NO ISSUE BASED COSTS ORDER AND PART 36 BENEFITS APPLIED WHEN CLAIMANT BEAT HIS OWN PART 36 OFFER: HIGH COURT DECISION TODAY

In Scales v Motor Insurers’ Bureau [2020] EWHC 1749 (QB) Mr Justice Cavangh rejected the defendant’s submission that there should be an issue based costs order and awarded a claimant the usual Part 36 benefits when he beat his own Part 36 offer. The fact that Spanish law applied was held not to be relevant.  I am grateful to solicitor James Riley for bringing my attention to this case, James was the solicitor for the claimant. (James tells me that there had been an earlier trial on liability where the claimant was 100% successful and where, again, the defendant failed to beat the claimant’s Part 36 offer – that is an awful lot of indemnity costs…)

THE CASE

The claimant brought an action where the MIB was the defendant. The accident happened in Spain and Spanish law applied to the assessment of damages.  At the trial  he obtained judgment for £539,096.83.  He had made a Part 36 offer of £500,000. The issues related to the costs hearing. (The judgment on damages can be found herehttps://www.bailii.org/ew/cases/EWHC/QB/2020/1747.html).

AN ISSUE BASED COSTS ORDER

The judge considered, and rejected, the defendant’s contention that there should be an issue based costs order.
    1. Ms Wyles points out that Mr Scales was unsuccessful in two parts of his claim. He was unsuccessful in his contention that he was entitled to care costs and to future costs. Ms Wyles submits that he lost on these issues because of the application of established principles of Spanish law. Moreover, had these issues not been pursued, the care expert evidence, which dealt not only with care costs but also with services and future case management, none of which, in the event, was recoverable, would not have been necessary. The care expert evidence alone occupied one day of the trial. In those circumstances, Ms Wyles submits that a conservative and fair approach to reducing the costs accordingly would be an order that the Claimant should not recover costs in the expert phase in respect of the care expert evidence and that the Claimant’s costs in the trial preparation and trial phases should be reduced by 25%.
    2. The correct approach to issue-based costs awards under CPR 44.2 has recently, and very helpfully, been set out by Stephen Jourdan QC, sitting as a Judge of the Chancery Division, in Pigot v Environment Agency [2020] EWHC 1444 (Ch), at paragraph 6 of his judgment:
“(1) The mere fact that the successful party was not successful on every issue does not, of itself, justify an issue-based cost order. In any litigation, there are likely to be issues which involve reviewing the same, or overlapping, sets of facts, and where it is therefore difficult to disentangle the costs of one issue from another. The mere fact that the successful party has lost on one or more issues does not by itself normally make it appropriate to deprive them of their costs.
(2) Such an order may be appropriate if there is a discrete or distinct issue, the raising of which caused additional costs to be incurred. Such an order may also be appropriate if the overall costs were materially increased by the unreasonable raising of one or more issues on which the successful party failed.
(3) Where there is a discrete issue which caused additional costs to be incurred, if the issue was raised reasonably, the successful party is likely to be deprived of its costs of the issue. If the issue was raised unreasonably, the successful party is likely also to be ordered to pay the costs of the issue incurred by the unsuccessful party. An issue may be treated as having been raised unreasonably if it is hopeless and ought never to have been pursued.
(4) Where an issue based costs order is appropriate, the court should attempt to reflect it by ordering payment of a proportion of the receiving party’s costs if that is practicable.
(5) An issue based costs order should reflect the extent to which the costs were increased by the raising of the issue; costs which would have been incurred even if the issue had not been raised should be paid by the unsuccessful party.
(6) Before making an issue-based costs order, it is important to stand back and ask whether, applying the principles set out in CPR r.44.2 , it is in all the circumstances of the case the right result. The aim must always be to make an order that reflects the overall justice of the case.”
  1. In the present case, it would not, in my judgment, reflect the overall justice of the case to deprive Mr Scales of any part of his costs.
  2. It is true that Mr Scales was unsuccessful in relation to some of the points of Spanish law that were argued before me. However, he was successful in other respects. In particular, he was successful in the argument that, under Spanish law, the award for permanent incapacity, also known as the “corrective factor” award, could be “bumped up” to include compensation for costs or expenses that would not otherwise be recoverable under the Baremo. The argument on this issue effectively overlapped with the argument about whether, in any event, Mr Scales was entitled to recover heads of losses that were not specifically mentioned in the Baremo, such as future costs and care costs. I do not think that it would be just, or appropriate, to treat the argument on the points of law on which Mr Scales was unsuccessful as being a discrete aspect of the case. The reality of the position was that Mr Scales, through counsel and his Spanish law expert, was advancing two alternative arguments, respectively embodying a more ambitious and a less ambitious position, and he was successful on the less ambitious of his two alternative arguments.
  3. Moreover, as I made clear at paragraph 253 of the main judgment, when awarding the maximum amount for Mr Scales’s absolute permanent incapacity, I took account of the sums that, ideally, Mr Scales would have been allocated for care management, third party support, gratuitous support, and future therapies. It follows that the evidence from the care experts was not wasted. Their evidence assisted me when considering the extent to which Mr Scales requires third party care, case management and other services and in placing a value on these costs (as a result of which I allocated the maximum figure payable for absolute permanent incapacity). Moreover, their expert evidence was relevant to the question of how much I should award for certain of the permanent on-going symptoms, and to the amount for temporary incapacity pre-Consolidation.
  4. I agree with Mr Chapman QC, therefore, that, on any analysis, Mr Scales has won this case, and I do not consider that it would be just or appropriate to make an issue-based award, either in relation to the period before 1 April 2020 or the period after that date. The expert evidence from Spanish law experts and from care experts would, in any event, have been necessary even if Mr Scales had not advanced the arguments upon which he was unsuccessful.
  5. Ms Wyles further submits that, in this regard, I should take account of the fact that the MIB has already been penalised, via the penalty interest payable under Spanish law, for failing to pay Mr Scales his compensation, for not accepting the offer, and for taking the matter to trial. Penalty interest under Spanish law imposes a much higher financial penalty than Part 36 consequences do under English law. Ms Wyles does not go so far as to submit that the imposition of Spanish penalty interest displaces the Part 36 rules, but submits that the penalty should be taken into account in considering whether it would be unjust in this particular case to apply all of the Part 36 rules.
  6. I am also unable to accept this submission. It is true that the rate of interest that the MIB (and, ultimately, the CCG) will have to pay is higher than would be payable if the accident had happened in England, but on the other hand, the compensation payable to Mr Scales is lower, and probably very much lower than it would have been had the accident happened in England rather than in Spain. I do not think that the fact that I applied Spanish law, including the Spanish law relating to interest, is a factor which renders it unjust to refrain from taking an issue-based approach to the assessment of costs. Indeed, I think that this factor is wholly irrelevant to the decision which I have taken on the question whether there should be an issue-based approach to the assessment of costs.

PART 36 CONSEQUENCES

The judge also rejected the defendant’s argument that the normal Part 36 consequences should not apply.

    1. Mr Chapman QC submits that each of the consequences provided for by CPR 36.17(4) in a case in which a Claimant has “beaten” his Part 36 offer should apply to the present case. These are that:
(1) Costs should be assessed on the indemnity basis from 1 April 2020, being 21 days after the Part 36 offer was made;

(2) Interest should be awarded on those costs at 6% above base rate; and

(3) An additional award should be made to Mr Scales of £51,950. This is 10% of the damages (including interest) that I awarded up to £500,000, plus 5% on the sum above £500,000.

  1. As I have said, I am required by CPR 36.17(4) to make these orders unless it would be unjust to do so. Ms Wyles says that it would indeed be unjust to make these orders in the present case.
  2. She says, first, that the MIB has already been penalised to a much greater extent than the Part 36 rules alone would permit, as a result of the imposition of the Spanish penalty interest. I have already made clear that I do not think that this is a good argument.
  3. Second, Ms Wyles submits that ordering the payment of this additional amount would infringe the principle established in Moreno v MIB [2016] UKSC 52 that the Claimant is entitled to the same compensation that he would have been entitled to against the Spanish Guarantee Fund under Spanish law. He would not have been entitled to such an additional amount under Spanish law, save in the form of the penalty interest already awarded. Ordering the additional amount would duplicate that penalty and would be unjust.
  4. I do not accept that it would be unjust. The penalty interest in Spanish law deals with something different from Part 36. Spanish penalty interest is payable, in a case such as this, if the Guarantee Fund fails to pay compensation within three months of being notified of the claim. In contrast, the Part 36 consequences in this case follow because the MIB did not accept the Part 36 offer made by Mr Scales on 11 March 2020. It follows that there is no injustice in the MIB being liable both to Spanish penalty interest and to the consequences of Mr Scales “beating” the Part 36 offer.
  5. As for the rate of interest, I have a broad discretion to determine the rate of interest on the costs from 1 April 2020, up to a maximum of 10% over base rate. Mr Chapman QC asks for 6% over base rate. Ms Wyles argues for 4% over base rate, relying on McPhilemy v Times Newspapers (No 2) [2001] EWCA Civ 933[2002] 1 WLR 934 in support of her submission that this is the conventional “generous” allowance. I will award 6% over base rate. The difference between 4% and 6%, in the wider scheme of things, is likely to be small, and I do not read the Court of Appeal’s judgment in McPhelimy as laying down any general norm. There is a broad discretion and in my judgment 6% is the better figure.