THANKS FOR THE £500,000. NOW WHERE’S THE EXTRA £50,000 YOU OWE ME? KNOWING THE RISKS AND ADVANTAGES FOR THE CLAIMANT IN THE NEW PART 36

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The new provisions when a claimant beats their own Part 36 provide challenges (including potential negligence claims) for the claimant lawyer.

 A claimant who beats their own Part 36 offer at trial now obtains considerable benefit.

 CPR 36.13(3) states that where a claimant at trial obtains judgment against the defendant is at least as advantageous to the claimant as the proposals contained in a claimant’s Part 36 offer.”

 Then the court will normally award:

“a)        interest on the whole or part of any sum of money (excluding interest) awarded at a rate not exceeding 10% above base rate for some or all of the period starting with the date on which the relevant period expired;

 (b)       Costs on the indemnity basis from the date on which the relevant period expired; 

 (c)       Interest on those costs at a rate not exceeding 10% above base rate; and

 (d)       An additional amount, which shall not exceed £75,000, calculated by applying the prescribed                            percentage set out below to an amount which is –

 

(I)         where the claim is or includes a money claim, the sum awarded to claimant by the court; or

 

(ii)        Where the claim is only a non-monetary claim, the sum awarded to the claimant by the court in respect of costs –

                  

Amount awarded by the court

Prescribed percentage

up to £500,000

10% of the amount awarded;

above £500,000 up to £1,000,000

10% of the first £500,000 and 5% of any amount above that figure”

 This rule may be being misunderstood.  Some people are confusing it with the 10% in general damages post 1st April and stating that it does not apply to Pre-April cases. In fact it applies to all Part 36 offers made after 1st April.

 THE ADVANTAGES TO THE CLAIMANT 

The Claimant obtains a major advantage:

(1) Interest at 10%.

(2) Costs on the indemnity basis and interest on those costs.

However the most novel development is the award of additional damages. This is a deliberate policy advocated in the Jackson report. It gives claimants a stake in making a reasonable offer.  A “successful” claimant obtains an additional 10% up to £500,000 and an additional 5% of the balance up to £75,000. These are not inconsequential sums.

IS THE CLAIMANT LAWYER NEGLIGENT IF A PART 36 OFFER IS NOT MADE?

The answer to this has to be “most probably”.  There may have to be compelling reasons if an offer has not been made at all.  At the very least the client must be told that a Part 36 can be made and the advantages of making that offer. If the client does not want to make an offer, then this is a matter for them.  However firm and clear advice needs to be given.

 IS THE  LAWYER NEGLIGENT IF AN “INADEQUATE” OFFER HAS BEEN MADE?

This is a more interesting question.  If a claimant’s Part 36 offer is so extravagant so as not to represent a real risk to the defendant  then the claimant may ask why a more reasonable offer was not made.  The lawyer may be called upon to justify the offer and explain why their client did not recover the additional sums that would have been made.

 EXPLAINING THE MATTER TO THE CLIENT

Part 36 offers made by defendants are usually made on behalf of insurers who have generations of experience in relation to the commercial risks of litigation.  Most claimants lack this experience.  However care now has to be taken to ensure that claimants are aware of the benefits of prompt and reasonable offers.

Sometimes, of course, this is extremely difficult.   The medical prognosis is not clear; future losses need to be clarified; in big cases there are often major uncertainties. The claimant’s main concern is not to under-value the claim.  However at some stage the claimant will have to come to a view as to overall value of the claim and be able to put an offer to the defendant.

My experience is that once clients understand the potential benefits there is little difficulty in their coming to a view on the offer. Clients particularly like the fact that the 10% additional damages would be paid on the increased sum that the court awards and not the lower amount of their offer.

THE RISKS FOR THE CLAIMANT LAWYER

It is now more essential to make a valid Part 36 offer in an case that goes to trial. It is unwise to be wholly reactive to letters. At least 21 days before the trial a Part 36 offer that is realistic should be made.

THE RISKS FOR THE DEFENDANT LAWYER

Part 36 offers from claimants may be rare.  In the Solicitors Journal on 21st May 2013 Geoff Owen, a partner in Greenwoods, was reported as saying that  he had received a claimant’s Part 36 offer the previous Friday, “for the first time in his career”. (http://www.solicitorsjournal.com/news/personal-injury/road-traffic/portal-expansion-will-lead-%E2%80%98enormous-number-negligence-claims%E2%80%99)

Given the increased penalties if the Defendant does not beat the offer defendants will have to weight up the commercial risks involved.