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27/03/2023
Background facts
A capable 62 year old man suffers a modest (liability admitted) injury in an RTA, but then (by common consent) goes on to develop severe CRPS. He had had a myocardial infarction one year earlier (from which he made an excellent recovery, returning to work) and is a Type 1 diabetic.
He is exploring spinal cord stimulation and amputation when the Defendant makes a Part 36 offer of £200,000 gross. Assuming the Claimant will not be able to return to his skilled profession (which seems plain), the value of his claim will easily exceed the offer. If he chooses, and tolerates, amputation (with osseointegration) his claim could be very substantial because of the need for prosthetics, wheelchair use in later life, etc..
A year, and a raft of costs, later, the Claimant dies unexpectedly of Covid. Given the date of his death, his estate is bound to achieve a less advantageous outcome than the ‘old’ Part 36 offer. Consequenlty, if the usual CPR36 consequences apply, the Estate will lose a very substantial portion of the original offer.
The relevant provisions of the CPR
Pursuant to CPR36.13(4)(b) where an offer is accepted after the expiry of the ‘relevant period’ …”the liability for costs must be determined by the court unless the parties have agreed the costs.”
When determining how to determine the costs, CPR36.13(5) indicates that where CPR36.13(4)(b) applies “but the parties cannot agree the liability for costs, the court must, unless it considers it unjust to do so, order that […] the offeree do pay the offeror’s costs [after expiry of the relevant period].”
CPR36.13(6) then provides that when determining what is and what is not ‘unjust’ the court “must take into account all the circumstances of the case including the matters listed in rule 36.17(5)”.
Finally, CPR36.17(5) lists these specific factors which must be taken into account as well as “all the circumstances”:
Application of the rules
The cases commenting upon those provisions strike a salutary note.
In Downing v Peterborough NHSFT [2014] EWHC 4216 (QB), Sir David Eady noted that a Judge asked to depart from the norm:
“should not be tempted to make an exception merely because s/he thinks the regime itself harsh or unjust. There must be something about the particular circumstances of the case which takes it out of the norm.”
In Smith v Trafford Housing Trust [2012] EWHC 3320 (Ch) Briggs J pithily stated:
“The burden on a claimant who has failed to beat the defendant’s Part 36 offer to show injustice is a formidable hurdle to the obtaining of a different costs order”
Furthermore, it is clear beyond doubt that “the function of a Part 36 payment is to place the claimant on that costs risk if, as a result of the contingencies of litigation, he fails to beat the payment [33]: Stanley Burnton J in Matthews v Metal Improvements [2007] EWCA Civ 215, a case which requires further examination.
In Matthews, the adult Claimant suffered a severe psychiatric disorder as a result of a head injury at work, rendering him a protected party. He subsequently suffered an unrelated lymphoma. The initial prognosis was that the Claimant would (70% chance) live for ten years (which was longer than the likely duration of the impact of the psychiatric disorder.
In August 2005 the Defendant made a Part 36 offer, in ignorance of the fact that the Claimant had had a biopsy of a lymph node just 6 days earlier. Then, just within the currency of the Part 26 offer (the 20th day), the Claimant’s expert indicated that the prognosis may have become “much poorer” [32]. Notwithstanding that development the offer was formally rejected in September, but the formal biopsy result, in January 2006 indicated that the lymphoma had become aggressive – meaning that the offer had to be, and was, accepted.
In those circumstances, the District Judge ordered the Defendant to pay the Claimant’s costs before and after the expiry of the relevant period for acceptance. The Defendant appealed and Stanley Burnton J allowing the appeal, explored three key issues:
As far as (i) was concerned, there was no special rule or provision which applied to protected parties, and “in principle, a Defendant in proceedings brought on behalf of a [protected party] is entitled to the same costs protection from his Part 36 offer as a Defendant against whom a claim is brought by a competent Claimant” [28].
(It is clear from Hewitt, (below) that there may indeed be circumstances in which the fact a Claimant is a protected party may indeed be relevant (as one of “all the circumstances” – see comments of Pill LJ quoted below).
One such example might be where a Claimant (or Litigation friend) sought approval to accept an offer but the Court declined to approve (c.f. the rigorous decision in Abada v Gray & MIB (25.06.97, C/A).
As far as (ii) was concerned, it was held (and reiterated in Hewitt) that “reasonableness was relevant but not necessarily determinative” – noting that neither party had acted unreasonably in Matthews or Hewitt.
Turning to (iii), the judge referred to the approach to uncertainties facing the Claimant’s representative, stating “the result might have been different if the claimant’s solicitors had requested [on the facts of that case a ‘stay’] and the defendant’s solicitors had refused …until the results of the Claimant’s biopsy were known” [34].
However, in Hewitt, Black LJ made the point that Stanley Burnton J appears to have made a broader point – “it was not just the contingencies of litigation that had led the plaintiff to be in the position he was in but also the way in which his solicitors had responded to them” (Hewitt, [46]). That point seems, respectfully, to elide the “reasonableness” and “contingency” points.
Matthews provided a foundation for two more recent cases which encapsulate the arguments from either end of the spectrum.
SG v Hewitt [2012] EWCA Civ 1053 concerned a 6 year old child who suffered a severe TBI (and other injuries) in 2003. In 2009 the Defendant made a pre-action Part 36 offer of £500,000 which was ultimately accepted in 2011 (and approved). The parties could not, however, agree about the correct costs order from 21 days after the offer until acceptance. Popplewell J ruled in favour of the Defendant (relying on Matthews). In the Court of Appeal, Black LJ, giving the leading judgment, started by exploring the relevant facts.
In 2009 the Defendant’s neurologist (referring also to an unserved neuropsychological report) and the Claimant’s neurosurgeon both considered a final prognosis could not be achieved until the age of 16. In January 2011, a clinical psychologist indicated that it was, at that point, “possible to state with increased confidence that the current profile reflects a level of relative stability on which a final prognosis can be tentatively assessed”, and in July 2011, the Claimant’s paediatric neurosurgeon concurred – leading to acceptance.
On appeal, the Defendant argued that if permitted to accept the Part 36 offer, and not pay any of the Defendant’s costs, the Claimant would receive a substantial ‘windfall’ (of c.£130,000 over the offer). Black LJ rejected the relevance of that argument to the question of costs (and referred to the risk of perennial problems where parties disagreed about the relevance of a windfall in compensation [61]).
Black LJ also rejected the argument that the Claimant ought to have sought an extension of time to accept the offer, not least because it was impossible to determine what the Defendant’s response would have been (indeed to allow such extra time would have countermanded the effectiveness of the offer – my implication is that Black LJ felt that a request would probably have been refused).
In deciding whether to overturn Popplewell J’s discretionary decision, the Court also considered the extreme difficulty in advising the Claimant in 2009.
It also considered, with concern the fact that the Judge had stated, in terms, that approval “is not a relevant factor”, which meant that he did not do what was required, namely to “put into the balance” the fact of approval with the rest of the “specifics of the case, along with the rest of the relevant factors” [70].
Among those relevant factors was the inherent difficult in reaching a prognosis because of the very nature of the injury; the fact the injury was to a child; the fact the Claimant had not rejected the offer but merely wanted to obtain reports to ascertain the likely future (which could have been far worse).
It is important to note that whilst Black LJ and Arden LJ were keen to point out the narrow basis of their decision, Pill LJ went a great deal further and based his decision on the absence of prognosis in a protected party case: “Justice between the parties required, in this infant case, that the Claimant should have his costs until a clear prognosis could be offered to the court and a settlement recommended” [94].
We come, finally, to Briggs v CEF [2018] 1 Costs L.O.23 (2017) in which the Court of Appeal reversed a flawed decision allowing the Claimant his costs long after expiration of an offer (noting, as the Court did, the “heavy burden on an appellant in establishing that the judge’s order fell outside the proper ambit available to him”).
In Briggs the Claimant issued proceedings for a crush injury to his foot. The Defendant made a Part 36 offer of £30,000 in 2010, then a further offer of £50,000 in September 2012. At the end of May 2013 the Claimant sought a stay pending surgery, which was granted, and remained in place, until April 2014.
In June 2014, the Claimant increased the value of his claim to £248,000. In August 2014 the Defendant served surveillance evidence, and in October 2014 a new orthopaedic expert (the first having retired) provided a supportive report for the Claimant, and then embarked on the Joint Statement.
Regardless of the surveillance having been disclosed in August 2014, it is clear that the new orthopaedic expert had not seen it, and, having done so, he shifted his position significantly towards that of the Defendant’s expert (as well as agreeing some other issues, including the reasons why surgery had not been successful, including the Claimant having not ceased smoking).
The Claimant then accepted the 2012 Part 36 offer in June 2015, and the District Judge permitted him to recover the costs until just before the Joint statement (so, October 2014), with the usual order to follow only after that date.
He did so on the basis that it would be ‘unjust’ for the Claimant to be liable to pay the Defendant’s costs from 2012 onwards. He also commented that the injury had not healed and it was difficult for the Claimant’s solicitors to advise in such circumstances.
The Court of Appeal unanimously reversed the District Judge (‘whose decision was “wrong in principle” and “plainly wrong” [40]), and the sense is that they would have done so on far less material than was, in fact, presented to them, which were:
Gross LJ found the progress of the litigation very troubling [38]. He found it difficult to understand why the Claimant has pursued the claim after the Joint Statement for another 8 months, and (after initial misgivings) he accepted that the ‘stay’ arguments ought not to have disapplied the usual rule (even during its currency). He concluded:
“Struggle though I have, I have been unable to detect anything which would render it unjust for the usual order to operate.” [38].
Groos LJ also passed comment on Hewitt, which, rather echoing Pill LJ’s judgment, he described as “a very extreme case concerning the brain damage to a small child” – “a very clear case falling on the other side of the factual line” [36].
Applying the law – and advising
What then of the Claimant in my case (the estate of my former client)?
My sense was that using the precise rubric of CPR36.17(5) would be crucial to point out why there would (or could) be a “relevantly unjust” outcome if the usual order prevailed.
Whilst the Defendant was fully entitled to protect itself, and had clearly made an offer which would have comprehended perhaps 2-3 years of loss, there had been no indication that the Claimant might die (or suffer some unrelated medical issue which would have compromised his work as his cardiac recovery had been excellent).
The Claimant had disclosed his medical records, and reports, and had concealed nothing about his condition.
The Claimant had submitted to early examination by the Defendant’s experts (and indeed one had written a letter advising against amputation).
The Claimant’s solicitors were open and informed the Defendant immediately after the Claimant’s death, and set out its position, clearly and fully, on the relevant issues concerning Part 36, and caselaw.
In the event, the insurers acted with real humanity and permitted the estate to accept the previous offer and pay the Claimant’s costs throughout.
That might have reflected their feeling that they might have lost a costly argument over CPR36.13(4), or reflected the risk of doing so, or it may (as seemed the case from its conduct) have merely been motivated not to take advantage of an intensely difficult situation (with none of the shenanigans in Mr Briggs’ case).
The issue was finely balanced. Briggs could have been distinguished in a large number of respects, but similarly, the Defendant had made a CPR36 offer in the case of an injured man with underlying cardiac symptoms and diabetes, and the outcome would have been less advantageous.
Of course, there were intermediate positions for both parties, selecting different dates ‘up to which’, and ‘from which’ the usual order might run.
Ultimately, that is probably the best way to try to compromise these problems, because unless there is strong evidence of fundamental dishonesty (in which case the Defendant is unlikely to give ground) there will always be some latitude for argument.
However, in order to give oneself the best opportunity of overcoming the “formidable hurdle” of the usual costs order, a Claimant must at the very least be proactive, straightforward and if at all possible, collaborative, in its dealings with the Defendant/insurer to give itself the best opportunity to resolve these issues without running the difficult gauntlet of CPR36.13(4)(b).
Call: 1991
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