PART 36, LATE ACCEPTANCE AND QOCS: COURT OF APPEAL DECIDE AN UNUSUAL ISSUE: A COURT CANNOT MAKE AN ORDER PROTECTING A PARTY AGAINST A POTENTIAL CHANGE IN THE RULES

In Tabbitt v Clark [2023] EWCA Civ 744 the Court of Appeal rejected an application for a declaration that would have “future proofed” the claimant’s position in relation to liability for costs following late acceptance of the defendant’s Part 36 offer.  Although the law had changed, and the claimant remained protected, the judge was correct not to have made an order which could have overridden changes to the rules.

“If every time a man relied on existing law in arranging his affairs, he were made secure against any change in legal rules, the whole body of law would be ossified forever.”

THE CASE

The claimant brought a personal injury action against the defendant. The action was subject to QOCS.  The defendant made a Part 36 offer that the claimant accepted some 9 months later.

The parties agreed that the claimant could recover his costs to the date that the offer expired. It was also agreed that the defendant was entitled to costs, but the provisions of QOCS that then applied meant that these could not be enforced.

However the claimant sought a declaration

“Pursuant to rule 44.14 CPR the Defendant is not permitted to enforce (including by way of setoff) the costs Order in paragraph 3 of this Order in his favour against the Claimant.”

THE REASON FOR THE APPLICATION

The aim of the declaration was to “future proof” the claimant’s potential liability for costs following late acceptance of the Part 36 offer.

1. 1. It was common ground that as the rules stood at the date of the judge’s judgment (a) acceptance of a Part 36 Offer did not result in an award of damages and (b) any costs order in favour of the defendant could not be enforced either against the amount of the Part 36 Offer or against the order for costs made in Mr Clark’s favour.

1. 1. Since the costs had not been assessed or agreed, there was at the date of the judge’s judgment no immediate prospect of enforcement of any costs order against Mr Tabbitt.

1. 1. But at the time of the judge’s judgment changes to the QOCS rules were under active consideration by the Civil Procedure Rules Committee (“the CPRC”). On 7 October 2022 the CPRC approved an amendment to the rules which, as drafted, would permit enforcement by a defendant of a costs order against agreements to pay damages and other costs order. The text of the draft was quoted in Harrison v University Hospitals of Derby & Burton NHS Foundation Trust [2022] EWCA Civ 1660, [2023] 4 WLR 8 at [51].

1. Mr Tabbitt wished to guard against the possibility of a future rule change with potential retrospective effect. Mr Clark (or rather his insurers) were willing to take their chances. Since the claim had been disposed of by agreement, it would have been open to the parties to have achieved Mr Tabbitt’s objective by agreement, perhaps by Mr Tabbitt making it a condition of acceptance of the Part 36 offer that no costs order would be enforced against him; or by offering to accept a lower sum in exchange for that agreement. But that was not done.

THE DECISION AT FIRST INSTANCE

HHJ Walden-Smith, sitting as a High Court Judge, refused to make the order that the claimant sought.

1. 1. Judge Walden-Smith accepted that she had power to make an order in the form of the declaration sought by Mr Tabbitt, but in the exercise of her discretion declined to do so. As the judge put it at [22]:

“The rule is what it is and will be applied in the wording of that rule at the relevant time.”

1. 1. She added at [25]:

“It is not for the court to cast the rules as they are currently worded into stone so that if there were to be a rule change that had retrospective effect, that rule change could not take effect in the way that was intended.”

1. She herself gave permission to appeal.

THE CLAIMANT’S UNSUCCESSFUL APPEAL TO THE COURT OF APPEAL

The Court of Appeal did not accept the claimant’s arguments that an order should be made.

1. 1. It is well-settled that there is no presumption against retrospective changes to procedure. But if the CPRC were to have taken the view that it would be unfair for any changed rules to apply to a person in Mr Tabbitt’s position, then it may provide for transitional cases.

1. 1. Mr Hogan argued that the extent of the court’s powers under section 51 of the Senior Court Act 1981, which include power to determine the extent to which costs are to be paid, means that the court can decide the question of the enforceability of any costs order at the date when it makes the order. As a general rule, however, the enforcement of costs orders is a downstream activity from the making of a costs order in principle. Subsequent events might intervene, such as the bankruptcy of a party; or the acquisition of property against which a charging order could be made. It is not the practice in, say, an action for damages for breach of contract for a judgment awarding damages to address the question of enforcement, except perhaps to the extent of granting a stay of execution.

1. 1. Mr Hogan had two answers to this point. The first was that the QOCS rules were so tightly drawn that they compelled a judge to judge to exercise any discretion to deal with the question of enforceability in favour of doing so; and to do so on the basis of the rules as they stood at the date of the decision. I do not agree. The QOCS rules themselves deal with the question of enforceability, and I do not consider that a judge is bound to replicate the effect of the rules by means of a declaratory judgment, at least where there is no dispute about what they mean. Although Mr Hogan submitted that the rules are given effect by orders, I consider that in fact in general the converse is true. Orders are given effect by the rules. The rules apply whether or not they are recorded on the face of an order. Mr Hogan also submitted that it would be unsatisfactory if, in order to understand the effect of a court order, it were necessary to consult the CPR. An order should be clear on its face. But the CPR (including the QOCS rules) are the general legal background against which orders are made; and the legal effect of an order is at least partly informed by those rules.

1. 1. Mr Hogan’s second main answer relied on the principle of finality. The order that the judge made was a final order because it disposed of the claim for damages. The principle of finality is an important principle, which also applies generally to litigation. Despite what Mr Hogan called the Balkanisation of personal injury litigation, I do not consider that the principle of finality applies with any greater force to such cases. As I have said, in the normal course of events the question of the enforcement of orders is an activity downstream of the substantive judgment. Moreover, I consider that Mr Hogan’s submission mixes up finality with comprehensiveness. The finality principle is about changing or challenging orders that have been made. It is not about leaving some matters over for further decision.

1. 1. The effect of Mr Hogan’s argument is that the judge was required to make an order preserving the existing rules in aspic, regardless of what the CPRC might do. That is contrary to the approach in Adelekun which placed the responsibility for changes firmly on the shoulders of the CPRC. As the American jurist Lon L Fuller said in The Morality of Law (quoted with approval by Lord Reed in Axa General Insurance Ltd v Lord Advocate [2011] UKSC 46, [2012] 1 AC 868 at [120]):

“If every time a man relied on existing law in arranging his affairs, he were made secure against any change in legal rules, the whole body of law would be ossified forever.”

1. In my judgment, the judge was entitled, in the exercise of her wide discretion, to decline to make the order sought and to leave the matter to the CPRC.

THE RULE CHANGES WERE NOT RETROSPECTIVE IN AN EVENT

In fact the rule changes that were made were not retrospective.

1. 1. In fact the CPRC have now amended the rules. The amendments are contained in The Civil Procedure (Amendment) Rules 2023. Rule 24 of those Rules amends CPR Part 44.14 so as to permit a defendant to enforce an order for costs in their favour (including orders for costs deemed to have been made) against orders for damages, or agreements to pay or settle a claim for damages, as well as against costs orders. The effect of the change is to reverse Adelekun and some earlier decisions of this court. But rule 1 (3) of the 2023 Rules provides that the amendments made by rule 24 apply only to claims where proceedings are issued on or after 6 April 2023. The 2023 Rules did, therefore, provide for transitional cases. It follows that Mr Tabbitt’s claim is unaffected by the change in the rules. Mr Marven KC accepted that this was so; and that even if Mr Clark is successful on this appeal, a costs order will not be enforceable.

1. 1. Thus, the unfortunate reality of this appeal is that what seems to be in issue is the position as between Mr Tabbitt and his own lawyers. It is very regrettable that so much money has been spent on pursuing both the original application and this appeal, which now far exceeds the amount of costs initially in issue.

1. 1. In my judgment, on the rules as they stood at the date of the judge’s decision, she was fully entitled to decline to make the order that she was asked to make.