JUDGE WAS CORRECT TO ORDER DEFENDANT TO FACE NORMAL CONSEQUENCES WHEN CLAIMANT BEAT THEIR OWN PART 36 OFFER: HIGH COURT DECISION

There is another aspect of the judgment in Elgamal v Westminster City Council [2021] EWHC 2510 (QB) that needs consideration.  The judgment on fundamental dishonesty was considered in the previous post.  The defendant was unsuccessful in their appeal against the consequences of the Claimant’s Part 36 offer being successful.

THE CASE

The claimant brought an action for damages for personal injury after being injured in a gym.  Liability was agreed with a 35% deduction for contributory negligence.  The defendant was unsuccessful in arguing that the claimant had been fundamentally dishonest at trial and was equally unsuccessful on appeal.  The defendant’s second argument at appeal was that the judge should not have imposed the normal Part 36 consequences on them, the claimant having beaten his own Part 36 offer to settle.

THE JUDGMENT ON THIS ISSUE

Mr Justice Jacobs did not accept the defendant’s arguments that the trial judge had erred on this issue.   The defendant did not establish that it was “unjust” to pay the normal Part 36 consequences.

F: Costs

1. 1. The Defendant contends that the judge failed properly to address the question of whether it was unjust for the Defendant to be required to pay the Claimant’s costs on an indemnity basis, having not responded to the Claimant’s Part 36 offer. The Defendant relies upon CPR 36.17 which provides that the consequences there set out apply unless the court “considers it unjust to do so”. The argument was based upon the judge’s failure to deal with the Defendant’s argument that indemnity costs should not be awarded in the light of the Claimant’s exaggeration of his case and the lies that, on the judge’s findings, had been told.

1. 1. The judge’s approved judgment in relation to costs runs to some 22 paragraphs. He dealt first with the question of costs prior to the Part 36 offer. In that context, and by reference to the terms of CPR 44.2, he considered the argument that the Claimant had exaggerated his case. Paragraphs 9 and 10 of his later judgment, which are quoted above, appear in that context. The judge rejected the argument, essentially because the claim had succeeded in a substantial sum, the arguments as to fundamental dishonesty had failed, and there was nothing in the Claimant’s conduct which warranted the disapplication of the usual order that the successful party should be awarded his costs. There is no appeal in respect of that part of his decision.

1. 1. In the context of Part 36, the judge referred (in paragraph [14]) to the submission of the Defendant that he should again reconsider the issue of conduct, “namely the exaggeration and the lies that I have found”. Although Mr Lyons argued that the judge did not in fact do so, it seems to me that he did address the argument in paragraphs [17] and [18] of his judgment as follows:

“17. I go back to the real issue in this case and that is, and I remind myself that I have got to take into account all the circumstances of the case and I have spelt out what the circumstances of the case are when I considered the issue in relation to costs generally and, in my judgment, those circumstances do not change between Part 44 and Part 36, they are the same. That is that this claimant faced a massive sanction if the real issue that the defendant wished to raise, that is of fundamental dishonesty, was found against him and, in my judgment, those are circumstances which must take into account in relation to the offer, the Part 36 offer.

18. So, in my judgment, it is not a case of me having to decide whether the Part 36 offer bites or not, it is a matter for me to consider whether it is unjust to make the orders referred to because of factors like whether the Smith v Manchester information was available to the defendant at the time but that is subsumed in the consideration of all the circumstances and, as I say, the reality of this case is that that was the defendant’s case, that they submitted that the claimant had been fundamentally dishonest, they submitted that on the back of that the claim should be dismissed and I have no doubt that if it had been so dismissed there would be submissions that the defendant was entitled to their costs because of that fundamental dishonesty, even possibly on the indemnity basis but I do not know about that, I am not making that as part of my reasoning but that, as I say, leads me to the consideration of all the circumstances and in those circumstances, in my judgment, the costs consequences of the Part 36 offer apply and the claimant is going to be entitled to the interest and the costs consequences that flow as set out in Part 36. I will turn to interest and then I will hear submissions on what the discretionary elements of interests should be – in other words, what the interest rate in relation to the discretionary elements should be.”

1. 1. I see nothing wrong with the judge’s approach or decision. This was a discretionary decision for the judge to make, taking into account all the circumstances of the case. The judge decided to apply the usual costs consequences of a failure to beat an unaccepted Part 36 Claimant’s offer. He did not consider it unjust to do so, and I can fully understand his decision, which was well within the ambit of his discretion. After all, the Claimant had made a reasonable Part 36 offer, had established his case at trial, and had defeated the “fundamental dishonesty” argument. I see no basis for overturning the judge’s decision.

1. Accordingly, the appeal is dismissed.