry.

The sums in issue there will generally be far greater than 10% of the damages, so why is that not disproportionate?

Furthermore the paying party here had its remedy – had it made a Part 36 offer of say £450,000, then the claimant would have failed to beat it and would have been penalized in costs.

It should be noted that this was a costs assessment – there is no question of the defendant not being liable, as may occur in a substantive case, the issue was simply how much the defendant had to pay.

The Master lists that the case is considered, but absent from them is the key case of

Carver v BAA Plc [2008] EWCA Civ 412

where the Court of Appeal held that the claimant, who beat the defendant’s Part 36 offer by just £51, had not really won the case on Part 36 as beating a Part 36 offer by such a small amount was not deemed to be more advantageous on the facts given the trauma etc. of going to court.

I was highly critical of that decision, and said that solicitors should ensure that their clients gave evidence to say how much they enjoyed going to court, and it was not traumatic at all and indeed the whole experience of giving evidence made it more advantageous than settling.

My irony, as ever, was lost on some, but not Parliament which intervened and statutorily overturned the Court of Appeal’s decision in Carver and introduced the test set out above, that for the result to be more advantageous all it requires is for it to be better in money terms, by any amount, however small.

Thus this decision follows a Court of Appeal decision, which was not cited to the court, and which has been overturned by Parliament.

This is not a situation where the courts need to interpret the will of Parliament, but rather Parliament has told the courts that they must not interpret Part 36 in the way that the court did in Carver and in the way that this Master has.

This judgment is hopelessly wrong and, like some other Part 36 judgments of the judiciary, threatens to undermine the whole Part 36 regime.

It is worse than that. Parliament went further and CPR 36.17(5) sets out five factors which the court must take into account in considering whether it would be unjust to make the orders referred to in 36.17(4).

Those circumstances are:

(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;

(e) whether the offer was a genuine attempt to settle proceedings.

None of these applied here. True it is that the court must take into account all the circumstances including those matters, which does not prevent the court from considering other matters.

However the Civil Procedure Rules are riddled with references to proportionality, and had Parliament, or the Civil Procedure Rules Committee, wished proportionality to be a factor in determining whether it was unjust to give the bonus, then Parliament would have said so.

At CPR 36.17(4)(d)(ii) the rules set out the percentage uplift that must be awarded. These figures are mandatory and not a maximum.

Contrast the wording of CPR 36.17(4)(a) and (c) where the words “not exceeding 10%” are used, which clearly gives the court a discretion to award a lower percentage.

That is not the case with CPR 36.17(4)(d)(ii), where a flat percentage is given, with no discretion for the court to award less.

The very fact that as far as costs are concerned a successful Part 36 gets indemnity costs – see CPR 36.17(4)(b), where proportionality cannot apply, demonstrates the absurdity of introducing proportionality into the Part 36 regime, and in any event the courts have, time and again, stated that Part 36 is a self-contained scheme not subject to the ordinary law.

The uplift on damages is a key part of the incentive on claimants to make Part 36 offers, and this was introduced by primary legislation, that is section 55 of the Legal Aid, Sentencing and Punishment of Offenders Act 2012, and not by secondary legislation or rule changes, and the rules set out above implemented an Act of Parliament, and it was not simply a question of Parliament approving changes to the Civil Procedure Rules by way of a statutory instrument.

In February 2019 the government published its Post Implementation Review of Part 2 of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 and at chapter 6 discusses changes to Part 36 offers to settle.

The opening paragraphs of the review read:

Part 36 of the Civil Procedure Rules (CPR) was introduced to encourage early settlement through a ‘carrot and stick’ approach to ensure all parties have an interest in agreeing to early settlement.

Section 55 of the LASPO Act made relatively minor statutory changes including provision for recovery of an additional sum by a claimant where a defendant fails to beat the claimant’s offer. This was accompanied with a rule change to reverse the effect of Carver v BAA to clarify that ‘most advantageous’ meant by any amount, no matter how small.”

The review then goes out to set out, at paragraph 126, that many lawyers for claimants took the view that the 10% enhancement is not sufficiently high to make a meaningful difference or to be a decisive factor determining whether to settle and that the additional costs of a trial could exceed this enhancement, limiting the impact of any uplift.

Thus some respondents to the review suggested that the uplift should be increased to 20% and that the uplift cap of £75,000 should be raised.

This decision is close to being a contempt of Parliament, save that it appears that all of the parties, their lawyers and the judge were unaware of the legislative history in this matter.

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Written by kerryunderwood

February 22, 2019 at 6:56 am

Posted in Uncategorized

12 Responses

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  1. This case is being appealed.

    Ben Williams

    February 22, 2019 at 7:03 am

  2. Carver was my case Kerry. Still sore about that but rather depressing seeing history being repeated. Don’t judges learn from history?

    Jeff Zindani

    February 22, 2019 at 5:58 pm

    • Thanks Jeff – good to hear from you – think you have answered your own question!

      Kerry

      kerryunderwood

      February 22, 2019 at 6:01 pm

  3. This seems like a bizarre judgment. There isn’t any real indication of the nature of the reductions in the judgment and therefore whether or not, for example, proportionality was a key issue or determinative factor. (Unless I’ve missed it whilst skim reading on an iPhone with coffee in hand). So pausing their, if a lawyer anticipates that his or her costs may be assessed as broadly reasonable but nevertheless disproportionate and then accurately predicts a reasonable outcome in an effort to avoid an assessment he/she will not be adequately rewarded for having taken a reasonable and commercial view of a range of outcomes. In the absense of some serious misconduct, that just seems wrong.

    Further, There is no discussion in the judgment about the nature of any part 36 offers made by the paying party. Maybe it wasn’t an issue but again let’s suppose that the paying party’s offer was say £300,000 or even £350,000. Then who is the clear winner? Whilst it is true that it is only beating the receiving party’s offer which would result in the enhancements under the rule; in my view those enhancements should not be diminished, certainly if viewed against an unreasonably low counter offer. I’d be interested to know the margin between the paying party’s offer and the award.

    On proofing my comments I see that Ben Williams has indicated an appeal in this case . . . Can’t say I’m surprised.

    Tony Armstrong

    February 25, 2019 at 12:03 pm

    • Tony

      I agree. The basis of the decision appears to be “I don’t want you to be given the bonus ordered by Parliament, so I am not giving you it.”
      No suggestion of misconduct.

      Kerry

      kerryunderwood

      March 1, 2019 at 2:00 pm

  4. Is the master confused about the rules of stare decisis, or am I? She says that Ayton was binding on her, but Ayton was “only” a High Court decision and the SCCO is part of the High Court. I didn’t think a decision made in the same court could bind that court, regardless of whether it was made at first instance or on appeal, and regardless of the level of judge.

    Jon Heath

    February 25, 2019 at 1:49 pm

    • The level of the judge is the key. A Master is a District Judge and thus is bound by the decision of a full High Court judge.

      That is why, occasionally as a policy decision – that is so that the judgment is binding – SCCO assessments are heard by full High Court Judges, a notable example being the case of Bolt Burdon Solicitors v Tariq and others [2016] EWHC 811 9QB) where the court expressed its support for contingency fees over conditional fee agreements.

      Leave to appeal was refused, but that leave to appeal was to the Court of Appeal, confirming the status of a High Court Judge giving the decision.

      An appeal from a Master hearing the same case would be to a High Court Judge.

      Kerry

      kerryunderwood

      March 1, 2019 at 1:55 pm

      • Two Chancery masters have ruled that decisions of masters and judges of the High Court have the same standing for the purposes of precedent. The cases are Randall v Randall [2014] EWHC 3134 (Ch) and Coral Reef Limited v Silverbond Enterprises Ltd and Another [2016] EWHC 874 (Ch). The twist in the tale is that Master Matthews’ decision in Coral Reef was appealed, and David Foxton QC sitting as a deputy HC judge held on the appeal that HC judges’ decisions are binding on masters. Of course, that in itself is not conclusive if in fact Deputy Master Collaco Moraes got it right in Randall! I don’t know if there have been any subsequent developments in this area.

        FWIW, I think the decisions of HC judges should bind masters, but the logic of Howard de Walden Estates Ltd v Aggio [2008] Ch 26 seems to run contrary to that.

        Jon Heath

        March 1, 2019 at 2:47 pm

  5. I disagree. A High Court Master’s decision is not binding on High Court Judges- there are hundreds of instances of their decisions being overturned by a High Court Judge – how could that happen if they are of equal standing, and why is the line of appeal as set out by me?

    Kerry

    kerryunderwood

    March 1, 2019 at 2:59 pm

  6. Kerry: the argument isn’t that masters’ decisions are binding on HC judges — it’s that they are of equivalent value for the purposes of the doctrine of precedent. HC judges can overturn masters’ decisions on appeal because the rules give them that power when they are exercising their appellate jurisdiction. It does not necessarily follow that a HC judge’s decision must always trump a master’s decision. Cf. the position with a CJ’s decision on appeal in the CC.

    Jon Heath

    March 4, 2019 at 9:37 am


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