OFFERS TO SETTLE: COSTS, CONDUCT AND A WHOLE LOT MORE: REHILL –v- RIDER HOLDINGS CONSIDERED

Mediatelegal

The case of Rehill –v- Rider Holdings  [2014] EWCA Civ  42 offers quite a few lessons for litigators and litigants. In relation to offers and filing schedules of costs and the risks of litigation for litigants and lawyers.

 REHILL –v- RIDER HOLDINGS: THE FACTS

Rehill was a personal injury case where the claimant was a pedestrian struck by a bus.  Prior to issue the defendant had admitted liability and made two pre-action offers to settle of £75,000, in April 2007  and £100,000 in November 2007. Both offers   were subsequently withdrawn.

When proceedings were issued the schedule of damages was “largely unquantified”. The defendant made an offer of £40,000 in June 2009. That was not accepted as were further offers to settle. Eventually, shortly before the trial on quantum, the claimant accepted an offer of £17,500.

THE ORIGINAL ORDER FOR COSTS

The issue of costs came before a Recorder for determination. He held that the claimant had failed to beat the offer of £40,000 made in June 2009 and that he should pay the defendant’s costs from 21 days thereafter. However the defendant was liable for the claimant’s costs incurred before that date.

The claimant’s claim for damages was, it appears without doubt, embellished, and he had not been wholly truthful about the circumstances of the accident.   However the Recorder held that prognosis was uncertain when the first offers were made and that, although the defendant was liable for the claimant’s costs up to the date of the June offer neither party was precluded from raising issues of conduct.

THE DEFENDANT’S APPEAL ON THE ISSUE OF COSTS

The Court of Appeal stated it is clear that the consequences of Part 36 do not apply to an offer that is withdrawn. Such an offer falls to be considered within CPR Part 44.3 which requires the court to take into account any admissible offer to settle. The Court held that:

  • The issue was whether the claimant acted reasonably in not accepting the earlier offers.
  • This involves a consideration of the information available to the parties at the time when the offer was made.
  • If the claimant had been misleading his lawyers and doctors then the issue of reasonableness should be judged on what he himself knew rather than what they knew.
  • The reality was that, at the time the offer was made, there was no significant uncertainty about the claimant’s condition.
  • The clinical uncertainty there was at the time the offer was made was incidental to the overall value of the claim.

There was sufficient uncertainty to make it reasonable for the claimant not to have accepted the offer in April 2007. However it was unreasonable for the claimant not to have accepted the offer in November 2007.  The claimant was ordered to pay the defendant’s costs from 21 days after that date.

COSTS IN RELATION TO A DISHONEST CLAIM

The court also considered the issue of whether the order made properly marked the disapproval of the dishonest prosecution of an inflated claim.  However it stated that the Recorder’s order did not do that. Lewison L.J. stated:

23. “22. What then, of Mr Rehill’s dishonesty? Mr Jefferies’ powerful submission is that the Recorder was wrong in not marking the court’s disapproval of the dishonest prosecution of an inflated claim. He points to the judgment of Lord Clarke JSC giving the judgment of the Supreme Court in Fairclough Homes Limited v Summers [2012] UKSC 26[2012] 1 WLR 2004 at paragraph 53:

“As to  costs , in the ordinary way one would expect the judge to penalise the dishonest and fraudulent claimant in  costs . It is entirely appropriate in a case of this detained order the claimants to pay the  costs  of any part of the process which had been cause bid his fraud or dishonesty and moreover to do so by making orders for  costs  on an indemnity basis. Such  costs  orders may often be in substantial sums, perhaps leaving the claimant out of pocket. It seems to the court that the prospect of such orders is likely to be a real deterrent.”

24. 23. If the overall effect of the Recorder’s order was had Mr Rehill would be entitled to recover the  costs  of advancing a dishonest case then I would agree that he would have erred in principle. But I do not consider that that is the effect of his order. In Ultraframe UK Limited v Fielding [2006] EWCA Civ 1660[2007] 2 All ER 983 this court held that  costs  incurred in promoting a dishonest case cannot be said to have been “reasonably incurred” and that such a point could be raise odd a detailed assessment, at least if the judge said that it could be. Waller LJ said at paragraph 34:

“It seems me that consideration of a party’s conduct should normally take place both at the stage when a judge is considering what order for  costs  he should make and then during assessment. But court will want to ensure that dishonesty is penalised but that the party is not placed in double jeopardy. Ultimately the question is one of the proper construction of the order made by the judge.”

25. 24. He added at [37] that if as a matter of interpretation of the judge’s order the dishonest party is prevented from recovering his  costs  and fighting a dishonest case then there is no error of principle. Mr Ferm confirmed that the power to disallow  costs  or the power to order Mr Rehill to pay part of the bus company’s  costs  pursuant to CPR Part 44.14 would be open to the  costs  judge and that the Recorder had not pre judged that issue.

26. 25. CPR Part 44.14 applies where the conduct of a party or his legal representative before or during the proceedings was unreasonable or improper. Sub rule (2) goes on to provide:

“Where paragraph 1 applies the court may (a) disallow all or part of the  costs  which are being assessed or (b) order the party at fault or his legal representative to pay  costs  which he has caused any other party to incur.”

27. 26. Properly applied, the exercise of that power would itself result in the disallowing of any part of Mr Rehill’s  costs  incurred in advancing a dishonest case and might also result in his having to pay the bus company’s  costs  of combating that dishonest case. Once one appreciates that the agreed terms recorded in paragraph E of the schedule to the order allow the bus company to contend on the detailed assessment that Mr Rehill should not be entitled to recover his  costs  of advancing a dishonest case the judge’s observation about a further penal order for  costs  becomes intelligible. It must also follow that the judge’s observations about Mr Rehill’s conduct cannot be taken as having been intended to bind the  costs  judge, not least because that would be to go behind the terms of the agreed paragraph E.

28. 27. Although in his written argument Mr Ferm stressed the terms of the  offer  of 10 July 2009, I do not consider that conformably with Ultraframe UK Limited v Fielding an  offer  to pay Mr Rehill’s “reasonable  costs ” can be interpreted as an  offer  to pay the  costs  incurred in advancing a dishonest case.”

THE STING IN THE TAIL FOR THE DEFENDANT: THEY HAD NOT FILED THEIR COSTS SCHEDULE 

There was, however, a sting in the tail for the successful defendant.

“30. I add the following postscript. The appeal was heard, and judgment delivered, in the course of a single day. That accorded with the time estimate. In those circumstances, under PD 44 para 13 the general rule is that the court will assess  costs  summarily; and in order to enable the court to do that the parties must file schedules of  costs  not less than 24 hours before the hearing. Neither party complied with the practice direction. The consequence was that the court was unable to assess the  costs  of the appeal which we ordered Mr Rehill to pay to the bus company. As is well known the court had become more insistent in recent months about compliance with orders and practice directions since that is now part of the overriding objective. In order to mark our disapproval of the bus company’s failure to comply with the practice direction we ordered it to pay the  costs  of any detailed assessment in any event.”

GETTING YOUR COSTS SCHEDULE IN COURT AND IN TIME

Frankly many observers will consider that the defendant was lucky in obtaining an order for costs.

  • In several reported cases the sanction imposed for failing to file a costs schedule in time has been that no costs have been awarded.  See the report from Costs Advocates on Williams -v- Hardy 
  • I have been involved in an application [ironically enough a relief from sanctions application] where the successful defendant failed to file a schedule of costs. The judge held that they could only receive costs if they made a specific application for relief from sanctions.

OTHER LESSONS TO BE LEARNT

Sometimes the hardest job in litigation is advising a client that the optimistic claim being advanced is not supported by the evidence.  It is important that clear and robust advice is given whenever a realistic offer is made.  Careful consideration needs to be given as to whether the evidence actually supports the claim being made.  Some (and I stress some, and this is only a small minority) see a personal injury claim as a dash for cash. It is not. It is an appraisal (and what will be a highly critical appraisal) of the losses and future needs arising out of their injuries.

There is often (indeed almost always) an irony that a claimant who inflates a claim receives less than he or she would have received if the matter had been pursued honestly.  (This may not be an irony but, on consideration, be quite fair).  The Rehill case went to the Court of Appeal (twice) and the claimant lost (twice).  Some litigants would benefit from extremely robust advice at times. [Which is not to say Mr Rehill did not receive robust advice.  The indications in the judgments appear to be that he was being far from candid with his doctors and his lawyers].

OFFERS OF SETTLEMENT

The other clear lesson is that offers of settlement can be relevant, even if they are later withdrawn. This highlights the need to consider all offers of settlement with extreme care. There is a duty to warn the litigant of all the possible consequences.