Tag: Part 36

Costs Consequences of the Claimant’s Late Acceptance of the Defendant’s Part 36 offer

angelanakoLeave a comment

A recent Court of Appeal decision provided important clarification on how legal costs were calculated when a Part 36 settlement offer was accepted late.

Background

The Claimant in Attersley v UK Insurance Ltd [2026] EWCA Civ 217 was injured in a road traffic accident in March 2018. Whilst the claim began under the Road Traffic Accident (RTA) Protocol, it exited the protocol and in February 2021, the Claimant issued Part 7 proceedings, valuing the claim up to £150,000 supported by several expert reports.

The Defendant admitted liability in March 2021 and made a Part 36 offer in the sum of £45,000. The Claimant did not accept this offer within the 21-day relevant period set by the rules. Consequently, the claim was allocated to the multi-track in January 2022, which typically allows lawyers to recover their costs based on what is considered reasonable rather than fixed amounts. The Part 36 offer was accepted in July 2022.

As the Claimant accepted the Part 36 offer outside the 21-day relevant period, and once the claim had been assigned to the multi-track, there was a dispute as to whether the costs could be recovered on a standard basis or were limited to fixed recoverable costs.

Outcome

The Court of Appeal considered the version of the civil procedure rules which applied at the time and held that the key date is when the 21-day period for accepting the Part 36 offer expires, rather than when the offer is eventually accepted, meaning that Claimants who accept an offer after the relevant period will generally be entitled to the amount of costs they would have received had they accepted the offer on the last day of the relevant period. As during that 21-day period the claim remained within the fixed costs regime, the Claimant was entitled to fixed costs which applied at that stage of the proceedings.

The court highlighted that the rules governing settlement offers are designed to encourage early settlement and clarity surrounding financial risk, therefore Defendants should be able to rely on the costs environment that existed when the offer’s relevant period expired. Allowing later events, such as the case being allocated to the multi-track, to change the cost consequences would create unnecessary uncertainty. The court outlined that:

“it is hard to see why a Claimant who [accepted the offer outside the relevant period]…should be in a better position than one who accepts the offer within time.”

Conclusion

The key point of this judgment is that if an offer is made and expires while the case is still within the fixed‑costs regime, the fixed‑costs rules apply to the consequences of accepting that offer, even if the case later evolves or moves outside the fixed‑costs regime.

Although this decision was made in the context of the pre-October 2023 fixed costs rules, it is expected that this is the same approach the Courts will apply under the new fixed‑costs rules introduced in October 2023. That is because those rules are also built around clear stages and predictable cost consequences.

Angela Nako is a Paralegal in the Costs and Litigation Funding Department at Clarion Solicitors. You can contact the team at civilandcommercialcosts@clarionsolicitors.com

Part 36 Rewards

Dominic ReganLeave a comment

HOCHTIEF V ATKINS ( 2019) EWHC 3028 ( TCC) saw a claimant who bettered their Part 36 quantum offer by just  £4,500 secure  an uplift of £65,000 and interest at 6% above base plus indemnity costs.

JLE V WARRINGTON NHS TRUST (2019) 1WLR 6497  –  On 21 June 2018 the claimant made a Part 36 offer in the sum of £425,000, inclusive of interest, in respect of the Bill of Costs. That offer accordingly expired on Friday 13 July 2018, i.e. the last working day before the hearing commenced.  Master McCloud assessed the bill inclusive of interest in the sum of £431,813.05, i.e. £421,089.16 plus £10,723.89 interest. The claimant therefore beat her Part 36 Offer by just under £7,000.

Had the Court  granted the default Jackson 10% uplift the claimant would receive an additional £43,181-30.

The Master considered this to be unjust given that the offer was made late on and it was only bettered by a slender margin .The Master was plainly troubled by the disparity between the amount by which the offer was beaten (£7,000) and the consequential uplift ( 6 times as much ).

She thus  declined to award the uplift. The claimant successfully appealed to Stewart J who made the award. The defendant ought to have paid up and settled. It only had itself to blame . The offer was plainly good.

In TELEFONICA  V OFFICE FOR COMMUNICATIONS (2020) EWCA Civ 1374 the claimant had bettered its offer by £4.5m or 9% yet received no more interest than would have been payable had it made no offer at all. The Appeal Court endorsed the view of Stewart J in JLE ( above ) that it would be highly unusual for the Court to grant some benefits but to withhold others .This was particularly so on the facts of this £54m case. Indemnity costs and an additional £75,000 “was an almost trivial uplift and any significant enhancement in overall relief would only have been achieved by the award of additional interest on the principal sum “ ( paragraph 42).The Judge was in error by regarding the award of 2 trivial enhancements as justification for not awarding the major enhancement, uplifted interest. The Appeal Court corrected the omission and so Telefonica gained  a useful extra £900,000.

Some Judges at first instance had flirted with the concept of withholding some of the rewards, adopting a pick and mix approach. The Appeal Court made it abundantly clear that the victor  ought to  receive each of the four enhancements pursuant to CPR 36.17(1)(b).There is nothing in the Rule which undermines or lessens entitlement to the others. The rewards are a composite package. All of them  ought to be bestowed .

On a practical note I surmise that Sir Rupert Jackson would agree. An approach which encouraged arguments about dividing up the spoils would be a blatant incentive for the paying party to raise challenges in the hope of shaving something off. Finality and certainty are secured by this approach.

HOCHTIEF was a good offer on quantum. JLE was a good one on costs. These examples demonstrate why it is crucial for a receiving party to make good, early offers to settle. We do !

You can find out more about our services here or you can contact the Costs and Litigation Funding team at CivilCosts@clarionsolicitors.com.

Part 36 costs consequences for a late accepting Claimant – overturning the ‘normal order’ is easier said than done

clarioncostsLeave a comment

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.

You can find out more about our services here or you can contact the Costs and Litigation Funding team at CivilCosts@clarionsolicitors.com.

Part 36 offers and split trials

Robert PattersonLeave a comment

Where a split trial has been ordered and a party has made a Part 36 offer which relates to issues that have not yet been decided, the usual order will be that costs are reserved until after quantum has been determined. Does, however, unreasonable and dishonest conduct on behalf of the offer allow the court to make a costs award?

In Original Beauty Technology Company Ltd & Ors v G4k Fashion Ltd & Ors [2021] EWHC 954 (Ch) (28 April 2021), the Claimant submitted that under CPR Rule 36.17(3), if they did not do better than the Defendant’s Part 36 offer, then the Court would order them to the pay the Defendants’ costs, unless it was unjust to do so. It was their case that the qualification “unjust to do so” gave the court a very wide discretion and in circumstances where the Defendants’ conduct was dishonest and unreasonable, that discretion was wide enough to allow the court to make an award of costs before quantum was determined.

On that issue, David Stone (sitting as a Deputy Judge of the High Court) found that the language used in CPR Rule 36.17 prevented the court making a costs order. In particular, the Judge found that the rule required judgment to be entered, which it had not, and for that judgment to be no better than the Part 36 offer, before the qualification in CPR Rule 36.17(3) could take effect. Furthermore, it was held that the court “must” take into account the factors listed in CPR 36.17(5) before exercising its discretion. Crucially, although the court was aware of the existence of the Part 36 offer, it could not be informed of its terms; the focus of the injustice analysis in the rules was on the circumstances of the making of the offer and the provision of relevant information, not the general conduct of the parties. Of the five factors listed in CPR Rule 36.17(5), the only factor before the court was whether the offer was a genuine attempt to settle the proceedings, and that was not disputed by the Claimant.

The Claimant also relied on the comments of Jackson J in Multiplex Constructions (UK) Limited v Cleveland Bridge UK Limited and Anor [2007] EWHC 659 TCC at paragraph 26, where he found that in an exceptional case a Judge may make an immediate order for costs despite a Part 36 offer if the circumstances warranted such a course. The Judge rejected those submissions because CPR Rule 36.17 was not in force in its current form at the time that judgment was given in that case and that no general discretion could be transferred across.

In summary, it was found that whilst reserving costs following a split trial was not the appropriate course, it was the only course of action open to the Judge.

This article was featured in our March 2021 newsletter, see the full newsletter here.

You can find out more about our services here or you can contact the Costs and Litigation Funding team at CivilCosts@clarionsolicitors.com.

Part 36 – Important changes to Interest

Joanne ChaseLeave a comment

From 1 April 2021 a key change to Part 36 means that additional interest will not be payable where the Part 36 offer is accepted after the relevant period unless specified within the offer.

In accordance with CPR 36.5(4) a Part 36 offer is treated as inclusive of any interest to the expiry of the relevant period. From 1 April 2021 a new rule 36.5(5) provides as follows:-

A Part 36 offer to accept a sum of money may make provision for accrual of interest on such sum after the date specified in paragraph (4). If such an offer does not make any such provision, it shall be treated as inclusive of all interest up to the date of acceptance if it is later accepted.

This rule change is likely to affect only claimants’ offers. However, defendants should be aware of the rule and check the terms of any offers received carefully.

At this stage the meaning of the rule is somewhat ambiguous. It is not clear whether it means that an offer may provide that if accepted after the expiry of the relevant period there will be a liability to pay further interest, or whether it simply means that the offer may exclude further interest from the terms of the Part 36 offer (i.e. the offer will become an offer for part of the proceedings after it has expired). These questions, and the effect of an offer which excludes interest, are only likely to be clarified when they have been put before the Courts. As the rule applies only to offers made on and after 1 April 2021, this is unlikely to be for some time.

You can find out more about our services here or you can contact the Costs and Litigation Funding team at CivilCosts@clarionsolicitors.com

High Court ruling addresses Part 36 anomaly

Anna LockyerLeave a comment

In the privacy case of Pallett v MGN Ltd [2021], the Defendant sought to exploit an anomaly in the Part 36 rules by accepting an offer outside the relevant period and inviting the court to consider the liability for costs, on the assumption this would result in them paying less in costs to the Claimant.

CPR 36.13 (4) (b) states that where a Part 36 offer, which relates to the whole of the claim, is accepted after the expiry of the relevant period the liability for costs must be determined by the court.

The Defendant accepted the offer on day 22, post-expiry of the relevant period. If the Defendant had accepted the offer made by the Claimant within 21 days, they would have been bound to pay the Claimant’s costs. The Defendant’s tactic was to avoid these costs consequences and instead have costs put “at large” for determination by the court.

The High Court ruled that although the Defendant was entitled to take this approach, normal consequences should follow and the Claimant was awarded all the costs of the proceedings in the same way they would have been if the offer was accepted within 21 days.

The anomaly in the rules relating to Part 36 may have previously deterred Claimants from advancing Part 36 offers but this case demonstrates that the court can impose the same costs outcome, whether a Part 36 offer is accepted in or out of the 21 days, at their discretion.

This article was featured in our January 2021 newsletter, see the full newsletter here.

Anna Lockyer is an Associate in our Costs and Litigation Funding team. If you have any questions please contact her on 0113 2885619 or at anna.lockyer@clarionsolicitors.com.

Part 36 – is it unjust to award CPR 36 consequences when the defendant does not have the money to pay? (Rawbank -v- Travelex)

Joanne Chase1 Comment

This article supplements and updates one titled Consequences of Beating a Part 36 Offer: Injustice published on 12 June 2019.

The case of Rawbank SA -v- Travelex Banknotes Limited [2020] EWHC 1619 (Ch) related to a contract that the Defendant would provide banknotes totalling in excess of $40 million to the Claimant. Due to the Coronavirus pandemic the Defendant was suffering from financial difficulties such that it could not fulfil its contract with the Claimant, and required restructuring. However, the Defendant had no defence to the claim, it was simply unable to fulfil its contractual obligations. Judgment was entered against the Defendant which was more advantageous to the Claimant than the terms of a Part 36 offer the Claimant had made.

Giving judgment in relation to the consequences of CPR 36, the Court allowed some of the consequences under CPR 36.17(4), but declined to allow an “additional amount” as provided for by CPR 36.17(4)(d). This decision reinforces a number of previous judgments in relation to the application of Part 36.17, specifically:-

  1. That the Court may adopt a cherry-picking approach and allow some of the consequences of CPR 36.17(4) but not others; and
  2. The court does not have discretion to award an “additional amount” at a rate other than 10% – it is all or nothing,

What is interesting about this case, however, is why the judge declined to make the award of the additional amount.

The Part 36 offer was made on terms that “the Defendant paid £48,290,000 within 14 days of accepting the offer…” At paragraphs 35 – 37 of the judgment, Zacaroli J held that “…acceptance of the Part 36 offer could only be made by actually paying the sum referred to in it…” and that because the Defendant was insolvent, “…it would be unjust to make at least some of the orders identified in Rule 36.17(4)”. The Court effectively found that because the Defendant did not have the money to pay the settlement sum, it could not have accepted the offer, and furthermore the fact of the Defendant’s impecuniosity meant that it would unjust to award the additional amount set out in CPR 36.17(4)(d).

In summary: a party’s financial position is a relevant consideration when considering the injustice test.

This decision appears to contradict, at least in part, the earlier authority of  Cashman -v- Mid Essex Hospital Services NHS Trust [2015] EWHC 1312 (QB), in which it was held that the court cannot take into account the amount of the additional amount when considering the test on injustice. It is a logical extension of that principle that the fact of a defendant’s ability or inability to pay is not a relevant consideration for the court to consider.

Furthermore, the judge appears to have erred in finding that the Part 36 offer ” could only be [accepted] by paying the sums referred to in it…” as CPR 36.14(7) provides that if the settlement sum “is not paid within 14 days of acceptance of the offer… the claimant may enter judgment for the unpaid sum”. It is plainly wrong to say that a party which accepts a Part 36 offer will then be bound to prioritise payment of the settlement sum above secured creditors (as was suggested at paragraph 35 of the judgment); the defendant will simply become liable to pay the amount of the settlement sum. If the defendant does not do so, then the claimant will be entitled to enter judgment. That judgment will be an unsecured debt and will be dealt with in an insolvency in accordance with the usual order of priority.

This decision appears to be a departure from previous authority and raises some significant uncertainty surrounding the meaning of “injustice” in the context of CPR 36.17, which many lawyers had hoped had been settled by a number of judgments in 2018 and 2019. It remains to be seen whether Rawbank will set a new standard by which the test of injustice is measured, or whether future courts will distinguish the case on the basis of its somewhat unique factual background. In either case, it can only be hoped that a case will find its way to a higher court to give some clarity on the question of what precisely “injustice” is.

Should you have any questions, you can contact the team at CivilCosts@clarionsolicitors.com

Part 36 – offer to pay by instalments

Joanne Chase1 Comment

A party to proceedings (usually the defendant / paying party) may sometimes want to make an offer to pay the settlement sum by instalments. Whilst this is possible to do by Part 36, it does have an effect on the effect of the offer.

CPR 36.6(2) provides that a defendant’s Part 36 offer which offers to pay “all or part of the sum at a date later than 14 days following acceptance of the offer will not be treated as a Part 36 offer unless the offeree accepts”. The effect of this rule is that where a defendant makes an offer to pay by instalments:-

  1. If it is accepted then it will be treated in the usual way as a Part 36 offer. Therefore, Part 36.13 will apply (the defendant will pay the claimant’s costs up to acceptance, payment must be within 14 days etc);
  2. If it is not accepted and the defendant goes on to beat it, then CPR 36.17 will not apply.

It is important to note that this rule only applies to defendants’ part 36 offers – a claimant may make a Part 36 offer to accept payments by instalment and it will be treated as a Part 36 offer in the usual way.

The rules do appear to create a lacuna where a claimant makes a Part 36 offer including payments by instalments but where the offer includes a counterclaim or adverse claim. I am not aware of any existing authority on this point; it is likely that this is because this only affects a very small number of claims. In my view, it is likely that the court would construe such an offer as being a claimant’s offer for the purpose of CPR 36.6(2) unless it related solely to a counterclaim, in which case I think that it would be treated as being a defendant’s offer in accordance with CPR 20.2(2)(b).

Should you have any questions, you can contact the team at CivilCosts@clarionsolicitors.com