PERCENTAGE COSTS ORDERS AFTER A CLAIMANT BEATS THEIR OWN PART 36 OFFER: A HIGH COURT DECISION
In Webb -v- Liverpool Womens’ NHS Foundation Trust  EWHC 449(QB) HH Judge Saffman (sitting as a High Court Judge) considered the consequences where a claimant had beaten their own Part 36 offer at trial.
NB this aspect of the case was overturned by the Court of Appeal see the post on the Court of Appeal decision in this case here.
After a trial on liability and causation the judge decided that the defendant had been negligent in the claimant’s birth and that negligence had suffered a Brachial Plexus Injury as a result. The claimant was unsuccessful in many of the specific allegations but was, however, entitled to 100% of the damages.
- It is important that realistic time estimates are given in relation to arguments about costs.
- The fact that a party has made a Part 36 offer which is effective does not insulate that party against the making of a “percentage costs order”.
THE CLAIMANT’S PART 36 OFFER
- It is of course not disputed that my judgment is more advantageous to the claimant than the proposal contained in the Part 36 offer. On 28 January therefore when the judgment was handed down Mr Sheldon, counsel for the claimant, contended that the consequences of Part 36.14(3) should apply and that the claimant should have all her costs on an indemnity basis from the expiry of the relevant period plus interest thereon at the enhanced “Part 36 rate” plus the enhancement of damages specified in 36.14(3)(a) and (d).
- The defendant’s position was that the consequences of Part 36.14(3) should be disapplied because, by reference to Part 36.14(4), in the circumstances it would be unjust to apply them. Furthermore Mr Martin argues that even if Part 36 is not disapplied, it does not prevent the court from making an issues based or proportionate costs order to reflect the fact that the claimant failed in respect of the Second Limb bearing in mind that the Second Limb was a discrete and independent allegation. In other words, that, at best, the claimant should have her costs with the Part 36 enhancements in respect of the work referable to the First Limb claim but that she should not be awarded costs for the unsuccessful prosecution of the Second Limb of her claim at all, much less with any Part 36 enhancements.
- Furthermore, Mr Martin for the defendant argued that even in respect of any costs awarded to the claimant the court has discretion to permit some but not necessarily all of the Part 36 enhancements in respect of costs and damages and can decline to do so if permitting them would lead to an injustice. Mr Martin contended that it would indeed be unjust to permit all the enhancements on those costs awarded to the claimant even though she had bettered her Part 36 offer.
- For reasons that I shall come to the claimant does not accept the proposition that a proportionate costs order is even permissible where a Part 36 offer has been made and which the defendants have failed to beat or that an application of all the consequences envisaged by Part 36.14(3) would lead to injustice.
- On 28 January I concluded that it was not unjust for the consequences of Part 36 to apply in principle. In the time available however it was impossible to resolve the issue as to whether a proportionate costs order was appropriate to reflect the claimant’s want of success on the Second Limb and whether the existence of a Part 36 offer had a bearing on whether a proportionate costs order was permissible and/or appropriate in any event. Equally it was not possible to consider whether it was appropriate to disallow any of the enhancements otherwise due to the claimant in the circumstances.
- Before I deal with these issues I feel constrained to observe that the draft judgment on the liability trial was circulated to the parties on 27 November 2014 but it was not until 26 and 27 January 2015 that I received skeleton arguments on the issue of costs (and other issues) from counsel for the defendant and the claimant respectively. These were sent in anticipation of the handing down of judgment which it will be remembered was listed for the 28 January and for which 30 minutes had been allocated, as the parties well knew.
- Mr Sheldon’s skeleton argument made it clear that there were 6 issues that needed to be resolved on 28 January. The first 2 were the issues as to costs identified above. The second of those, namely the impact that a Part 36 offer has on the appropriateness of a proportionate costs order is regarded by both counsel as an important and perhaps novel proposition of law.
- The remaining 4 cover amendments to costs budgets, payments on account of costs, interim payment of damages and the defendant’s application for permission to appeal the substantive judgment. As I understand it, only one of these namely an interim payment of £25,000 was actually agreed. Mr Martin’s skeleton argument added one further issue; that related to the issue of permission to rely on expert psychological evidence about which at that stage there was also an absence of agreement.
- At my request on 27 January the Court staff emailed counsel to ask if they seriously believed that all these matters (about which I had had a 12 page skeleton from Mr Sheldon and a 9 page skeleton from Mr Martin) could be resolved in the 30 minutes allocated bearing in mind that I had a part heard trial starting at 10.30. The response was that 30 minutes was adequate and so the hearing went ahead.
- It was clear almost immediately that 30 minutes was nowhere near enough. In that time I was able only to deal with the issue as to whether Part 36 should be disapplied to the claimant’s costs in so far as she was awarded costs. As a result I was obliged to reserve the question of what proportion of the costs should be recoverable by the claimant and whether any Part 36 enhancements should be disallowed. My order of that date provided for further written submissions and factored in the possibility of a further hearing, albeit by telephone if possible.
- I am grateful to both counsel for their courtesy in recognising that their view that these issues could be resolved in 30 minutes was “over-optimistic” as they put it but the fact is that costs and time have been wasted. I make this point first because it may have to be reflected in the order as to costs in respect of the preparation of the further written submissions and any hearing, telephone or otherwise, that may be required to determine all outstanding issues and secondly because it is important to emphasise how important it is that parties give critical and constructive consideration to time estimates and not work on the basis that a hearing will take no longer than the parties merely hope it will take.
Agreed concessions regarding the consequences of Part 36
- Mr Martin, counsel for the defendant, has made some sensible concessions in connection with the application of Part 36 in light of my finding that it is not unjust in principle for the consequences of Part 36 to apply to those costs to which the claimant is entitled and which have been incurred after the relevant time.
- First, that the claimant is entitled in any event to the additional amount pursuant to CPR 36.14(3)(d). As he states in paragraph 5 of his Supplemental Note on Costs of 8 February, “this was an all or nothing case, the claimant is entitled to her damages in full and thus logically to Part 36 damages enhancements in full”.
- Secondly, that he does not suggest that there should be a proportionate costs order to reflect the fact that the claimant failed to establish that a Caesarean section should be performed on the 3 occasions after 13.50 hours when she says the opportunity to do so was missed. He accepts that the first limb of the claimant’s case was that there should have been a Caesarean section at some time before vaginal delivery and that she succeeded on that. The fact that she was unsuccessful in respect of some of the sub-allegations is not, he accepts, a ground for depriving her of the costs of establishing that the birth was mismanaged by the failure to administer a Caesarean section.
- Thirdly, he does not seek the defendant’s costs in successfully defending the Second Limb. He merely asserts that the claimant should not be awarded a proportion of her costs to reflect that she lost on that issue.
A proportionate order?
- It seems to me that the first question that I must address is whether, even in the absence of a Part 36 offer, a proportionate costs order would have been appropriate. Such an order is permitted pursuant to Part 44.2 and in particular Part 44.2(6).
- It is right however to recognise that the general rule is that the unsuccessful party should pay the costs of the successful party. In Day v Day  EWCA Civ 415 at paragraph 17 the test applied by the court to identify the successful party was to ask which party it was that was writing the cheque as a result of the judgment. By that test the successful party is emphatically the claimant.A propo rtionate costs order would therefore be a departure from the general rule.
- In Multiplex Constructions UK Ltd v Cleveland Bridge UK Ltd 2008 EWHC 2280 TCC Jackson J as he then was set down some propositions of general application concerning issues based orders which he had identified from a review of previous cases. I do not intend to set them out in detail, they are summarised in volume 1 of the 2014 edition of Civil Procedure at page 1392. Suffice it to say for these purposes that;
a. An issues based (or proportionate) costs order need not be confined to exceptional cases. The extent to which costs should be disallowed should be left to the evaluation of the judge “by reference to the justice and circumstances of the particular case“.
b. The reasonableness of taking failed points can be taken into account
c. There is no automatic rule that an issues based order should be made because the successful party loses on one or more issues and indeed the mere fact that such a party was not successful on every issue cannot, of itself, justify an issue based costs order. This is so because in complex litigation including complex personal injury cases any winning party is likely to lose on one or more issues in the case.
- In an assessment of the “justice and circumstances of the particular case” it is right to recognise that the first limb of the claimant’s case was an attack upon the management of her labour by the obstetricians responsible for the labour. The second limb of her case was an attack on the midwives’ management of the actual delivery. Neither allegation is dependent on the other; each is a separate, self contained, discrete claim.
- Each limb was supported by its own separate expert evidence. In respect of the first limb I heard from obstetric experts and in respect of the second I heard from midwifery experts. It is true to say that the experts in each discipline were asked, and had something to say, on the appropriateness or otherwise of the conduct of the defendant’s staff in relation to the limb formally outside their specific discipline but their evidence in relation to that was, in my view, peripheral.
- I note for example that in reaching my conclusion in the substantive judgment from paragraph 160 to paragraph 195 that the defendant was negligent at 13.50hrs I refer only fleetingly to the evidence of Mrs Brydon, the expert midwife instructed by the defendant, in the context of her belief that a Caesarean was not necessarily indicated and not at all to Mrs Tranter, the claimant’s expert midwife.
- As for the conclusion that the delivery was not negligently managed, it is right to say that in reality, and as I recognised at paragraph 218, this was a determination of fact. The experts were agreed that if the delivery had been managed as the claimant’s mother and her lay witnesses suggested then the delivery was negligently managed. If it was managed as the defendant’s witnesses of fact contended then it was not.
- On the question of the reasonableness of prosecuting the failed allegation, it is right to note what the allegations were. They were that the midwives;
a. failed to put the claimant into the McRoberts position,
b. applied fundal, as opposed to suprapubic, pressure
c. applied excessive traction.
- The evidence in respect of McRoberts was at best only that it had not been achieved. Even the claimant’s mother’s evidence and that of the other lay witnesses suggested that it, or something approaching it, had been attempted.
- The evidence of the application of fundal pressure rather than suprapubic pressure was wholly unsatisfactory. Indeed I found at paragraph 254 that there was no evidence that fundal pressure had been applied.
- Only Mr Webb, the claimant’s father, had a recollection of excessive traction being applied. The picture he painted though of 2 midwives pulling on the claimant’s head to force a birth of the body in a manner reminiscent of a tug of war was wholly unconvincing and it was not evidence that only emerged at the trial, it was his evidence in his witness statement.
- It is clear, and it is a point conceded by Mr Sheldon, that at all times the Second Limb claim was decidedly weaker than the First Limb claim. Yet it was pursued as a separate, stand alone claim.
- It is of course easy to bring hindsight to bear. The Second Limb issue was essentially an issue of fact. In those circumstances a party may well feel that it is right to let the court decide the disputed facts but on the claimant’s mother’s written evidence and that of the rest of the family present at the birth the claim in respect of the delivery was far from strong even though I accept that I found at paragraph 256 that the excessive traction point was more difficult to resolve than the other 2 complaints centred on the delivery.
- It is also right to recognise that the allegations went to the professional competence of 2 or 3 midwives still actively practicing midwifery. It is not surprising that, the allegation having been put, they would wish to defend the claim and seek to achieve some vindication and absolution from the charge that they were responsible for a serious birth defect that will affect the claimant throughout her life. In my view these are factors that go to the reasonableness of taking the failed point.
- As to the principle enunciated in paragraph 23 (c) above, it seems to me that Mr Martin embraces this point by the concession referred to in paragraph 19 above. The point he makes is that the Second Limb allegation is a cause of action based on a factual matrix that is entirely different from the First Limb claim – all that they really have in common is that they are both allegations of negligence against the defendant hospital arising out of the birth of the claimant.
- Mr Sheldon makes the point that an order depriving the claimant of part of her costs will mean that some of her damages may be lost to costs and that that is wholly undesirable where the damages are to compensate a minor for serious injury. In fact, as a matter of fact that may not be the case here in the light of the fact that the defendant accepts that since I have found that the Part 36.14 consequences apply in principle, the claimant is entitled to the 10% enhancement in her damages provided by Part 36.14(3)(d). That is a windfall over and above the damages appropriate to compensate for loss. It is a windfall to which the claimant is entitled by virtue of the Rules but it is a windfall nevertheless. I emphasise that the fact that this enhancement is due is not a reason for making a different costs order to the one which would be made if it was not due. I mention it simply to address the concern expressed by Mr Sheldon that the claimant may be out of pocket. Having said that, I accept that it would be wrong in principle to apply a different approach where the claimant is a minor to that which would be applied if the claimant had capacity. If a proportionate costs order is appropriate in respect of a claimant with capacity then in my view it is appropriate where the claimant is a minor.
- Mr Sheldon also makes the point that the Second Limb occupied a relatively small proportion of the time spent on the case. I am not in the best position to know how the legal representatives’ time was divided between both limbs but in terms of the time devoted to each at trial it would be unrealistic to say that the second limb was a negligible or even a small issue. We had 2 experts and all of the live lay evidence other than that of Dr Adams was directed to the Second Limb. In any event in so far as the time spent on the Second Limb was not so small as to be discounted that issue would go to the size of the percentage deduction from costs rather than the principle.
- Finally, Mr Sheldon argues that the defendant could have sought to settle the liability claim by making an offer on the basis that the Second Limb was abandoned. That is true, but so too could the claimant. In so far as it is contended that the claimant did so by her Part 36 offer, I shall come to that shortly.
- Having considered all these matters I am bound to say, taking matters in the round and having regard to the principles in Multiplex and the observations I make above that, albeit an issues based or a proportionate order is a departure from the general principle, nevertheless, in the absence of a Part 36 offer, I would have been disposed to exercise my discretion to make a costs order that required the defendant to pay only a proportion of the claimant’s costs to recognise the failure of the claimant to establish her Second Limb claim.
- In reaching that conclusion I have not overlooked the claimant’s complaint that the defendant’s approach to settlement was inflexible and their offer to settle at 30% of total damages was overly parsimonious. The answer to that is to do precisely what the claimant did here, namely make a Part 36 offer which has the effect of exposing the inflexible party to the possibility of the full rigours of the Part 36 consequences being visited upon them. The defendant’s conduct therefore, while a matter to go into the balance, does not swing the scales against a proportionate order in my judgment. The question now is how my decision that a proportionate order would have been appropriate absent a Part 36 offer is affected by the actual Part 36 offer.
The Part 36 Offer
- The claimant’s position is that Part 36 is a self contained regime and costs have to be considered in the context of that regime, not the regime created by Part 44. In this case the claimant offered to settle on Part 36 terms for 65% of the damages, the award gave her 100% of the damages and Part 36.14(2) requires that the court will permit the Part 36 enhancements if the claimant betters the Part 36 offer unless it is unjust to do so. Mr Sheldon makes the point that the court has already determined that it is not unjust for Part 36 to apply hence it cannot be unjust for the claimant to be awarded all her costs and for the Part 36 enhancements to be applied across the board.
- In effect the claimant’s position is that the existence of a Part 36 offer that was bettered by the final outcome insulates the claimant from a proportionate or issues based costs order. What is the basis for such a contention? It is summarised I think in paragraphs 10 and 11 of Mr Sheldon’s Further Submissions on Post Judgment Issues namely that the self contained Part 36 regime offers a complete code for the resolution of costs in cases to which it applies. There is no provision for an issues based approach to costs in Part 36 as there is in the Part 44 regime and to import an issues based approach would be directly contrary to the clear authority that Part 36 is a complete self contained code.
- Here it is contended that the claimant made a Part 36 offer in respect of the whole of the claim and so the costs consequences apply to the whole of the claim, not just that aspect upon which the claimant succeeded. Her decision to pitch the Part 36 offer at 65% of the damages was a balanced and realistic reflection of the strengths and weaknesses of the two limbs of the claim and in particular was reflective of the relative weakness of the Second Limb claim and it was open to the defendant to accept it but they chose not to do so.
- Mr Sheldon argues that other than making a Part 36 offer there was no way that the claimant could protect itself against the “draconian order for which the defendant now contends” viz an issues based order whereby the shortfall in costs would have to be met by eating into the damages awarded.
- He points out that the defendant did not seek to follow up the Part 36 offer by any attempt to separate out the one limb of the case from the other for example by suggesting that such an offer may at least provide a good starting point for settlement if, in reaching a settlement, the Second Limb claim was abandoned. By the same token of course that was not a suggestion put forward by the claimant.
- At paragraph 19 of his Further Submissions on Post Judgment Issues Mr Sheldon suggests that making an issues based order against the background of an effective Part 36 offer would frustrate the aim and purpose of Part 36 which is to encourage parties to settle before trial. He argues that this case should have settled before trial because the claimant had made a reasoned and sensible Part 36 offer before trial indeed, as it turned out, it was a very generous offer to the defendant because 35% of the damages that the claimant was prepared to forgo may well equate to a very many thousands of pounds if not tens of thousands.
- Mr Sheldon suggests that to accede to the defendants contention that an issues based order is permissible and appropriate notwithstanding the existence of a valid Part 36 offer would be to take a step not validated by any existing authority and would be directly contrary to authority that the Part 36 regime is a self contained code.
- Mr Martin disputes the contention that there is no authority for the course of action he proposes namely a proportionate costs order because it would be otherwise unjust for the successful party to recover all its costs. He has in mind Thinc Group Ltd v Jeremy Kingdom  EWCA Civ 1306.
- Mr Martin argues that the court in Thinc rejected the notion that where Part 36 applies all the consequences of Part 36.14 must be applied or none of them. Thinc he argues is authority for the proposition that it is not a matter of “all or nothing”. He refers me in particular to paragraph 22 in which Macur LJ considers the notion of injustice in the context of a consideration of a disapplication of the consequences of failure to accept a Part 36 offer. Her conclusion is that the consequences of Part 36.14 will apply unless and to the extent that it is unjust that they should do so. It is clear that that analysis allows the court to consider permutations. There need not be simply a bipolar approach whereby the Part 36 offeror gets all his or her enhancements or none of them. That same approach was adopted by Andrews J in Davison v Leitch 2013 EWHC 3092 (QB) where the learned Judge visited some of the consequences of Part 36.14 on the unsuccessful defendant but not all of them.
- Mr Martin argues that the importation of permutations to avoid injustice cannot simply be confined to whether the successful Part 36 offeror receives all the enhancements on costs awarded to him or her, it must also permit the court to take the view that not all costs should be awarded per se in circumstances where to do so would cause injustice. Such an approach is not inconsistent with a finding that Part 36 consequences should be suffered by the defendant because they are not in principle unjust. The exercise involves first considering whether Part 36 consequences should apply to any of the costs and if that is answered in the affirmative, as in this case, the next step is to consider how to apply them.
- Mr Martin argues at paragraph 24 of his Supplemental Note on Costs that “in Part 36 terms it would be unjust if the costs order pursuant to Part 36 did not reflect the extent to which the defendant succeeded on a discrete, important part of the case”.
- I am satisfied that the fact that there was a successful Part 36 offer does not mean that the court is unable to make an issues based or proportionate costs order. I accept that Part 36 is a self contained regime and that the Rule itself makes no reference to such orders – in distinction to Part 44.2. Nevertheless in so far as such an order is necessary to avoid injustice it is in my view permissible for the court to make it.
- In short I do not accept that the existence of a Part 36 offer in principle insulates the offeror from such an order. That protection does not appear to be consistent with the approach adopted in Thinc or Davison. Perhaps even more importantly it would prevent the court from making an order that would not be unjust in circumstances where the Rule specifically states that the Rule can be disapplied if its application leads to injustice. I have already found that in the absence of a Part 36 offer I would have made a proportionate costs order. I do not accept that such an order ought not to be made simply because there has been a Part 36 offer. In reaching that conclusion of course I have in mind all the factors that led to my conclusion at paragraph 39 above.
Conclusion as to Costs
- In the circumstances I propose to make a costs order in favour of the claimant limited to a percentage of her costs. The figure shall be that which is appropriate to reflect the percentage of time expended on establishing the First Limb but not the Second and 100% of the disbursements directly incurred in establishing the First Limb but not the disbursements directly incurred in seeking to establish the Second Limb. In this context I have particularly in mind the fees of the experts but there may be others. The costs order shall include all the enhancements stipulated in Part 36.14 from the Relevant Time. The starting point is that the Part 36.14 costs consequences will apply to those costs awarded to the offeror. I see no injustice in applying them.
- In so far as the defendant argues that it is appropriate to disallow the enhanced interest payable on damages, then as a matter of principle I would not do so. I can see no distinction between that enhancement and the 10% enhancement permitted by Part 36.14(3)(d) and which the defendant concedes as being due. I refer to paragraph 18 above.
- I do not feel that I have sufficient information to determine what the percentage deduction should be. I shall hear oral submissions on that at a telephone hearing.
- At that hearing I shall formally hand down this judgment and shall also deal with outstanding issues in relation to amendments to cost budgets, costs on account, interim damages, permission to appeal the substantive judgment and any applications arising out of my conclusions in this supplementary judgment thus far, including costs. I shall also determine the rate of interest applicable to the costs and damages under Part 36.14(3)(a) and (c) if that has not been agreed.
- I have allocated 45 minutes to the hearing. If the parties believe that it should be allocated a different time estimate they should notify the court as soon as possible. I would remind the parties that in the context of any application for interim damages the claimant is a minor and so the court will need details about to whom the money is to be paid and for what purpose it will be applied. All relevant evidence shall be filed and served no later than 7 days before the hearing.
RELATED POSTS ON PART 36 AND COSTS
- How relevant are Part 36 offers to issue based orders?
- Knowing the risks and advantages for the claimant in the new Part 36.
- The costs consequences of Part 36 offers: do they always apply? The cases in detail.
- Costs consequences of Part 36 offers: some interesting examples
- Costs, conduct, Part 36 and the “Winning Party”.
- Interest and costs when a claimant beats their own Part 36 offer.
- Costs of £7 million: Part 36 bites hard on claimants who cleared a first hurdle but fell at the second.
- Claimant beats own Part 37 offer and receives an additional £75,000 in damages.
- The dangers of a Part 36 offer: Claimant pays three times more in costs than he receives in damages.
- Another example of a successful defendant not recovering all of its costs (and of the advantages of a Part 36 offer).