CLAIMANT HAD NOT “WON” UNDER PART 36 WHEN SHE HAD NOT BEATEN THE DEFENDANT’S OFFER ON DAMAGES BUT MADE AN OFFER IN RELATION TO LIABILITY: “BAFFLING” ARGUMENTS FAIL TO PREVAIL

I am grateful to barrister James Laughland for sending me a copy of the judgment of Mrs Justice Collins Rice in Mundy -v- TUI UK Ltd [2023] EWHC 385 (CH)*.      On appeal the judge rejected the claimant’s argument that it had “succeeded” under Part 36 when she had “beaten” her own offer in relation to liability but failed to beat the defendant’s offer in relation to damages.

*A copy is available here Mundy v TUI Ltd [2023] EWHC 385 (CH)

“I am unpersuaded this rejected 90/10 liability offer can be fitted in to the terms of CPR 36.17(1)(b) consistently with the wording, integrity and practicality of the CPR 36.17 mechanism. Trying to do so strains the language of the provision, undermines its
careful balance, and introduces a degree of complexity and uncertainty which I am not persuaded is within its contemplation. It is a provision that relies on its clarity, simplicity and predictability for the incentivising effects which puts it at the heart of the Part 36 code.”

THE CASE

The claimant brought an action alleging food poisoning on holiday.  Liability and damages were disputed. The matter went to trial where the judge awarded damages of £3,700 for general damages and £105.60 in special damages.

THE “CONFLICTING” PART 36 OFFERS

Both parties had made Part 36 offers prior to the trial.  Both offers were rejected by the other party.

• The claimant made two offers. One for settle for £20,000. The other to settle on a 90:10 split on liability in her favour.
• The defendant had made an offer of £4,000.

THE ORDER AT TRIAL

The trial judge ordered that the claimant should recover her costs up to the relevant date of expiry of the Part 36 offer. The defendant would receive their costs thereafter. (It was agreed on appeal that the Supreme Court decision in Ho -v- Adelsun meant that the defendant’s costs order could not be set off against costs or damages).

THE CLAIMANT’S UNSUCCESSFUL APPEAL

The claimant argued that she had beaten her own offer on liability.  She had succeeded for 100% on liability when she had offered to settle for 90%.   The judge did not accept that analysis.

40. Mr Mundy’s 90/10 liability offer was not an offer to settle the claim, or a quantifiable
part of or issue in the claim. It is difficult to fit into the Part 36 scheme altogether. If
accepted, in what sense will that produce the result that ‘the claim will be stayed’ (CPR
36.14(1))? If rejected, in what sense does that produce a quantifiable proposition
capable of being compared with what a claimant got ‘in money terms’ from a judgment
– that is, from the judgment itself and not from a private algorithm pre-attached to the
judgment? A simple case like this in which liability is not fought on a distinct issues
basis but in its entirety cannot produce anything other than a 100% result on liability
either way; the value of a win on liability ‘in money terms’ is difficult if not impossible
to separate from the quantum of damages awarded, and that will always and
axiomatically be more advantageous to a claimant than 90% of it. There is a
problematic degree of artificiality in all of this.
41. Mr Mundy had made a money settlement offer at the same time as his 90/10 liability
offer. He had also made a proposal about how the two offers fitted together – the offer
to settle for £20,000 was to be ‘net of acceptance of any liability offer’. That was a
proposal about the effects of acceptance. Whether to accept a 90/10 liability offer will
be a matter for a defendant’s commercial judgment (the proportions on offer, however,
may be unlikely to be attractive outside an issues-based claim; it is an offer likely to be
attractive only to a defendant clinging on to an outside chance of winning). But the
effects of rejection of the liability offer do not speak for themselves. And the effect
proposed by Mr Mundy in this appeal goes far beyond incentivising the avoidance of a
liability trial. It makes a 90/10 liability offer into a means for a claimant, who fails to
beat a money offer to settle his claim, to recoup a substantial premium for ‘winning’
the case nevertheless. It is an attempt at a unilaterally imposed insurance policy to
reverse the losses otherwise provided for by CPR 36.17. It is, in other words, an attempt
to use CPR 36.17 against itself, contrary to both its letter and its spirit.
Judgment Approved by the court for handing down. Mundy v TUI
42. I am unpersuaded this rejected 90/10 liability offer can be fitted in to the terms of CPR
36.17(1)(b) consistently with the wording, integrity and practicality of the CPR 36.17
mechanism. Trying to do so strains the language of the provision, undermines its
careful balance, and introduces a degree of complexity and uncertainty which I am not
persuaded is within its contemplation. It is a provision that relies on its clarity,
simplicity and predictability for the incentivising effects which puts it at the heart of
the Part 36 code.
43. How, then, does this 90/10 liability offer fit into the scheme of CPR 36.17, if not in the
manner suggested by Mr Pennock? The simplest answer to that lies in CPR 36.17(5).
In a case like this – an otherwise straightforward CPR Part 36.17(1)(a) case in which a
claimant has failed to beat a defendant’s offer – a court considering whether it would
be unjust to visit the subsection (3) consequences on the claimant must take into account
all the circumstances of the case. I can see that in an appropriate case – and whether or
not a 90/10 liability offer counts as ‘any Part 36 offer’ for the purposes of CPR
36.17(5)(a) – a court may be invited to consider any injustice arising by virtue of the
defendant having rejected that offer.
44. The ‘unjust’ bar of course remains a high one: a ‘formidable obstacle’ as Mr Pennock
acknowledged. The default provisions of CPR 36.17 cannot be expected to be diluted
by considerations relating to rejected 90/10 liability offers to the extent that it loses the
very clarity, simplicity and predictability on which its incentivising effects depend. It
may be that 90/10 liability offers, where no issue of split liability genuinely arises,
largely need to rely on any inherent attractiveness and incentivisation they may have in
the context of a particular case to achieve an outcome – agreement to avoiding a liability
trial – if that is in the commercial best interests of both parties. It may be that they
cannot rely on the incentivisation furnished by the ‘Part 36’ consequences of rejection.
It may be, in other words, that in a simple case like the present they are all carrot and
no stick. If so, that is a result which seems to me entirely consistent with the letter and
spirit of the Part 36 code, and its focus on backing sensible money offers to settle claims
or quantifiable parts of claims.
(c) Was the County Court Judge ‘wrong’?
45. I recognise, in the strong instincts expressed by the County Court Judge in this case,
substantial consistency with the analysis I have set out above. He started in the right
place – by considering the question posed by CPR 36.17(1)(a). The obvious answer to
it was ‘yes’ – Mr Mundy had failed to obtain a judgment more advantageous than TUI’s
Part 36 offer.
46. He considered and rejected the ingenious suggestion that a different answer could be
reached by recalculating what Mr Mundy had got – via fitting the rejection of the 90/10
offer within CPR 36.17(1)(b) and adding in the CPR 36.17(4) uplift before answering
the CPR 36.17(1)(a) question. For the reasons I have given, he was right to do so.
47. He also addressed himself, in the alternative, to the potential relevance of the rejected
90/10 offer to the ‘unjust’ question in CPR 36.17(5) – along with all the other
circumstances of the case. He was persuaded the high bar would have been cleared for
interfering with the CPR 36.17(4) consequences had that been his conclusion. As I read
the judgment, that was because to do otherwise would have been unfairly to visit an
uncertain, unpredicted and indeed unpredictable consequence on a defendant which had
made a realistic settlement offer in good faith, and which had also reasonably rejected
the 90/10 liability proposition.
48. The rejection was reasonable because the issue in principal contention at the trial had
been how far Mr Mundy’s debilities were attributable to the cyclospora infection. That
was a quantum question but one in which causation issues were very much live. The
90/10 offer on ‘liability’ was at large and unparticularised. The difficulties of applying
a 90/10 liability offer to issues of causation are illustrated in the decision of the Court
of Appeal in Seabrook v Adam [2021] EWCA Civ 382, a case referred to in Mr
Pennock’s skeleton argument; hence the observation there that, in relation to a
claimant’s offer ‘if the issue to be settled is ‘liability’, it would be sensible to make clear
whether the defendant is being invited only to admit a breach of duty, or, if the
admission is intended to go further, what damage the defendant is being invited to
accept was caused by the breach of duty’. The offer in this case did not do that. Where
extent to which debility and damage were caused by the defendant’s fault is the core of
the dispute, as it was here, it is hard to see that the County Court Judge was ‘wrong’ to
see injustice in the conventional operation of CPR 36.17(4) in the present case had he
been persuaded it applied here.
49. My conclusion in these circumstances is that the County Court Judge’s decision on the
issues raised by the rejected 90/10 liability offer was not ‘wrong’. I can see that he
found the submissions advanced on Mr Mundy’s behalf to be strongly counter-intuitive,
if not to a degree baffling, but I am unpersuaded that he went wrong in his core analysis.
If some of his explanatory reflections reflected rather than resolved that degree of
bafflement, I am unpersuaded that his reasoning, taken as a whole, lacked explanatory
power, and I have in any event expanded upon it in this judgment. In these
circumstances, I would dismiss the appeal on grounds 1-3.

(d) Setting off the Defendant’s costs
50. Mr Laughland, for TUI, accepted before me at the appeal hearing that the question
raised by the fourth ground of appeal has now been settled by the Supreme Court in Ho
v Adelekun [2021] UKSC 43 in favour of Mr Mundy. He was right to do so. It follows
that the appeal falls to be allowed on ground 4, and paragraph 6 of the Order under
appeal amended accordingly