LATE ACCEPTANCE OF CLAIMANT’S PART 36 OFFERS: TWO CONTRASTING CASES & THE GREAT DEBATE

There is an ongoing debate about whether the Defendant should, or does, face any adverse consequences when a Claimant’s Part 36 offer is accepted late.  I had a recent email from solicitor John McQuater of Atherton Godfrey.   Here I look at two contrasting cases and, with his permission,  John’s views – to add to the debate.

DECISION 1: LATE ACCEPTANCE  IN ITSELF DOES HAVE CONSEQUENCES:

John was the solicitor in Sutherland -v- Khan (DJ Besford 21st April 2016) (This is from his note on the case).

“The defendant argued any order for costs should be on the standard basis and that that would, in any event, mean that Part 45.29B applied, limiting the claimant to fixed costs on the basis that these, under that rule, were “the only costs allowed”.  The defendant resisted the argument that the claimant should recover indemnity costs by relying on Fitzpatrick Contractors Limited –v- Tyco Fire & Integrated Solutions (UK) Limited (No 3) [2009] EWHC 274 (TCC).  Giving judgment in that case Coulson J, on the basis of earlier authorities such as Petrotrade Inc –v- Texaco Limited [2000] All ER (D) 724, held that the claimant, who had been spared the costs, disruption, and stress of trial, should not recover indemnity costs on late acceptance of a Part 36 offer by the defendant. 
Here the claimant, however, emphasised the importance of Part 36 in the need to incentivise parties to both make and accept offers, an example cited being Broadhurst –v- Tan [2016] EWCA Civ 94.
District Judge Besford preferred the argument advanced by the claimant and held:
“The interpretation of these cases put forward by Coulson J is not, with respect how I read the more recent cases coming forth from higher courts. My understanding is, as I have alluded to, that there has been a tightening up as to the ‘carrot and stick effect’ of part 36 offers. To my mind, notwithstanding the comments of Coulson J, if there was no incentive or penalty there would be little point in a defendant accepting offers early doors, as opposed to waiting immediately prior to trial. It also seems to me unsatisfactory that there should be penalties flowing if you do not beat an offer at trial, whereas if you settle before trial there are none. This position does not sit comfortably with the overriding objective of saving expense. In my view, I think that Fitzpatrick is perhaps a statement of the law as it was in 2009, but not necessarily the way the law in respect of part 36 is being interpreted in 2016.”
Consequently, District Judge Besford considered that:
“In conclusion, I do not find that the court has to find that the defendant has, in some way been guilty of inappropriate behaviour or conduct capable of censor before I can consider making an order for costs on an indemnity basis.”
Following this analysis the judge turned to the terms of Part 36, noting that Part 36.13 (6) requires the court, when considering whether it would be unjust to make the usual order on late acceptance specified in Part 36.17 (5), to take account of all the circumstances of the case, but specifically the matters identified in Part 36.17 (5).
On this basis the judge considered Part 36.17 (5) required consideration of whether it would be unjust to make the orders ordinarily flowing under Part 36.17 (4) which included indemnity costs.
On this basis the judge reviewed the circumstances of the case, including the factors expressly referred to in Part 36.17 (5) and noted:
  • The terms of the Part 36 offer were clear and unambiguous.
  • The offer made at an appropriate stage.
  • Both parties had material information to make and consider the offer at the time it was made.
  • There was no relevant conduct.
  • There was no suggestion the offer was not a “genuine offer to settle” and, in any event, that offer having been accepted suggested it was indeed genuine.
Accordingly, District Judge Besford ruled:
“It follows that for the court to deny the consequences that flow from accepting a part 36 out of time the court has to make pretty exceptional findings and there has to be some very good reason as to why it is unjust not to make the usual order. The very fact that the claimant obtains a ‘windfall’, most certainly does not constitute unjustness, under part 36.17.”
The claimant was, accordingly, awarded costs, to be assessed on the indemnity basis, from the end of the relevant period in the claimant’s Part 36 offer.”

COMPARE AND CONTRAST: DECISION 2: LATE ACCEPTANCE DOES NOT NORMALLY HAVE CONSEQUENCES

This has to be compared with the case of  Whiting v Carillionamey (Housing Prime) Limited (Claim No B80YM364) reported by Andrew Hogan on his blog Costs Barrister. This was an appeal to His Honour Judge Hughes QC in the County Court at Winchester. The judge overturned decision of a Deputy District Judge awarding indemnity costs following late acceptance of a claimant’s Part 36 offer.

JOHN’S RESPONSE

Andrew’s blog post describes Sutherland -v- Khan as a “curious case” and John replies:

“I note a different approach appears to have been taken by HHJ Hughes QC in the County Court at Winchester, the basis of that decision appearing to be that there is nothing “out of the norm” which would justify indemnity costs just because there has been late acceptance. These are my thoughts.

1. The approach of District Judge Besford appears to reflect the increasing willingness of the courts to treat any failure to engage in ADR, which can extent to not promptly accepting reasonable offers, as something “out of the norm”. It is not clear, from the extract of the judgment I have seen, whether HHJ Hughes QC was referred to ABC -v- Barts Health NHS Trust [2016] EWHC 500 (QB) where a late accepting claimant was ordered to pay the defendant’s costs on an indemnity basis.

2. There is also the question of whether, in any event, the claimant is entitled to judgment following late acceptance by the defendant, or at least if any order which is then made by the court amounts to such a judgment, because that then triggers the claimant’s entitlement to indemnity costs under Part 36.17 and that arises without the need to establish anything “out of the norm” as a number of the cases cited by HHJ Hughes QC make clear (although these refer to the earlier version of Part 36). Whilst Fitzpatrick Contractors Limited -v- Tyco Fire & Integrated Solutions [2009] EWHC 274 (TCC), which was also relied on by HHJ Hughes QC, suggests some difficulty with this approach a careful reading of the judgment in that case indicates the judge considered that to get indemnity costs a claimant had to do better at trial than the claimant’s own offer whereas, whilst Part 36 was originally framed in this way, the requirement is now only to secure a judgment which is at least as advantageous.

3. Ultimately this point is about fairness and parity, if the defendant secures the benefits conferred by Part 36.17 when a claimant accepts a Part 36 offer late, then the claimant should get the corresponding benefits conferred by that rule when the defendant accepts a Part 36 offer late (the fact those benefits are slightly different, with the claimant getting indemnity costs, is irrelevant for the reasons explained in Kiam -v- MGN Ltd [2002] EWCA Civ 66). That is particularly so in cases subject to fixed costs, such as Sutherland.”

RELATED POSTS: PART 36

 

2 comments

  1. To add to that mix, I dealt with a case on the same point on 1st November (post-Whiting which was not referred to in any event) on behalf of the Claimant in Hart v Pizza Hut heard by DJ Newman in Chester. The Defendant was represented by Thomas Herbert of Ropewalk, the skeleton having been prepared by Andrew Hogan. In a short judgment he held that the Claimant had been put to work in the period post expiry of the relevant period and ultimate acceptance (49 days late in this case) which was a relevant factor. He adopted the reasoning of DJ Besford in distinguishing Fitzpatrick and added that the overriding objective was in play in that it was inequitable if it was right that a Defendant automatically gets its major Part 36 benefit on a Claimant’s late acceptance but a Claimant does not where a Defendant accepts late. That was obviously inequitable in that the parties were not on an equal footing (CPR 1.1(2)(a)). The Court must seek to give effect to the overriding objective when it interprets any Rule (CPR 1.2). Accordingly, the Claimant was entitled to costs on the indemnity basis for the relevant period. The Defendant was granted permission for leave to appeal.

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