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Part 36 offers: whether genuine attempt to settle

MVN (R on the application of) v London Borough of Greenwich
High Court (Admin)
10 July 2015

When Part 36 was reformed in April, one of the amendments was aimed at addressing “cynical Part 36 offers”. The court always had to consider a number of factors when deciding whether it is unjust to award the additional benefits under Part 36 but a new factor was introduced in CPR 36.17(5)(e): whether the offer was a genuine attempt to settle the claim. Although this issue has arisen in some pre-April decisions, we now have what we believe to be the first the High Court decision to consider the new provision. Andrew Cousins reviews MVN v London Borough of Greenwich.

Background

The substantive issue in this case had been a dispute over the claimant’s age and whether or not the claimant was a child. After exchanging witness statements, the claimant made an offer which purported to be a Part 36 offer on terms that the defendant would accept the claimant’s case about his age and agree to pay costs.

At trial Picken J accepted the claimant’s evidence concerning his age. Following the judgment there was no issue that the defendant must pay the claimant’s costs. However, there was an issue as to whether the claimant should recover indemnity costs and interest on costs as set out in CPR 36.17(4).

The claimant argued that he had obtained a judgment at least as advantageous to him as the terms of the Part 36 offer. The defendant argued that the offer was not a genuine offer and that it would be unjust to order the recovery of enhanced costs and interest. 

Findings

Picken J, dismissing the claimant’s arguments, held:

There was no “give and take” in the claimant’s Part 36 offer and acceptance of it would have constituted complete capitulation by the defendant. The claimant was offering to settle for nothing short of what was being claimed in the proceedings. The offer was merely a “tactical ploy” and was not a genuine offer of settlement.

It would be unjust to give the claimant enhanced costs as sought as the offer was all take and no give. When considering the factors listed in CPR 36.17(5), and whether it is unjust to make an enhanced costs order, the court has to look at the position not only of the claimant but the more general position of the case and the offer as a whole and what the claimant was actually offering to the defendant.

Whilst the genuineness of the offer is only one consideration set out in the list of factors for the court to consider, it is incorrect to take the approach that the only question the court should ask is whether the judgment is “at least as advantageous” as the Part 36 offer. The court has to examine the terms of the offer and as the claimant was not offering to “give” anything to the defendant and was solely looking to “take” from the defendant, it would be unjust to award the claimant enhanced interest and costs.

The claimant relying upon the case of East West Corporation v DKBS (2002) also sought to argue that, if accepted, the offer would have entailed a saving of costs on both sides so that the claimant should be regarded as offering to save costs for the defendant such that this represented the necessary ‘give’.

The judge rejected this point was rejected stating that Part 36 is in itself concerned with costs implications and that costs should not be taken into account when determining whether the offer was genuine or not.  

Comment

The case is the first recorded judgment which addresses the issue of what is a “genuine settlement offer” since the new Part 36 rules were introduced in April 2015.

When determining the costs consequences following judgment in a situation where either the claimant has failed to obtain a judgment more advantageous than the defendant’s Part 36 offer; or the judgment against the defendant is at least as advantageous to the claimant as the proposals contained in the Part 36 offer; then pursuant to CPR 36.17(3) and (4), the court must make an order on the terms set out in those sections of the CPR, unless it considers it unjust to do so.

When considering whether it is unjust to make such an order, the court has a checklist of factors to take into consideration. These are set out in CPR 36.17(5):

a) the terms of any Part 36 offer;

b) the stage in the proceedings when any Part 36 offer was made, including 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 the 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 the proceedings.

Whilst the MVN case focusses on criteria (e), it is clear that these factors are intertwined in some respects and the terms of the offer, criteria (a), will be relevant to determining whether the offer is genuine or not.

The court has been faced with the issue of what is a genuine attempt to settle proceedings in the past, but not since Part 36 was reformed in April 2015. In addressing the claimant’s argument, Picken J considered some of the authorities from pre-April 2015, notably the High Court judgment in AB v CD & Ors (2011). In AB the court held that making a Part 36 offer to accept 100% of the claim was an abuse of Part 36. The principle of a “100%” offer being invalid has therefore been reinforced by the reforms to Part 36 and is rejected by Picken J’s judgment.

When examining whether an offer is a genuine offer of settlement, the judgment of Jonathan Parker LJ in the Court of Appeal decision of Huck v Robson (2011) is still very relevant. In Huck it was held that:

…in order to qualify for the incentives provided by paragraphs (2) and (3) of the rule a claimant’s Part 36 offer must represent at the very least a genuine and realistic attempt by the claimant to resolve the dispute by agreement. Such an offer is to be contrasted with one which creates no real opportunity for settlement but is merely a tactical step designed to secure the benefit of the incentives.”

The policy behind Part 36 is to encourage the sensible settlement of claims pre-trial, the concept of the “100% offer” runs contrary to that, and this position is underlined by the reforms to Part 36. At the heart of the matter therefore is the question of what constitutes a “genuine offer” as opposed to a “tactical offer”?

This is still a very subjective concept that will be open to interpretation, based on the terms of the offer before the court on each case. In non-monetary claims the task is made more difficult by the fact that the final order does not give a pecuniary measure against which litigants can measure success and failure, thus leaving the issue open to a wider interpretation.

The determination of any issue on this question will involve a certain degree of fact finding by the judge to determine the costs depending on the facts of the case. The amendments to Part 36 in this regard are controversial as there is little guidance as to how parties are to approach an issue of how to differentiate between the two positions of whether an offer is “genuine” or not and a fact finding exercise conducted by the court is likely to be time consuming and costly.

Therefore whilst the concept of a 100% offer being valid has been rejected, there is likely to still be some degree of satellite litigation surrounding the definition of a “genuine offer” yet to come. 

Contact

For further information please contact Andrew Cousins, Senior Solicitor Advocate, Insurance on 0161 603 5093

By Andrew Cousins

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This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.

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