INDEMNITY COSTS ORDER AGAINST DEFENDANT UPHELD BY COURT OF APPEAL: OFFERS AND CONDUCT: MANNA II
The second post on the Court of Appeal decision in Manna -v- Central Manchester Hospitals NHS Trust  EWCA Civ 12 relates to the Court’s upholding of the trial judge’s award of indemnity costs.
“A judge should in my view be very slow to entertain a discussion as to whether parties to litigation have negotiated in a reasonable manner. Such an enquiry opens up the prospect of undesirable and wasteful satellite litigation, as the reasonableness of a negotiating stance may and almost certainly usually will depend upon a careful evaluation of the respective states of knowledge of the parties. The Part 36 regime is designed precisely to obviate this kind of enquiry.”
- The courts should be reluctant to investigate the history of negotiations in an action.
- The judge was wrong to award indemnity costs on the basis of the defendant’s negotiation history.
- However the judge was entitled to award indemnity costs against the defendant where its conduct of the action was “outside the norm”. The Court of Appeal would not interfere with that decision.
The judge had awarded indemnity costs at the end of the trial. The defendant appealed this award.
THE JUDGMENT IN THE COURT OF APPEAL
The Court of Appeal rejected the Defendant’s appeal. The Court was keen that the courts should not look closely at the history of negotiations. However it was uphold the award on the basis of the judge’s assessment of the defendant’s conduct.
“On handing down her substantive judgment on 1 October 2015 the judge heard submissions about ancillary matters, including costs. She delivered an extempore judgment giving her reasons for her conclusion, to which I have already referred at paragraph 1 above, that the Defendant should pay the Claimant’s costs incurred as from 11 June 2015, including therefore the trial costs, on the indemnity rather than on the standard basis. The significance of that date is that it was on that day that a pre-trial offer of settlement by the Claimant was rejected by the Defendant.
The judge’s costs judgment is available at  EWHC 3461 (QB) and again reference may be made to it. The judge gave two reasons for her decision. The first was that the Defendant had failed “to enter into meaningful negotiations in a collaborative way and to seek a sensible compromise in a quantum only trial” in a manner which “was unreasonable, especially in light of the self-evident weaknesses in their care and occupational therapy evidence”. The judge castigated the Defendant’s decision to carry on to trial as “ill-judged”, necessitating “an 8 day trial, at huge cost both to public funds and to the family of this severely disabled young claimant”. The second reason was that the judge regarded the nature of the case advanced by the Defendant and as put to Mr and Mrs Cocking in the witness box as unsustainable and entirely inappropriate in the context of the case.
On 22 May 2015, thus 21 days before the trial, the Defendant made an offer complying with CPR Part 36. In comparing offers and recovery in this case, where liability was compromised at 50%, it is important to compare like with like. This offer would have involved payment of a further lump sum of £1.25 million and periodical payments of £80,000 per annum. The Claimant rejected that offer.
For my part I do not think that the Defendant’s conduct in negotiations should attract any sanction in costs, and I do not consider that the judge gave adequate reasons for her conclusion that it did. A judge should in my view be very slow to entertain a discussion as to whether parties to litigation have negotiated in a reasonable manner. Such an enquiry opens up the prospect of undesirable and wasteful satellite litigation, as the reasonableness of a negotiating stance may and almost certainly usually will depend upon a careful evaluation of the respective states of knowledge of the parties. The Part 36 regime is designed precisely to obviate this kind of enquiry. The judge does not refer in her judgment to the circumstance that there was here a flurry of last minute disclosure of documents from the Claimant and also that significant witness evidence was provided very late in the day. Lord Faulks summarised these developments as follows:
“(i) Documents received from the Claimant’s solicitors on 8 May 2015 including (a) Bush & Co Risk Management Plan dated January 2015, (b) further disclosure of Local Authority records and (c) care diary for Lamarieo Manna by Jackie Lee from 5 January 2014 to 18 January 2014;
(ii) Documents received from the Claimant’s solicitors on 14 May 2015 including (a) daily evaluation from community support worker, (b) unplanned review reassessment from adult social worker, (c) diary written by Jackie Lee, Claimant’s personal assistant, dated January 2014 to April 2015 and (d) Fulwood High School Annual Review Summary Report dated 2014/2015.
(iii) Documents received from the Claimant’s solicitors on 11 May 2015 consisting of various invoices.
(iv) Documents received from the Claimant’s solicitors on 18 May 2015 including school risk assessment records to include personal emergency evacuation plan and individual behaviour plan.
(v) Documents received from the Claimant’s solicitors on 4 June 2015 consisting of (a) a statement from Mr Cocking dated 25 May 2015 and (b) a report from David Reynolds, the Claimant’s accommodation expert, dated June 2015.
(vi) Documents received from the Claimant’s solicitors on 5 June 2015 consisting of physiotherapy records.”
Although the blame for this cannot be laid at the Claimant’s door, it should also be noted that the joint statement from the assistive technology experts was received only on 26 May 2015 and the joint statement from the accommodation experts on 28 May 2015. I have already referred to the point that as late as 8 May 2015 it was uncertain whether the Claimant would pursue the claim for a second home in the light of the possible costs consequences in the event of failure of that head of claim and the adoption of an issues-based approach to costs. In all the circumstances the judge’s criticism of the Defendant’s approach to settlement was in my view unjustified.
I take a different view however so far as concerns conduct of the trial. Both Mr Sweeting and the judge were at pains to emphasise that there was here no criticism of Mr Seabrook, who had complied with his instructions and put in a fair and courteous manner a case which proved unsustainable. It was however the nature of the case which took it out of the norm. The case put against Mr and Mrs Cocking was that they had dishonestly set out to mislead the professional advisers by exaggerating the difficulties involved in Lamarieo’s care, and that their evidence at trial was in these respects similarly dishonest. It was suggested to them that they had been motivated by greed rather than by the interests of Lamarieo. A particularly egregious example of this attack concerned their purchase of a Land Rover Discovery, a purchase of an eminently suitable vehicle for Lamarieo’s needs about which they had consulted the Deputy Mr Alex Guy, a purchase nonetheless castigated by the Defendant as unnecessary extravagance motivated by greed. Furthermore the judge was very critical of the evidence given by the Defendant’s experts in the field of care and occupational therapy, which criticism went beyond the “self-evident weaknesses in their evidence” to which the judge referred in her costs judgment. The evidence of Ms Utting, the care expert, was described in the judge’s substantive judgment as both “illogical” and “unrealistic” – . Implicit in her report and her evidence was the incorporation of Lamarieo’s parents into the care regime although overtly she accepted the premise that they wished to withdraw from the role of primary carers. Similarly Ms Utting’s approach to the natural father Mr Manna involved that Lamarieo would spend more time with him in a property with accommodation for one dedicated carer, funding for the acquisition of which was of course vigorously opposed by the Defendant. The judge’s more serious criticism was reserved for the Defendant’s occupational therapy witness Marie Palmer. Her evidence was “wholly unrealistic” –  and, at , “extraordinary and . . . . wholly out of kilter with awards made in this area”.
I have no doubt that had the judge acceded to the Defendant’s suggestion that the Claimant’s case was deliberately exaggerated the Defendant would have sought an award of indemnity costs. What is sauce for the goose should be sauce for the gander. I bear in mind that litigation in this field is often hard-fought. Given that litigation is necessarily adversarial, and that litigation unfortunately cannot be avoided in this field, I guard against a feeling that sometimes it is conducted in a manner inappropriate to the subject matter. I appreciate that there were here serious issues which the Defendant felt needed to be explored in the manner in which they were, although as the judge records at  the contemporaneous records, of which there were here a large number, including in particular medical, social services and educational records, were likely to be the most reliable source of information. Looked at in the round, the judge who heard the trial, and who I might add had heard many like it, plainly concluded that what had occurred fell outside the norm, although she did not express her conclusion in precisely that manner. That conclusion will I hope rarely be reached in litigation of this kind, but I do not consider that we would be justified in interfering with the judge’s conclusion that here it properly should be. I would therefore dismiss the Appellant’s appeal on this aspect also.”
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