In MRA -V- The Education Fellowship Limited [2022] EWHC 1069 (QB, the Court was asked to consider as to whether a Defendant could successfully claim their Costs from the Claimant following the expiry of a well-made, but early Part 36 offer.

 

The Rules

 

CPR Rule 36.13 (6) states:

In considering whether it would be unjust to make the orders specified in para (5), the Court must take into account all the circumstances of the case including the matters listed in CPR rule 36.17(5).”

 

CPR Rule 36.13 (4) states:

 

Where … (b) a Part 36 offer which relates to the whole of the claim is accepted after expiry of the relevant period (i.e 21 days), the liability for costs must be determined by the Court unless the parties have agreed the costs.”

 

CPR Rule 36.17(5) states:

 

In considering whether it would be unjust to make the orders specified in paragraphs (3) and (4), the Court must take into account all the circumstances of the case including-

 

(a) the terms of any Part 36 offer;

(b) the stage in the proceedings when the Part 36 offer was made, incusing in particular how long before the trial started the offer was made;

(c) the information available to the parties at the time when the Part 36 offer was made;

(d) the conduct of the parties with regard to giving of or refusal to give information for the purposes of enabling the offer to be made or evaluated; and

(e) whether the offer was a genuine attempt to settle proceedings.

 

The rule is therefore clear and the costs consequences favourable to the Defendant must apply unless it is unjust to so with the burden falling upon the receiving party.

 

The Case

 

 

The Claimant claimed damages for historic child abuse by a teacher. Breach of Duty was admitted prior to the issuing of proceedings served on 07.09.17. The Defendant made a Part 36 offer of £80,000.00 on 19.01.18 which was ultimately accepted out of time on 02.04.20.

 

The Defendant sought their costs from the expiry of their Part 36 offer until its acceptance. The Claimant sought to argue that it would be unjust for the same to be awarded to the Defendant with the Defendant arguing that the “normal rules” should apply as set out in CPR 36.13 (4).

 

The Parties’ Position

 

Quite simply, it was the Claimant Solicitors case that the Defendant’s Part 36 offer made in January 2018 could not have been accepted until a final prognosis opinion had been provided by his psychiatric / psychological experts as to whether the Claimant was suffering from PTSD and it was only in March / April 2020 that the same was clear and therefore it was unjust to award the Defendant their costs until a final prognosis was known.

 

The Claimant also argued that it was unjust to allow the Defendant Solicitor to deduct their costs from the Claimant’s damages (circa £45,000.00) as to do so would detract from the overall amount of damages that the Claimant would receive.

 

The Defendant agued that at the time they made their Part 36 offer in January 2018 the Claimant’s psychiatric / psychological position, whilst not fully know, was clearly sufficient for them to formulate a protective Part 36 offer and that the Claimant was more than capable of assessing and advising their client on the same and that they should not now be penalised for “pitching” a sufficiently well-judged Part 36 offer.

 

The view of the Court

 

It was firstly the Courts view that it was for the Claimant to show that for the normal consequences of accepting a Part 36 offer out of time was unjust as per CPR Part 36.13 (6) with it being specifically recorded that Part 36 exists to ensure that a party can ordinarily obtain some degree of costs protection by making a well-judged (and ideally early) offer to settle.

 

In dealing with the position as regards a defined prognosis for the Claimant that the Claimant says that they could not sufficiently advise their client on in January 2018 and their linked argument that in any even the Court would not have approved any “agreed order” at that time unless a prognosis was clear the Court did not find in their favour.

 

The Court commented that:

 

“If one were to decide that uncertainty of prognosis of the sort here was sufficient to make the (important salutary) application of the rules quite deliberately created to shift risk an “injustice”, one would undermine a key aspect of balance in the QOCS regime. Insurers would face costs even though they wisely make high and well-judged early offers. Settlements would be delayed so as to enable Claimant’s to reach a high degree of clarity as to value and the table in my judgment would become tilted by removal of one supporting leg from under the table, in the form of the protective Part 36 costs regime.”.

 

As regards as to whether the Court would of or would not have approved any “agreed” order before a prognosis was clear, the Court commented that Masters were experienced in knowing the practical realities of litigation and injury quantification and that in this instance if an advice had been presented which recorded that the offer as made was at the “high end” and that the litigation risks and associated risks of the offer made it prudent for the case to be settled, that the Court was likely to do on that basis that; “were one to expect absolutely settled prognosis in such cases, the Court process itself would be a spanner in the works in terms of settlement on a pragmatic basis”.

 

Dealing with the injustice that the Claimant would face if the Defendant were entitled to deduct their costs from any damages, Master Mc Cloud recorded that it was not permissible to take into account the degree of reduction (or the fact or reduction) of damages which arise from the operation of the rule in the “default” form and that Detailed Assessments exists to ensure that excessive sums are not deducted, and that this is the route to avoid injustice in that form.

 

It was therefore found that:

 

it would not be unjust to allow the rule to apply, and the Defendant (subject to assessment) may make the relevant deductions from damages under Part.”

 

Lessons to be learnt

 

Whilst the judgement in this case is very much case specific, the Court seems to be ruling that if a “high” Part 36 offer is made that would put a party at risk at trial, it is incumbent upon, and indeed expected, for Solicitors’ to consider the same regardless as to the stage of the case when the Part 36 offer was made and as to what evidence was to hand at that time.

 

A good Part 36 offer and the effect of the same is, at the end of the day, exactly what the rules were designed for and the Courts continue to apply the applicable law relating to the same.

 

 

 

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