Risky business: Part 36 offers and their consequences
Mr Justice Foskett has recently delivered judgments on the costs consequences of Part 36 in two claims.
In JMX (a child by his mother & litigation friend, FMX) v Norfolk & Norwich Hospitals NHS Foundation Trust [2018] EWHC, he considered whether an offer to accept 90% of the sum claimed constituted a "genuine attempt to settle" the dispute for Part 36 purposes. In Gemma Ballard v Sussex Partnership NHS Foundation Trust (2018) EWCH 320, he was asked to assess the costs consequences of a withdrawn Part 36 offer.
JMX (a child by his mother & litigation friend, FMX) v Norfolk & Norwich Hospitals NHS Foundation Trust [2018] EWHC
The Claimant made a Part 36 of 90% of his claim shortly before trial. The offer was not accepted. At trial, the Court found in favour of the Claimant and was asked to consider whether the costs consequences of the Claimant's Part 36 should bite.
The Defendant maintained that the offer was not a genuine attempt to settle the claim because it did not reflect a realistic assessment of the risks of litigation – a factor considered by the Court, under CPR 37.17(5), when deciding whether it would be unjust to enforce the consequences of a Part 36. The Defendant argued also that the letter of offer did not explain why only a 10% discount was being offered. Mr Justice Foskett did not accept the Defendant's arguments.
Mr Justice Foskett considered an offer to accept 90% was reflective of circumstances where the Claimant's legal representative's assessed the Claimant's case to be very strong but were prepared to offer a small discount to "[…] secure absolute certainty of obtaining substantial compensation" (paragraph 15). The Judge acknowledged that this was a high-value dispute such that the offer of a 10% discount was an opportunity for the Defendant to achieve more than a "token" saving on the claim. Moreover, the costs of five-day trial were significant and settlement even a day before the trial started would have represented a further substantial savings for the Defendant. The Court found that the Claimant's offer was a genuine attempt to settle the claim and applied the normal Part 36 costs consequences. However, the costs outcome for a lower value claim, with less significant costs, might have been different.
Gemma Ballard v Sussex Partnership NHS Foundation Trust (2018) EWCH 320
Over the course of this personal injury claim, various settlement offers had been made. The Defendant issued three significant letters of offer:
- On 25 January 2016, the Defendant made a Part 36 offer of £50,000 ("the First Offer")
- On 8 February 2017, the Defendant served a letter, stating that the First Offer was withdrawn
- On 8 February 2017, the Defendant made a second Part 36 offer of £30,000 ("the Second Offer") and confirmed that all previous offers had been withdrawn.
At the trial, on 2 and 3 March 2017, the Claimant was awarded damages of approximately £23,300. There was no dispute that the Claimant should be liable for the Defendant’s costs following the expiry of the Second Offer (essentially, the costs of the trial). However, at first instance, the Court ordered the Claimant pay the Defendant’s costs from the expiry of the First Offer until the commencement of the trial. On appeal, the Court was asked to reconsider which party was liable for costs for the period between the expiry of the First Offer, which had been withdrawn, and the expiry of the Second Offer.
The Claimant submitted that the Second Offer made it clear that, if the judgment obtained was not more advantageous than the Second Offer, the Defendant would seek an order that the Claimant should pay the Defendant’s costs from 1 March 2017. The Defendant argued that, although the First Offer had been withdrawn, the Court had discretion to have regard for the First Offer and make a costs order, which reflected that, had the First Offer been accepted, costs would had been saved by both parties.
Mr Justice Foskett did not accept the Defendant's arguments. The appeal was allowed and the Defendant was ordered to pay the Claimant's costs up to and including 1 March 2017, whilst the Defendant was entitled to its costs thereafter. In his decision, Mr Justice Foskett stated that the Defendant could not escape the precise terms of the Second Offer, which stated that First Offer had been withdrawn. Had the Defendant amended the First Offer, rather than withdrawing it, it would have benefitted from the costs consequences attached to that offer.
These cases serve as an important reminder of the importance of the timing, wording and level of any Part 36 offers made or received and the costs consequences of these offers.