ACCEPT A PART 36 OFFER LATE AND PAY THE CONSEQUENCES: LITIGATION CAN BE A HARSH WORLD

I have been waiting for a while to see the transcript of the Court of Appeal decision in Briggs -v- CEF Holdings Ltd [2017] EWCA 2363 (Civ), some people have even written enquiring whether I have covered it. It is a case where the Court of Appeal overturned a decision in favour of a claimant where a Part 36 offer was accepted late. It demonstrates the need to give clear warnings of the risks of Part 36 offers even in cases where the prognosis is uncertain and it is not possible (at the time the offer is made) for the recipient of the offer to properly value the case. The fact that it is difficult to form a view as to the outcome of the litigation does not, normally, provide a basis for displacing the normal rule as to Part 36 costs.

“… the important point is that there is a general rule which emerges from Part 36, namely, that if the offer is not accepted within time then the claimant bears the costs of the defendant until such time as the offer is accepted. If, of course, the offeree can show injustice, then a different situation will prevail – but it is up to the offeree to show injustice, not simply that it may have been difficult to form a view as to the outcome of the litigation.”

THE CASE

The claimant was injured in 2010. Proceedings were issued. In September 2012 the defendant made a Part 36 offer of £50,000. On the 2nd June 2015 the claimant accepted that offer. The claimant made an application for an order that the defendant pay the claimant’s costs up to October 2014.  The district judge allowed that application. The defendant appealed to the Court of Appeal.

THE JUDGMENT OF THE COURT OF APPEAL

The Court of Appeal overturned the District Judge’s order.  The District Judge held that the medical uncertainty up until October 2014 made it appropriate to make a different order. The Court of Appeal did not agree. Lord Justice Gross stated:

 “In my judgment, it is very important not to undermine the salutary purpose of Part 36 offers. It is important too that in considering often attractively advanced submissions as to uncertainty the court should not be drawn into microscopic examination of the litigation details. It is true that every case in this area is fact-specific but the important point is that there is a general rule which emerges from Part 36, namely, that if the offer is not accepted within time then the claimant bears the costs of the defendant until such time as the offer is accepted. If, of course, the offeree can show injustice, then a different situation will prevail – but it is up to the offeree to show injustice, not simply that it may have been difficult to form a view as to the outcome of the litigation. The whole point of the Part 36 offer is to shift the incidence of the risk as to costs onto the offeree. As observed in the note in Civil Procedure (set out above), it is important not to undermine that salutary purpose. Nothing in these observations is in any way at odds with SG v Hewitt. For my part, with respect, SG v Hewitt was a very clear case on the other side of the factual line. It was a very extreme case concerning brain damage to a small child. That is a very different situation from that prevailing here where, as one of the contingencies of litigation, it was perhaps difficult to work out how it might go. As Stanley Burnton J observed in the Matthews case, that is not infrequently the case and it is to guard against that risk that a Part 36 offer is made…”

38. Nonetheless, I find the progress of the litigation in this case very troubling. It is sufficient, for my part, to conclude that I can see nothing here which is distinguishable from the usual litigation risk. On the facts here, quite plainly the decision did not await Mr Chell’s report. That came in October 2014. The claimant carried on. Notwithstanding the joint report shortly thereafter which, in my judgment, holed the claimant’s case below the waterline, the claimant continued, all the way through to June 2015. The reality here was that it was the joint report which undermined the claimant’s position. It was not a problem of awaiting the guidance in Mr Chell’s October 2014 report. Until then, there were uncertainties in litigation and the usual contingencies of litigation risks. Struggle though I have, I have been unable to detect anything which would render it unjust for the usual order to operate.
39. I have considered too the via media of the stay. At first blush, I confess to being somewhat attracted to it, and I might have been persuaded by it had the suggestion of the stay followed promptly on the defendant’s Part 36 offer in September 2012, but it did not. It followed a good deal of time later. Even without a finding that the photograph demonstrates exaggeration, nonetheless there is some force in Mr Jones’s submission about the ever-increasing size of the claim which accompanied certainly the end of the stay period. I am not therefore persuaded that in this case, albeit it might in many others, a stay justifies displacing the usual rule.
40. In the circumstances, though I would always hesitate long and hard before interfering in a costs appeal, with great respect, the decision of the judge cannot stand. I understand the sympathy which perhaps informed his approach but, with great respect, the decision was wrong in principle in failing to give effect to the purpose underlying Part 36 offers. If I had to express it in terms of the test in SG v Hewitt at [50], I would be driven to conclude that the conclusion was plainly wrong within the meaning of that paragraph. I reach that conclusion with respect for the judge, but ultimately on the facts before this court that is the conclusion to which I am driven. There is, in short, nothing unjust which has been identified by the judge to warrant departing from the usual order.