CLAIMANT’S LATE ACCEPTANCE OF PART 36 OFFER: UNCERTAINTY OF FUTURE OUTCOME NOT GROUNDS FOR MAKING A DIFFERENT COSTS ORDER

 The judgment of Mrs Justice Lambert in Campbell -v- Ministry of Defence [2019] EWHC 2121 (QB) emphasises the difficulties for a claimant who has accepted a Part 36 offer late.   The claimant had to bear the usual costs consequences and pay the defendant’s costs for a 13 month period.  The judgment emphasises the risks posed by Part 36 offers, the role that the lawyer has to play in making a “judgement call”, and the possibility of applying for a stay, which would, at the very least, reduce the escalation of costs.

“…  in personal injury claims as in other litigation, offers to settle are often made at an early stage when the evidence is incomplete (either on liability or quantum or both). In these circumstances, it is the job of the claimant’s advisors to weigh up the merits of the Part 36 offer and give the claimant appropriate advice”

THE CASE

The claimant brought an action for damages for personal injury.  Liability was admitted. In January 2018 the defendant made a Part 36 offer of £100,000. That offer was accepted by the claimant on the 22nd March 2019, 13 months after the time limit for acceptance had expired.

THE ISSUE

The claimant applied for an order that he be awarded his costs up to the 19th February 2018, with no order for costs thereafter, on the basis that the application of the usual rule would be unjust.

THE RULES

The judge reviewed the rules and the relevant principles.  The review of the case law is a salutary reminder of the difficulties involved for a claimant seeking to obtain a “different” order.

4 The legal framework is not controversial. The starting point is CPR 36.13 (4) which at (b) provides that where, as in this case, a Part 36 offer which relates to the whole of the claim is accepted after expiry of the relevant period, the liability for costs must be determined by the court unless the parties have agreed costs. CPR 36.13(5) provides that, in the event the parties are unable to agree the costs liability then the court must, unless it considers it unjust to do so, order that the offeree (in this case, the Claimant) be awarded the costs up until the date on which the relevant period expired but that thereafter the offeree should bear the offeror’s costs from the date of expiry of the relevant period to the date of acceptance.
5 In considering whether the normal rule would produce an unjust outcome, the court is required to take into account all of the circumstances of the case (CPR 36.13(6)) including the matters identified in CPR 36. 17(5). Those are:
(a) the terms of the Part 36 offer;
(b) the stage in the proceedings when any Part 36 offer was made, including, in particular, how long before trial started the offer was made;
(c) the information available to the parties at the time when the Part 36 offer was made;
(d) the conduct of the parties in the provision of information for the purposes of enabling the offer to be made or evaluated; and
(e) whether the offer was a genuine attempt to settle the proceedings.
6 The court must therefore approach the question of the appropriate costs order by considering (by reference to the factors above) whether it would be unjust to apply the presumption in 36.13(5) and, only if the court does so conclude, then go on to determine the appropriate alternative order by reference to CPR 44.3. The court must guard against making an exception from the norm on the grounds that the regime itself is harsh or unjust but must find something about the particular circumstances of the case which takes it out of the norm (see Downing v Peterborough & Stamford Hospitals NHS Foundation Trust [2014] EWHC 4216 at [61]) and keep in mind the salutary purpose of the Part 36 regime which is to promote compromise and avoid unnecessary expenditure of costs and court time (see Smith v Trafford Housing Trust [2012] EWHC 3320 (Ch) at [13]). Finally, the burden is on the offeree to show injustice: uncertainties in the litigation and the usual contingencies of litigation do not render it unjust for the normal costs order to operate (see Briggs v CEF Holdings Ltd [2018] Costs 123). Subject to this guidance, the court exercises a broad discretion as to the appropriate costs order.

THE CLAIMANT’S ARGUMENTS IN THE CURRENT CASE

The claimant argued that the normal principles as to costs were displaced because of the particular facts of the case.

“Mr Ridgway, who appears for the Claimant, submits that the burden of displacing the normal order is discharged in this case because the Claimant was not, during the period for acceptance, able to quantify fully the claim. The claim included a claim for loss of earnings, the value of which depended upon the success or failure of the Claimant’s application for a commission. The outcome of that application was not known until October 2018. The Claimant then had to undergo various occupational health assessments to establish whether he was fit to take up any post in the RAF and, although he had learned that he was to be posted as a Unit Welfare Officer in December 2018, there remained some uncertainty over whether he would be fit to take up the job given his phobia of flying. In January 2019 the Claimant’s solicitors learned that the medical board was not concerned by the phobia of flying and so updated employment evidence dealing with promotion prospects was then obtained. It was only when all of these steps had been taken that advice on the merits of the Part 36 offer could be given. Mr Ridgway accepted that the Claimant had not sought a stay of the action but submitted that there had been an adjustment to the court directions to delay the obtaining and exchange of expert evidence from employment consultants until after the results of the Commission Board were known. Mr Ridgway also submits that the Defendant would have been in a much better position than the Claimant to know whether the commission process was likely to be successful.”

THE JUDGE’S CONCLUSION

The judge rejected the claimant’s arguments.  The offer was a serious one, it was the role of the claimant’s lawyers to evaluate the offer at teh time it was made. It was not unjust for the claimant to bear the usual costs consequences.
9 In my judgment the usual costs order should be made in this case: the Claimant should pay the Defendant’s costs from the last date of expiry of the Part 36 offer. I reach this conclusion for the following reasons.
a. I accept that at the time when the offer expired, the evidence concerning the Claimant’s prospects of promotion was incomplete. However, in personal injury claims as in other litigation, offers to settle are often made at an early stage when the evidence is incomplete (either on liability or quantum or both). In these circumstances, it is the job of the claimant’s advisors to weigh up the merits of the Part 36 offer and give the claimant appropriate advice. I accept that the exercise involves judgement and experience, but, here, the Claimant had the benefit of specialist personal injury lawyers with a sub-specialisation in military claims. As such they were in as good a position as any advisor to evaluate the Claimant’s career prospects and to give him advice on the offer.
b. If, having considered matters, the Claimant’s advisors had concluded that his career prospects were so uncertain as to make any evaluation wholly speculative, then the appropriate course would have been to have made an application to the court for the action to be stayed pending the outcome of the application to the Commission Board. Had an application for a stay been made, then the court would have been able to consider prospectively the issues which have, many months later, been raised before me in this hearing and make an order which was fair to both sides. Importantly, had a stay been granted then the Defendant would not have incurred costs after the time for acceptance of the offer had expired.
c. The Claimant did not seek a stay of the action. Mr Ridgway was unable to tell me why not. Although I accept that there was some modification of the timetable to put back the expert evidence until after the outcome of the Commission Board was known, the Defendant continued to incur considerable costs throughout the 13-month period during which the Claimant could have accepted the settlement offer, including the costs associated with exchange of witness statements and expert evidence.
d. Even after the outcome of the Commission Board was known in October 2018, the Claimant did not apparently re-visit the merits of the Part 36 offer but waited a further 5 or 6 months before accepting the offer. I accept that the underlying logic was the need to obtain further evidence concerning the Claimant’s career prospects for the purpose of valuing the claim for future losses, but in the absence of a stay, the sequential obtaining of evidence placed the Claimant at risk of an unfavourable costs order in due course: a risk which might have been avoided if an application for a stay had been made.
e. Finally, I reject Mr Ridgway’s submission that the Defendant was in a better position to predict the outcome of the Claimant’s prospects of succeeding before the Commission Board. Both the Commission Board and the Occupational Health Board are independent of the Defendant and I accept that information is not funnelled back from either of those bodies to the Defendant or its solicitors. I do not therefore accept that this is one of those rare cases in which the Defendant was privy to information which would assist it uniquely in valuing the claim.
10 For these reasons, I do not find that it would be unjust to make an Order which reflects the normal consequences of a late acceptance of a Part 36 offer. The offer to settle in the sum of £100,000 was not a tactical offer but represented a serious attempt to resolve the claim. It deserved careful attention by the Claimant and his team. Having sought unsuccessfully to obtain a further extension of time for its acceptance the Claimant continued the litigation at his own costs risk, a risk which could have been avoided had he made an application for a stay.

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