CLAIMANT BEATS OWN PART 36 OFFER AND RECEIVES AN ADDITIONAL £75,000 IN DAMAGES

December 12, 2014 · by · in Applications, Civil Procedure, Costs, Part 36

The advantages to a claimant in making a prompt, and realistic, Part 36 offer are shown in the judgment of  Sir David Eady in Downing -v- Peterborough & Stamford Hospitals NHS Foundation Trust [2014] EWHC 4216 (QB).

THE KEY POINT

When a claimant beats its own Part 36 offer the rules require that the claimant gets the advantages of Part 36 unless it is “unjust” to do so.  Certain changes of mind by experts did not render it unjust to grant the claimant the additional benefits of beating their own Part 36 offer.

THE CASE

This was a clinical negligence case where liability was admitted.  The claimant made a Part 36 offer to settle in the sum of £1.2 m (inclusive of interest) plus costs. The damages awarded totalled £1,508,524. The claimant sought the benefits of Part 36.

THE JUDGMENT

  1. Counsel took the opportunity on 3 December to make submissions on what should be the consequences of my rulings. Mr Trusted referred to the new regime introduced in April 2013 in CPR 36.14. It is now clear that the judgment against the Defendant is “at least as advantageous to the claimant” as the proposals made in his Part 36 offer of 26 September. He then offered to accept £1.2 m (inclusive of interest) plus costs. The damages I have awarded amount to £1,508,524 (after deducting the agreed 37%). Mr Trusted therefore asks first, in accordance with CPR 36.14(3)(b) and (c), for costs to be awarded on the indemnity basis from the relevant date and for interest on those costs at a rate not exceeding 10% above base rate. The court is obliged to make such an order unless it considers it “unjust” to do so.
  2. Mr Porter referred to the indemnity costs provision as “punitive” in character. In one sense he is right, but one must be careful in the use of language in this context. It is quite clear that this rule, which obviously has legislative sanction, was not intended to “punish” only conduct which is deemed in some way morally reprehensible or which was in breach of a rule or statutory requirement. A decision was taken, as a matter of public policy, to impose sanctions in order to encourage and facilitate the settlement of litigation and, correspondingly, to avoid parties incurring the costs involved in going to trial and also to save court time. Indemnity costs are, therefore, bound sometimes to be payable under CPR 36.14(3)(b) because an assessment of the merits proves not to have been justified or simply because an informed guess as to the outcome turns out to be wrong.
  3. It is elementary that a judge who is asked to depart from the norm, on the ground that it would be “unjust” not to do so, should not be tempted to make an exception merely because he or she thinks the regime itself harsh or unjust. There must be something about the particular circumstances of the case which takes it out of the norm. Naturally, one cannot define exhaustively what those circumstances might be. Each case will turn upon its own facts. Some very general guidance is given in CPR 36.14(4). Not surprisingly, the court will take all the circumstances into account including the terms of the offer, the stage when it was made, the information available to the parties at that time, and “the conduct of the parties with regard to the giving or refusing to give information for the purposes of enabling the offer to be made or evaluated”.
  4. One could imagine that a court might well think it “unjust” to order indemnity costs if the individual defendant has rejected a Part 36 offer on the basis of inaccurate information through no fault of his own and, especially, where he has been misled by the claimant or his advisers through (say) non-disclosure of a material fact or document. In this case, Mr Porter invites me not to award costs on the indemnity basis because one of the experts (Dr Munglani) appeared in the witness box to take a less optimistic view of the Claimant’s prospects of recovery than that expressed in earlier written evidence: see paragraph [11] above. (The Defendant’s psychiatrist, on the other hand, seemed to have changed his view in the opposite direction: see paragraph [19] above.) The experts in this case were all somewhat tentative and cautious as to the chances of significant improvement. I believe that there is nothing here to justify a departure from the presumption in favour of indemnity costs. The Defendant’s advisers made a particular judgment call which turned out (at least at first instance) to have been wrong. Such an award does not carry with it any implied criticism of their professional skill or of their conduct. It is just one of the consequences imposed by the rules. I rule, accordingly, that costs should be assessed from the relevant date on the indemnity basis and, further, that there should be interest on those costs at 10% above base rate under CPR 36.14(3)(c).
  5. There is also provision in CPR 36.14(3)(d) for an additional sum, not exceeding at the moment £75,000, to be paid in accordance with a sliding scale there set out. I cannot see any reason why, under this new regime, the Claimant should not receive the maximum figure.

COMMENT

This shows the advantages of the claimant’s Part 36 offer. Indemnity costs; increased interests and increased damages (up to a maximum of £75,000). These are real advantages to a claimant and represent risks which should make a defendant consider any realistic Part 36 offer with care.

ALSO ON PART 36

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