COSTS WHERE A CLAIMANT ACCEPTS A PART 36 OFFER LATE: TWO CASES WHERE THE CLAIMANTS CAME TO GRIEF

When a claimant accepts a Part 36 offer late costs become at large.  Here we look at two cases where late acceptance of a Part 36 offer had grave consequences for a claimant.*

“A claimant who pursues a claim in excess, he says, of half a million pounds but settles for £40,000 attracts suspicion. When he does so in short order after service upon him of evidence which goes so far as seeing experts who have previously, though with some reservation and  some confusion supported his case, then one necessarily would look to find from the claimant some clear and convincing explanation as to why he should sell himself so short.”

KEY POINTS

  • When a claimant accepts an offer late costs are at large.

  • It is open to the court, in appropriate cases, to not made the “usual” order.

  • In both of these cases the courts ordered the claimant to pay the defendant’s costs from a date well before the date of the Part 36 offer.

These cases highlight the importance of the 21 day period. If decisions are to be made they must be made within that period (or any agreed extension). After that time the costs award is discretionary.

THE RULES

The relevant rules were summarised by HHJ Harris QC in Duncum -v- Churm (Oxford County Court 12th September 2014).

(1)Part 36 offer are dealt with by CPR 36.10:
“Where a Part 36 offer is accepted within the relevant period the Claimant will be entitled to the costs of the proceedings up to the date on which notice of acceptance was served on the offeror.”
(2)The relevant period is 21 days (CPR 36.3(c)).
(3) If,  the offer was accepted after the expiry of the period, then by CPR 36.10.4:
(4) “If the parties do not agree the liability for costs the Court will make an order as to costs.” And: “Unless the court order otherwise, the Claimant will be entitled to the costs of the proceedings up to the date on which the relevant period expired and the offeree would be liable for the offeror’s costs for the period from the date of expiry of the relevant period to the date of acceptance.”
(5) CPR 36.14.2 (dealing with costs consequences following judgment) is provided: “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.”
(6) CPR 44.2: “The court has a discretion as to whether costs are payable by one party to another, the amount … and when they are to be paid. If the court decides to make an order about costs, a) the general rule is that the unsuccessful party will be ordered to pay the costs of the successful party, but b) the court may make a different order.
(7) CPR 44.4: “In deciding what order … to make about costs, the court will have regard to all the circumstances, including conduct, the degree of success and admissible non-Part 36 offers.”

THE FACTS IN DUNCUM -v- CHURM

  • The claimant in a personal injury action claimed damages, the schedule put damages at £1,000,000.
  • There were a number of attempts at settlement which were unsuccessful.
  • The Schedule was amended to claim £500,000.
  • On the 14th January 2014 the defendant made a Part 36 offer of £202,500.
  • This was accepted but not until the 17th July 2014 (six months after it was made).
  • This represented some 11% of the claim as it was originally claimed.

THE JUDGE’S FINDINGS

The judge found that the claim had been on far too high a basis. Rather than make the usual costs order he ordered that the claimant pay the defendant’s costs from the date of the claimant’s original schedule in May 2013. [There is an error in the transcript at one point which wrongly gives the date as May 2014).

THE REASON FOR THE JUDGE’S DECISION: THE RELEVANT CASE LAW

“In SG -v- Hewitt [2012] EWCA Civ 1053, Lady Justice Black observed that CPR 36 established a ‘normal’ order and conferred on the court a discretion to depart from it, but did not provide any guidance as to when the court should do so. She referred to and followed authority which suggested that the approach should be similar to that in CPR 36.14. She continued:
“Accordingly, in the present case, the Court had to make the normal order unless it considered it unjust to do so, and deciding that it was unjust, it had to take into account all the circumstances of the case.”
She referred also to Lord Justice Longmore’s observations in Kunaka -v- Barclays Bank [2010] EWCA Civ 1035:
“Where the Court has a discretion pursuant to 36.10.5, it is open to the Court to assess what the fairness of the situation demands.”
She indicated that it was not wise to prescribe or restrict in the abstract the circumstances in which the Court may reach a conclusion and that everything relevant must be considered, for costs decisions are:
“Particularly sensitive to the facts of the individual case.”
Lady Justice Arden remarked that the power of the Court was:
“A deliberate and important safety valve. For a case to be within the safety valve, however, the judge will in general need to find that the case has features which take it out of the ordinary principle, and which demonstrate that it is unjust to impost the normal shifting of the costs risk. I would therefore, as Lady Justice Black has done, interpret the existing CPR 36.10.4(b) consistently with CPR 36.14.2, and thus as requiring the Court to find that it is unjust not to order otherwise. Where those circumstances are present, however, the judge has a wide discretion as to the form of order that he substitutes.””

THE DECISION IN HULLOCK

The judge also considered the decision of the Court of Appeal in Hullock -v- East Riding County Council [2009] EWCA Civ 1039.

“In a case … where the real dispute is confined to a claim for special damages which the judge finds to have exaggerated, and is therefore either dismissed or abandoned, that will normally be a central if not decisive consideration in determining who should pay the costs attributable to litigating that issue. The fact that the Defendant failed to make an effective Part 36 offer … is not … an answer to the argument where most, if not all, of the costs … were attributable to the disputed claims of care … the dispute would obviously have been settled at the figure eventually agreed upon had the Defendant not persisted in her exaggerated claim.”

And he concluded:

“This is … a case in which the exaggerated and unsuccessful claim for special damages had real costs consequences for which the Claimant should be made liable. The real winner was the Defendant.”

THE FACTORS IN THE CURRENT CASE

  1. The claim was originally cast beyond its true value. This was done even though the claimant was in possession of an adverse surveillance report.
  2. The Part 36 offer made was not the first offer. It was made after the claim had been halved in value.
  3. The claimant did not have the protection of the CPR automatic costs consequences.
  4. There had been no trial and no explicit judicial finding of dishonesty.
  5. It was “pellucidly clear” that the claim was put much too high on the claimant’s behalf.
  6. The fact that a claimant accepts much less than was originally sought does not, in itself, cause unfairness to a defendant.
  7. It could be legitimately inferred that the case would have settled much sooner than it did if the claim had been reasonable. There was no reason why this should not be reflected in costs and every reason why it should be.
  8. The defendant was clearly the “winner” in the parties’ rival contentions as to the value of the claim.

WORTHINGTON -V- 03918424 Limited

This was a decision of District Judge Harrison in Manchester on the 16th June 2015.

THE FACTS

  • The claimant put forward a case which was valued at £500,000.
  • Following the service of surveillance evidence and the change of mind of medical experts the claimant accepted (late) a Part 36 offer of £40,000.
  • The offer was made on the 22nd May 2014 and accepted by the claimant on the 3rd December 2014.

THE DECISION

  • There was a strong inference that the claim was exaggerated.
  • Had the claimant conducted the claim in a proper manner it would have settled on the 30th June 2012 (or thereabouts)
  • The defendant was ordered to pay the claimant’s costs up to the 30th June 2012.
  • The claimant was ordered to pay the defendant’s costs after that date (including the costs of the application) to be assessed on an indemnity basis.
  • The claimant was also ordered to pay the costs of and incidental to the collection of surveillance evidence.
“A claimant who pursues a claim in excess, he says, of half a million pounds but settles for £40,000 attracts suspicion. When he does so in short order after service upon him of evidence which goes so far as seeing experts who have previously, though with some reservation and  some confusion supported his case, then one necessarily would look to find from the claimant some clear and convincing explanation as to why he should sell himself so short.”

.REJECTION OF CRITICISM THAT THE DEFENDANT SERVED ITS SURVEILLANCE EVIDENCE TOO LATE

“The criticism that the defendant ought to have disclosed the surveillance evidence at an earlier stage is met quite properly by the defendant saying:
“We required the claimant fully and firmly to nail his colours to the mast, since to do otherwise would have invited an unscrupulous claimant to change his D evidence to accommodate him.
There is good force in that argument. I find no criticism of the defendant for having withheld the surveillance evidence.”

REJECTION OF CRITICISM FOR FAILURE TO NEGOTIATE

“11. In so far as there is criticism of the defendant for having failed to engage in the claimant’s frequent requests to engage in a joint settlement meeting, I find this: Firstly, E it was, indeed, inappropriate for the defendant not to respond to the requests to engage. If there was to be non-engagement, which clearly there was, then the defendants should have explained in brief their position in that regard. However, they would not, at that stage, have had to have gone so far as saying, “By the way, we are collecting surveillance evidence.”
12. The defendant’s argument that it was in fact in any event inappropriate for them to engage because of cost, is one which I will accept in the factual circumstances of this case. They had very good reason to believe that the claimant’s case was worth far less than that value which he had put forward. The costs of the JSM process would have been out of proportion.”

* Both of these cases are available on Lawtel.

RELATED POSTS

On Part 36 offers

On refusal to mediate

Cost orders

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