Part 36 Developments
A look at recent cases on, escaping the usual costs consequences and what constitutes a genuine attempt to settle
Andrew Cousins examines two recent decisions addressing Part 36 issues: the recently published Court of Appeal judgment in Briggs v CEF Holdings  EWCA Civ 2363 was an attempt to avoid the usual costs consequences following the late acceptance of a Part 36 offer; and the High Court judgment in JMX (a child by his mother and litigation friend, FMX) v Norfolk and Norwich Hospitals NHS Foundation Trust  EWHC 185 (QB) concerns the question of what constitutes a genuine attempt to settle.
Briggs v CEF Holdings Ltd
Court of Appeal
13 July 2017
Background and first instance decision
The claimant had injured his foot in January 2010 in an accident at work. He issued proceedings in January 2012, and served a medical report from an orthopaedic surgeon. In September 2012 the defendant made a Part 36 offer to settle the whole claim for £50,000. In May 2013 the claimant was granted a stay of proceedings and had foot surgery. The stay was lifted in April 2014, after which the claimant increased his damages claim to £248,000 and relied upon a report from a new orthopaedic surgeon. A subsequent joint statement from the parties' orthopaedic surgeons concluded that the claimant would be able to work until retirement age. The matter was given a trial window between April and May 2015, but the claimant applied to vacate the trial and in June 2015 accepted the September 2012 Part 36 offer.
At first instance the claimant successfully applied for an order under CPR r.36.13(5) that the defendant pay his costs up to 30 October 2014 - which coincided with when the claimant obtained his new orthopaedic evidence - despite the usual rule that he would have been liable for the defendant's costs after the expiry of the 21 day acceptance period. The judge agreed with his submission that it would be unjust to apply the usual rule because the injury had not been resolved and the prognosis had been uncertain until the claimant obtained his further orthopaedic report.
The defendant submitted that the judge's approach to the concept of injustice had been wrong, and that he should not have concluded that the uncertainty regarding the claimant's prognosis until October 2014 was sufficient to mean that the defendant should pay the claimant's post-offer costs.
The Court of Appeal held that it was important not to undermine the salutary purpose of Part 36 offers and that in considering submissions regarding uncertainty, the court would not conduct a microscopic examination of the litigation details. Whilst cases are fact sensitive, the general rule under Part 36 was that if an offer was accepted out of time, the offeree bore the post-offer costs of the offeror until the offer was accepted. If the offeree could show that that would cause injustice, that may displace the general rule, but that duty was on the offeree. The defendant's appeal was therefore allowed.
The court examined in some detail the note at CPR r.36.17(5) in the White Book and the circumstances in which Part 36 shifted the costs risk onto the offeree. The court was keen not to undermine the ability of a party to shift a costs risk to the opposing litigant with a well placed Part 36 offer.
The Court of Appeal's earlier decision in SG (A Child) v Hewitt (Costs)  EWCA Civ 1053 where there had been difficulties in forming a prognosis following brain damage to a child, had applied the same principles, but the court distinguished the index case from SG as that matter was a clear case on the other side of the line where, as a contingency of the litigation, it had simply been hard to work out how the litigation may progress. That was not an infrequent result, as seen in the case of Matthews v Metal Improvements Co Inc  EWCA Civ 215 which the court also considered.
Ultimately the claimant had chosen not to accept the defendant's offer but had pursued his case and the court's judgment reminds parties that when they are in receipt of a Part 36 offer, it will attract costs consequences unless there is a clear evidential uncertainty as to prognosis or as to the factual matrix required to consider the offer. Something beyond the norm will be needed. The court will not wish to water down the provisions of Part 36 and costs shifting without such evidence.
In the scenario of an injury claim it will usually be the claimant trying to avoid the usual costs consequences of wanting to accept a defendant's Part 36 offer out of time, having declined to do so at the time the offer was made on the basis that the prognosis then seemed unclear. It will be up to the claimant in a case such as this to demonstrate why it would be just to displace the usual presumption that would expect him to pay the defendant's post-offer costs. As the index case shows he will need to be able to point to something out of the ordinary.
JMX v Norfolk & Norwich Hospitals NHS Foundation Trust
High Court - QBD (Foskett J)
7 February 2018
This case concerned a clinical negligence claim brought by a minor against the defendant hospital trust. At trial the claimant succeeded on the issue of liability. Before trial the claimant had put forward a Part 36 offer to accept 90% of the damages to be agreed or assessed in due course. Following trial the claimant sought to invoke the provisions of CPR r.36.17 on the basis that he had achieved an outcome at least as advantageous as his Part 36 offer. The defendant contested the point and argued that the offer was not a 'genuine attempt' at reaching a settlement.
The court needed to examine the rule at CPR r.36.17(5)(e) and consider whether the claimant's offer was a genuine attempt to settle the proceedings or was just a cynical attempt to gain the protection of Part 36. The court found that the offer was a genuine attempt at settlement and that the claimant should have the costs protection afforded by the offer.
In reaching this decision the court rejected the defendant's argument that an assessment by the claimant of the risks of the claim failing as being only 10% was a significant under-evaluation of the litigation risk and, accordingly, that such an offer could not have been a genuine attempt to settle.
Foskett J found that "When an offer to accept 90% is made in a case such as this, I would regard it as a case where the claimant’s team regard the claim as very strong, but is prepared to offer a modest discount to secure absolute certainty of obtaining substantial compensation."
To an extent the judgment does not tread new ground: there have been previous decisions which have addressed what constitutes a 'genuine attempt' to settle proceedings, for example Huck v Robson  EWCA Civ 398 and R (on the application of MVN) v London Borough of Greenwich High Court  EWHC 2663 (Admin) which we looked at in this update.
The general rule that an offer to settle on a 100% basis is not a valid offer still remains; such an offer is clearly not a genuine attempt to settle. The grey area of what does constitute a genuine offer is outside of that, and is an issue which turns on the merits of each case. As recognised by Foskett J in JMX, a 10% reduction can represent a significant saving both in costs and in court time. Conversely though, in modest value cases, such a saving can be negligible but nevertheless expose parties to significant costs liabilities.
Given that, as recognised by Foskett J, the issue turns on the merits of the case, the issue of where the line is drawn on what constitutes a 'genuine attempt' to settle is still not clear and is likely to remain an issue for further judicial intervention. The decision in JMX though does lay down further grounds as to what does constitute a 'genuine attempt' and therefore provides some additional clarity on the issue.
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.