2019 AND CIVIL PROCEDURE THE YEAR IN REVIEW: PART 36: THE GROWTH IN CLAIMANT’S PART 36 OFFERS – AND WHY THE CONSEQUENCES USUALLY APPLY

Looking back it is clear that this has been a very busy year for cases on Part 36. Part of the reason for this has been the growth in cases relating to claimant’s offers.  There are a number of key themes of the cases (1) in cases where a claimant beats their own Part 36 offer then defendants will normally pay the Part 36 penalties: (2) the same goes for claimants who fail to beat an offer from a defendant; (3) compliance with the rules remains important. Parties must resist the attempt to put a “gloss” on a Part 36 offer.

MARCH: “THE CLAIMANT’S MUST RUE THE DAY THEY REJECTED THE DEFENDANT’S OFFER”

I mentioned the judgment in  Burgess & Anor v Lejonvarn [2019] EWHC 369 (TCC) as one that should be shown to all litigants. In a case about the design and work done in a garden, the defendant made an early offer of £25,000. The claimant did not beat that offer.  The defendant’s budget was £724,265.63 (excluding VAT).

“The Claimants must now rue the day they rejected the Defendant’s offer to settle but this was never an obviously hopeless case. But unlike a successful Claimant, the fact that the Defendant did better than her relevant offer does not give rise to an automatic entitlement to indemnity costs.

“THE CLAIMANTS MUST RUE THE DAY THEY REJECTED THE DEFENDANT’S OFFER”: CLAIMANT TO PAY STANDARD COSTS AFTER REJECTING VERY EARLY PART 36 OFFER” 

The judgment of Mr Justice Bryan in Assetco Plc v Grant Thornton UK LLP [2019] EWHC 592 (Comm) provided a helpful review of the principles and authorities relating to the approach to be adopted when a claimant beats their own Part 36 offer, in particular in relation to interest.

WHEN A CLAIMANT BEATS THEIR OWN PART 36 OFFER: A “CUT OUT AND KEEP” GUIDE: A JUDGMENT ON INTEREST OF INTEREST

 

MAY: AN OFFER IN RELATION TO AN UNPLEADED COUNTERCLAIM WAS STILL A VALID PART 36 OFFER

May was an incredibly busy month for Part 36 cases.

 

In Calonne Construction Ltd v Dawnus Southern Ltd [2019] EWCA Civ 754 the Court of Appeal upheld a finding that a defendant’s Part 36 offer was a valid one. The offer related to a counterclaim that had yet to be pleaded and sought 8% interest. This did not breach any of the requirements of CPR 36.

DEFENDANT’S PART 36 OFFER WAS VALID: COURT OF APPEAL UPHOLD OFFER THAT REFERRED TO UNPLEADED COUNTERCLAIM AND SOUGHT 8% INTEREST AFTER EXPIRY

The Calonne decision was looked at again in a second post.   The Court of Appeal dealt with an argument that an offer was not valid because it did not provide enough information.

“There would be no need for the clarification provisions in rule 36.8 if the result of a failure to provide enough information were automatically to disqualify the offer from being a Part 36 offer at all”

CIVIL PROCEDURE BACK TO BASICS 41: SEEKING CLARIFICATION OF A PART 36 OFFER: CPR 36.8

 

In FZO v Adams & Anor [2019] EWHC 1286 (QB) Mrs Justice Cutts considered the issue of whether interest was payable on the additional sums that a defendant pays when a claimant beats their own Part 36 offer (she decided it wasn’t).

PART 36: WHEN A CLAIMANT BEATS THEIR OWN PART 36 OFFER: NO INTEREST ON THE ADDITIONAL £75,000

 Part 36 was considered by Mr Justice Nicol in Horne -v- Prescot (No 1) Ltd 2019 1322 (QB). The case relates to whether a Part 36 offer on costs, which specifically excluded interest, remained a valid Part 36 offer.  A copy of the judgment is available here Horne v Prescot appeal judgment.  It is also available on Bailli here.  The Court of Appeal are considered the same issue in King -v- Corporation of London  in November.

PART 36 OFFER ON COSTS THAT STATES IT IS “EXCLUSIVE OF INTEREST” IS STILL A VALID OFFER: HIGH COURT DECISION CONSIDERED

In White & Anor v Wincott Galliford Ltd [2019] EWHC B6 (Costs) Deputy Master Friston considered the effect of a Part 36 offer on the hourly rates to be applied on an assessment of costs.  It was held that the offer in relation to the hourly rate alone was a valid Part 36 offer. However to grant the claimant an additional amount (of 10% of costs) was inappropriate because of the injustice that would arise.

PART 36 OFFER ON HOURLY RATE WAS VALID: HOWEVER INJUSTICE TEST MEANT CLAIMANT WOULD NOT RECOVER AN ADDITIONAL AMOUNT: MERE GAMESMANSHIP SHOULD BE AVOIDED

JULY: AN OFFER THAT IMPOSES A CONDITION AS TO COSTS IS NOT A VALID PART 36 OFFER

July was another busy month for Part 36 cases.

In Knight & Anor v Knight & Ors (Costs) [2019] EWHC 1545 (Ch)  HHJ Paul Matthews (sitting as a High Court Judge) held that an offer that attempted to limit costs was not a valid Part 36 offer.   The judge also rejected the claimants’ argument that the defendants’ failure to accept a reasonable offer, made outside the ambit of Part 36, should lead to the claimants being awarded indemnity costs.

“A mere failure to accept a reasonable offer is not enough. That happens every day of the week, with both parties acting reasonably and in accordance with the advice that they are receiving from their professional advisers. So if the matter is to be taken “out of the norm” there must be something more, something which prompts the court to visit the paying party with a special mark of condemnation. I see nothing of that kind here.”

AN OFFER THAT IMPOSES A CONDITION AS TO COSTS IS NOT A VALID PART 36 OFFER: MERE FAILURE TO ACCEPT REASONABLE OFFER DOES NOT LEAD TO INDEMNITY COSTS

In  Bull v Desporte [2019] EWHC 1669 (QB) Mr Justice Knowles rejected the defendant’s argument that a Part 36 offer meant that she did not have to pay costs

PART 36 OFFER WAS NOT AN EFFECTIVE ONE AND DEFENDANT HAD TO PAY COSTS

In a post on the 9th July I considered the issues relating to a party making a successful Part 36 offer when its budget had been limited to court fees.

PART 36 AND COSTS AFTER THE COURT HAS LIMITED THE BUDGET TO COURT FEES

This was soon followed by a reference to an other case where the issue was considered

ALI -V- CHANNEL 5

In Gibbons -v- Rotherham Doncaster and South Humber NHS Foundation Trust (o4/06/2019) the court rejected an argument that a Part 36 offer was invalid because it was unclear. The defendant could, and should, have sought clarification.

“It seems to me the Defendant could have used 36.8 and asked for clarification if they were not clear.  They did not do that.”

CLAIMANT’S PART 36 “SUBJECT TO A NIL CRU” WAS A VALID OFFER: IF THE DEFENDANT WAS CONFUSED THEY SHOULD HAVE SOUGHT CLARIFICATION

AUGUST: DE MINIMIS ERROR DID NOT INVALIDATE PART 36 OFFER

August had two cases about the construction of the rules around Part 36.

In MR v Commissioner of Police for the Metropolis [2019] EWHC 1970 (QB) Mrs Justice McGowan allowed an appeal as to costs in a issue relating to Part 36. She held that the trial judge had erred in making no order for costs in a case where the claimant had made a valid Part 36 offer to settle for no damages but with an admission of liability. The claimant was entitled to costs, and the relevant enhancements,  from the relevant date following the Part 36 offer.

AN OFFER TO SETTLE FOR NO DAMAGES CAN STILL BE A VALID PART 36 OFFER: APPEAL AGAINST NO ORDER FOR COSTS ALLOWED (IN PART).

In Momonakaya v the Ministry of Defence [2019] EWHC 480 (QB) HHJ Blair QC considered whether a claimant had properly accepted a Part 36 offer.  It was held that an offer that breached the rules in a de minimis way was still a valid offer.

” in my view, the failure to comply with that one sub-rule in r.36.22(7) is de minimis. It is not of any lasting consequence; no prejudice has been suffered. There was clarity between all parties as to what was being agreed and therefore I have come to the conclusion that Part 36 does apply so as to stay these proceedings.”

DE MINIMIS BREACH OF RULES DID NOT LEAD TO PART 36 OFFER BEING INVALID 

OCTOBER: WHY A PART 36 OFFER HAS TO BE CONSIDERED CAREFULLY, EVEN IF MADE EARLY

October was another busy month for Part 36 cases.

In  Global Assets Advisory Services Ltd & Anor v Grandlane Developments Ltd & Ors [2019] EWCA Civ 1764 the Court of Appeal confirmed that the court can make an interim order for costs after a claimant has accepted a Part 36 offer within time.

COURT HAS JURISDICTION TO MAKE AN INTERIM ORDER AS TO COSTS AFTER CLAIMANT HAS ACCEPTED A PART 36 OFFER: COURT OF APPEAL DECISION TODAY

 

In October I reported on the case of  Flanagan -v- Royal & Sun Alliance Insurance PLC. A copy of that case is available here  Darren Flanagan – Manchester CC – Judgment – 20190516 – V FINAL . It is an object lesson in the need to carefully draft Part 36 offers. The “not particularly happy” wording used meant the offer made was not a Part 36 offer and the court would not impose any of the penalties that would apply in a non-compliant offer.

” This offer is open for acceptance for 21 days from the date this letter is received by you. After 21 days the offer can only be accepted if we’re able to reach an agreement on costs or the court gives permission.” 

DEFECTIVE PART 36 OFFER MEANT CLAIMANT DID NOT OBTAIN PART 36 BENEFITS: WHY CLAIMANTS SHOULD DRAFT THEIR PART 36 OFFERS CAREFULLY

The importance of making a prompt decision when receiving a Part 36 offer is shown by 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 cost

“…  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”

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

NOVEMBER: CLAIMANT BEATS ITS OWN OFFER BY £4,800: DEFENDANT PAYS AN ADDITIONAL £65,000 (AND MORE)

The advantages to the claimant of making a careful Part 36 offer can be seen in Hochtief (UK) Construction Ltd & Anor v Atkins Ltd [2019] EWHC 3028 (TCC)  Mrs Justice O’Farrell considered the consequences of a claimant being its own Part 36 offer.  The claimant beat its own offer by a small amount but still gained considerable advantages.

“The fact that the JV beat the Part 36 offer by a very small margin does not displace the Part 36.17 regime”

CLAIMANT BEATS ITS OWN PART 36 OFFER DEFENDANT PAYS THE PRICE: OFFER BEATEN BY £4,800 LEADS TO DEFENDANT PAYING AN ADDITIONAL £65,000 – & INDEMNITY COSTS, & ADDITIONAL INTEREST…

In Ho v Adelekun [2019] EWCA Civ 1988 the Court of Appeal held that fixed costs still applied to a case  where an offer of settlement did not expressly refer to costs being fixed.

“…parties who wish to settle on terms that fixed costs will be payable would be well advised to avoid reference to assessment “on the standard basis” in any offer letter or consent order which may be drawn up following acceptance of an offer.”

FIXED COSTS NOT OVERTURNED BY THE TERMS OF AN AMBIGUOUS PART 36 OFFER: COURT OF APPEAL DECISION TODAY

DECEMBER: WHEN A CLAIMANT BEATS THEIR OWN PART 36 OFFER – THE DEFENDANT SHOULD NORMALLY EXPERT TO PAY THE CONSEQUENCES

In Kivells Ltd v Torridge District Council [2019] EWHC 3210 (TCC) the claimant beat its own Part 36 offer (by a fair margin). HHJ Russen QC rejected the defendant’s argument that it would be unjust to apply the normal Part 36 penalties in these circumstances. The claimant received an additional 10% interest, indemnity costs from the relevant date and enhanced interest.

“The essential thrust of CPR 36.17(4), in such circumstances and assuming normality prevails, is to put the rejected offeror into a different, superior class of judgment creditor in relation to the period beginning with the expiry of his offer. And the essential basis for that can be said to be the reflection, in hindsight, that the litigation should by then have been concluded with recognition of his entitlement”

PART 36: A SUCCESSFUL LITIGANT CAN BE BULLISH: CLAIMANT BEATS ITS OWN PART 36 OFFER AND THERE NOTHING UNJUST IN THE DEFENDANT PAYING THE PRICE

In Essex County Council & Ors v Davies & Ors [2019] EWHC 3443 Mr Justice Saini upheld a decision to award interest on costs at 10% over base in a case where a claimant had beaten its own Part 36 offer.

CORRECT INTEREST RATE ON COSTS WHEN CLAIMANT BEATS THEIR OWN PART 36 OFFER: TRIAL JUDGE WAS ENTITLED TO AWARD 10% OVER BASE