Court of Appeal confirms Part 36 costs consequences in new ruling
The Court of Appeal has ruled that a district judge was wrong in not applying the usual costs consequences to a claimant’s late acceptance of a defendant’s Part 36 offer.
In the recently decided case of Briggs v CEF Holdings Ltd (2017) CA (Civ Div) 13/07/2017, the defendant appealed to the Court of Appeal in respect of the first instance district judge’s order on costs.
The claimant, in that case, suffered an injury to his foot in January 2010 whilst working for the defendant. He obtained a report from an orthopaedic surgeon which stated that his future prognosis was unfavourable. Proceedings were issued and served by the claimant in January 2012 on that basis. In September 2012, the defendant put forward a Part 36 offer to settle the claim in the sum of £50,000. The 21 day period for acceptance expired on 9 October 2012 and the claimant neither accepted nor rejected the offer in that time. The claimant requested and was granted a stay of proceedings in May 2013 whilst he had foot surgery. The stay was lifted in April 2014 and he then increased the value of his claim. A further orthopaedic surgeon instructed by the claimant then prepared a report in October 2014 which had a slightly better prognosis. At expert discussions stage, the claimant’s orthopaedic expert altered his view and it was agreed that the claimant would probably be able to work to retirement age. The claim was listed for trial in 2015 but the claimant applied to vacate the trial. On 9 June 2015, the claimant accepted the defendant’s Part 36 offer of £50,000 made in September 2012.
The rules on acceptance of Part 36 offers and costs are found within Part 36 of the Civil Procedure Rules. The relevant sections in the Briggs case are as follows:
(a) a Part 36 offer which was made less than 21 days before the start of a trial is accepted; or
(b) a Part 36 offer which relates to the whole of the claim is accepted after expiry of the relevant period; or
(c) subject to paragraph (2), a Part 36 offer which does not relate to the whole of the claim is accepted at any time,
the liability for costs must be determined by the court unless the parties have agreed on the costs.
(5) Where paragraph (4)(b) applies but the parties cannot agree on the liability for costs, 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 does pay the offeror’s costs for the period from the date of expiry of the relevant period to the date of acceptance.
(6) In considering whether it would be unjust to make the orders specified in paragraph (5), the court must take into account all the circumstances of the case including the matters listed in rule 36.17(5).
As can be seen, under r36.13(4), where an offer is accepted after the expiry of the offer period the Court must determine the liability for costs unless the parties can agree. Under r36.13(5), where the parties do not agree, the court should order that the claimant is awarded his or her costs up to the date of expiry of the offer period and the party whose offer has been accepted should be awarded the costs from the date of expiry of the offer period to the date of acceptance, unless such an order would be unjust.
Therefore, applying this to the Briggs case, the claimant would be awarded his costs up to 9 October 2012 which is when the offer period expired and the defendant would then be awarded their costs from 10 October 2012 to 2 June 2015 which is when their Part 36 offer was accepted by the claimant.
However, the claimant argued – successfully at first instance – that under r36.13(6), the fact that he had an uncertain prognosis in September 2012 when the offer was made should be taken into account because he could not have known at that stage what his claim was likely to be worth.
The judge considered the factors listed in r36.17(5) – see below – and concluded that because of the uncertainty of prognosis, it would be unjust to order the claimant to pay the defendant’s costs from the expiry of the offer acceptance period. He, therefore, ordered that the defendant pay the claimant’s costs up to 30 October 2014, which is when the second orthopaedic report was obtained.
(5) In considering whether it would be unjust to make the orders referred to in paragraphs (3) and (4), the court must take into account all the circumstances of the case including—
(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.
The defendant duly appealed to the Court of Appeal on the basis that lack of knowledge about the likely future prognosis of the claimant’s injury was not sufficient to make it ‘unjust’ for the usual cost consequences of Part 36 to apply.
The Court of Appeal held that the general rule was that if an offer was accepted out of time then the offeree should bear the costs of the offeror from the expiry of the offer to the date of acceptance. It was up to the offeree (the claimant in this case) to show that injustice would be caused and it was important not to undermine the purpose of Part 36 offers. The fact that in September/October 2012 it was difficult for the claimant’s representatives to properly form a view on the likely outcome was part of the normal risks of litigation and there was nothing in particular in the claimant’s case to distinguish it from those usual risks. The Court of Appeal, therefore, overturned the district judge’s ruling and found for the defendant on costs on the Part 36 issue.
The Briggs case is a salutary reminder for claimant lawyers especially of the operation of Part 36. It is not enough to say that an uncertain prognosis means that Part 36 should not apply. Therefore any Part 36 offers received, particularly those which have been made before medical evidence has been obtained, should always be carefully considered and the risk of potential costs consequences should not be under-estimated.