When is a claimant protected from adverse costs?

In the majority of injury claims, parties will attempt to negotiate a settlement rather than allowing the matter to proceed to trial. Part 36 is a provision in the Civil Procedure Rules designed to encourage parties to settle disputes without the need for trial, which provides a self–contained procedural code which has specific costs consequences.

In the recent case of Anna Louise Tuson –v- Debbie Murphy [2018] EWCA Civ 1461, the Court of Appeal considered the extent to which a claimant who was found to be dishonest and misleading was liable for adverse costs.

In this case, the claimant suffered injury to her arm after falling off a horse at a riding school run by the defendant. She suffered a psychiatric injury and developed obsessive compulsive disorder (OCD) as a result of the accident which was confirmed by two psychiatrists.  Liability had been admitted subject to an agreed deduction of 15% for contributory negligence.

The claimant gave up her job as a school teacher and issued proceedings with her claim initially valued at £1.5 million, based on the premise she would be unable to work again.

At the time of providing her witness statement, the claimant did not make any mention of a mess play workshop franchise which she had acquired and neither did her mother’s statement make any mention of the play group franchise.

When this was later discovered by the insurer’s solicitors, the claimant provided further witness evidence stating that she had not disclosed the playgroup franchise which she had only had for 12 months as she had never seen it as a means of employment but rather a means of getting out of the house with her son and making friends and as personal CBT therapy.

A week after receiving the further witness statements, the insurers made a Part 36 offer to the claimant which was open for acceptance without penalty until 8 October 2015 and which the claimant later accepted on 1 December 2015.

At a costs hearing, a judge ordered the insurers to pay the claimant’s cost only up to 1 April 2104 and for the claimant to pay the insurers’ costs thereafter, as he found the claimant had been dishonest and misleading and that it would be unjust to allow the usual costs order to apply.

The claimant appealed on the grounds that it was not unjust as the insurers had chosen to adopt the Part 36 procedure and did so at a time when they were in possession of the relevant facts. They could have chosen to make a Calderbank offer making it clear that costs would not be offered.

Relying on CPR 36.13(1), the claimant argued that she would have been entitled to her costs up to the date of acceptance, if she had accepted the sum of £352,060 on or before 8 October 2015.

Where a Part 36 offer is accepted outside of the 21 day period CPR 36.13(5) provides that:

“the court must, unless it considers it unjust to do so, order that a) the claimant be awarded costs up to the date on which the relevant period expired; and b) the offeree do pay the offeror’s costs for the period from the date of expiry of the relevant period [of 21  days] to the date of acceptance.”

CPR 36.13(b) states that in considering whether it would be unjust to make the orders specified above, the court must take into account all the circumstances of the case including, amongst other matters, the information available to the parties at the time when the Part 36 offer was made.

Giving the judgment of the Court of Appeal, Lord Justice Bean held that the claimant’s modest attempt to run a playgroup did  not amount to evidence that the claimant’s disability was fabricated and neither was it a case of gross exaggeration on the scale of Summers v Fairclough Homes Ltd [2012] 1 WRL 2004.  However, the claimant had deliberately withheld this information and the reasons she had given for this were unconvincing.  In his view the judge was entitled to describe the claimant’s conduct as dishonest and misleading.

Nevertheless he could not agree with the judge’s decision or reasoning, as he stated his judgment failed to grapple with the argument a Part 36 offer was unconditional, rather than a Calderbank offer, and that it was made with the knowledge of the claimant’s material non- disclosure.

He stated in paragraph 29 of his judgment:

“I agree that cost decisions are fact-sensitive and that it may be unwise to attempt to list the categories of case in which it would be unjust to make the normal order. But it is painting with too broad a brush to say that the decision is entirely a matter of discretion, either generally or even in any case where a party has behaved dishonestly.”

Lord Justice Bean referred to the authorities of Webb v Liverpool Women’s NHS Foundation Trust [2016] 1 WLR 3899 which confirmed that Part 36 is a “self–contained code” and Tiuta PLC (in liquidation) v Rawlinson &  Hunter (a firm) [2016] EWHC 3480  which confirmed that where nothing had emerged to show that the insurers’ assessment of the risks and benefits involved in making the offer is in some significant way upset, contradicted or misinformed, it is highly unlikely to be unjust to apply the default rule.

The Court of Appeal concluded that whilst the claimant’s material non-disclosure could be described as dishonest and misleading, the judge’s exercise of his discretion was flawed. The claimant was entitled to her costs up to the date of 8 October 2015 and the she remained liable to pay the insurers’ costs from 8 October to 1 December 2015.

This is an interesting case which illustrates the protection for claimants under Part 36 CPR. In addition, this specific framework provides clarity and certainty for claimants that they will not face retrospective penalties which are unjust or disproportionate.

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