Persuading the Court to depart from the default order after late acceptance of a Part 36 offer comes with a high bar, but parties can make the jump easier
We in the civil legal field should all know by now the pitfalls and pearls of Part 36. It must one of the most deliberated and argued sections of the Civil Procedure Rules, and one that can cost any party in litigation dearly if not adhered to closely or understood properly.
Per CPR 36.1(1) and as repeated seemingly ad nauseum by the Courts, not least by Moore-Bick LJ in Gibbon v Manchester City Council [2010] EWCA Civ 726, [2010] 1 WLR 2081, as quoted by Newey LJ in King v City of London Corporation [2019] EWCA Civ 2266, Part 36 is a “self-contained procedural code” which is “carefully structured and highly prescriptive”. Those precisely crafted rules are there for a reason and, as the recent case of RXL (a protected party by her litigation friend) v Oxford University Hospitals NHS Foundation Trust [2021] EWHC 1349 (QB) shows, persuading the Court to depart from the default under CPR 36 is a tall order.
THE BACKGROUND
RXL was a case concerning a negligent decision to treat arterio-venous malformation (“AVM”) surgically which led to a catastrophic haemorrhage in the right temporal lobe of the brain causing serious brain damage in a 38-year-old mother. Liability had been compromised on a 50/50 basis, an agreement which had already received the approval of the Court in March 2017.
The issues in relation to quantum came down to the Claimant’s anticipated life expectancy, and in particular the interplay of such expectancy with a reported increased risk of dementia and the consequential knock-on effect on damages. In December 2020, the Claimant sought clarification from the Defendant as to comments within the Defendant’s neurology expert report in relation to the opinion on the risk of dementia and life expectancy being reduced to 70. The Defendant replied that it was not expected that their expert would comment further, and in response the Claimant cancelled a planned round table settlement meeting.
Days later, the Defendant made a Part 36 offer of a £3 million lump sum payment in full and final settlement. The Claimant reminded the Defendant that any settlement would require Court approval and stated, “We do not have the information required to evaluate the offer in accordance with CPR part 36.17 (5)”. The Claimant suggested that the offer remain open until 21 days after receiving the clarification and information requested from the Defendant in relation to life expectancy and dementia. The Defendant replied to confirm it was their belief that there was sufficient information and evidence for the offer to be evaluated.
The Claimant went on to serve amended Particulars of Claim pleading a claim for provisional damages in relation to dementia. The Defendant served and amended Defence, and the positions of the parties on the sufficiency of the information available to properly consider the offer became entrenched.
The joint neurology expert evidence was received on 24 February 2021 and on 11 March 2021 the Claimant made an attempt to settle the case at £3.4 million. The Claimant’s offer was rejected on the same day it was made and the Claimant ultimately accepted the Defendant’s earlier Part 36 offer on 19 March 2021, with Trial listed to commence on 19 April 2021.
THE LAW
As the Defendant’s offer was accepted after the expiry of the relevant period r.36.13 (4) applied. The ‘normal order’ under that rule is that where the parties cannot agree the liability for costs the Court must, unless it considers it unjust, award the offeree (in this case the Claimant) costs up the date on which the relevant period expired, whilst ordering that party to pay the offeror’s (in this case the Defendant’s) costs thereafter until the date of acceptance (r. 36.13(5)).
The factors which the Court must take into account when considering if the ‘normal order’ would be unjust, per r.36.13(6) are set out at r.36.17(5) and include (a) the terms of any Part 36 offer; (b) the stage in the proceedings when any Part 36 offer was made, including in particular the amount of time before the start of the trial; (c) the information available to the parties when the offer was made; (d) conduct, specifically in relation to the giving or refusing to give information so that the offer can be properly evaluated; and (e) whether or not the offer was a genuine attempt to settle.
THE COSTS ARGUMENTS
The Claimant maintained that at the time the offer was made, and the relevant period expired, there was insufficient evidence and/or clarification of the issues to properly evaluate the offer and to allow the Claimant’s Solicitors to reasonably advise the Claimant, or indeed for the Court to approve the settlement. It was the Claimant’s case that it was not until receipt of the joint neurology report on 24 February 2021 that there was sufficient information, and that this deficiency of available information, as well as the Defendant’s conduct in not obtaining the clarification requested by the Claimant from their neurology expert, should both be taken into account by the Court in deciding that it would be unjust for the “normal order” to apply in respect of costs.
Conversely, the Defendant continued to assert that there was indeed sufficient evidence available prior to the expiry of the relevant period for the offer to be considered. The Defendant pointed to the Claimant’s continued requests for further information after receipt of the joint neurology report, as well as the Claimant’s attempt to achieve a higher settlement just days before the Defendant’s Part 36 offer was eventually accepted, as evidence which undercut the Claimant’s argument that it was the contents of the joint report which allowed proper consideration and acceptance of the offer. The Defendant also stressed the high bar the Claimant must meet to overturn the default position, as well as the steps the Claimant could have taken to protect their position but did not.
THE DECISION
The Court accepted that it would have been better if the report of the Defendant’s neurology expert had referred to the contents of the Claimant’s, and that it was only after the joint meeting of the neurology experts that the Defendant’s expert supported his opinion with literature. However, the Court also accepted that there was sufficient evidence available for the Claimant’s Solicitors to have evaluated the offer and given appropriate advice to the Claimant, and that the Defendant’s expert evidence was not flawed by lack of reasoning, with the later addition of literature serving only to bolster the Defendant’s case.
Moreover, it was Mr David Pittaway QC’s (sitting as a High Court Judge) opinion that even if there was not sufficient evidence to properly consider the offer, there were procedural remedies open to the Claimant which had been entirely forgone. There had been no formal request for an extension of the relevant period, and the Claimant’s Solicitors could have applied to the Court for an order requiring disclosure of the information they believed they needed, or indeed for a Court ordered extension to the relevant period. No such requests or applications were made and therefore it was not accepted that it would be unjust to make the ‘normal order’ in favour of the Defendant in respect of costs following the expiry of the relevant period.
In his decision, Mr David Pittaway QC referred to a case relied upon by the Claimant, the judgement of Black LJ in SG v Hewitt [2012] EWCA Civ 1053 that persuading the Court to depart from the ‘normal order’ “would be the exception rather than the rule”. He also recalled a case relied upon by the Defendant, Smith v Trafford Housing Trust [2012] EWHC 332 (Ch) in which Briggs J (as was) said, “the burden on a Claimant who has failed to beat the Defendant’s Part 36 offer to show injustice is a formidable obstacle to the obtaining of a different costs order”.
CONCLUSION
In short it is up to the party at risk, in this case the Claimant, to establish that the ‘normal order’ would be unjust, and in deciding if such injustice is present the Court must maintain a high bar to such a departure from the ‘normal order’ to avoid undermining the very purpose of Part 36 to promote negotiation and settlement and avoid wasting costs and Court time.
In addition, RXL shows us the importance of parties protecting their position. The lesson here is not only that there is a high bar for persuading the Court to depart from the ‘normal order’, but also that when a party believes that there is insufficient information to consider a Part 36 offer, to make that position clear and request an extension of the relevant period. If necessary, back that position of perceived lack of knowledge of relevant facts up with an application to the Court.
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