Following late acceptance of a Part 36 offer, the court may order the party accepting the offer to pay costs on an indemnity basis.
The issue arose in ABC v Barts Health NHS Trust (2016) where the court was required to determine costs in a clinical negligence action in circumstances where the claimant had accepted a Part 36 offer by the defendant trust.
The claimant alleged that in 2003 the defendant’s delay in failing to diagnose a dissection of his aorta led to the claimant undergoing a fasciotomy and femoro-femoral bypass graft which caused a blood clot leading to the claimant suffering a stroke in 2006.
The defendant admitted breach of duty and that the further surgical procedure would have been avoided but for its delay in diagnosis. The defendant denied causing a blood clot which led to the claimant suffering a stroke (the “causation issue”).
The issue of causation and the consequences of the stroke gave rise to the overwhelming majority of the claimant’s claim pleaded in excess of £1m plus annual payments of £230,000. It accounted for the majority of the costs and the expensive expert evidence.
The defendant made a Part 36 offer of £50,000 in full and final settlement of the claim on 4 June 2015 which expired on 24 June 2015 without being accepted. On 24 February 2016, the claimant accepted the offer two weeks before a trial was due to start.
The claimant contended that there was no good reason to depart from the usual order that the defendant pay the claimant’s costs to 25 June 2015, with the claimant paying the defendant’s costs thereafter.
The defendant submitted that it would be unjust to make the usual order as it does not reflect that the claimant has failed in relation to the vast majority of his pleaded claim. The defendant contended that the claimant’s costs should be limited to the issue of the further surgical procedures, and that the defendant should be entitled to all the costs of the causation issue in the action together with the costs of the further surgical procedure issue after 25 June 2015.
The court held that the defendant had the opportunity of protecting itself in respect of the costs of the causation issue but had chosen to make a Part 36 offer in settlement of the whole claim. The claimant acted unreasonably in rejecting the offer and pursuing the claim to within a few weeks of trial.
In accepting the claimant’s submission, His Honour Judge McKenna said:
“….Part 36 expressly provides an effective remedy for that very situation in that the claimant will have to pay all of the defendant’s costs incurred post expiry of the Part 36 offer and in the circumstances of this case it seems to me that the assessment of those costs should be on the indemnity basis. To my mind there is nothing unjust about making the usual order in the circumstances of this case.”
The case is of interest for two reasons.
Firstly, the court has given a clear indication that where you accept liability for one part of a claim but not another, then you should make a Part 36 offer in respect of that part of the claim alone to avoid giving an entitlement to costs of the whole claim.
Secondly, the court considered that the claimant’s rejection of the offer and pursuit of the claim very close to trial was sufficient to exercise discretion and order the assessment of costs to be on an indemnity basis rather than the standard basis.
This has particular significance in fixed recoverable costs cases such as Broadhurst v Tan, where in February the Court of Appeal found that an assessment of costs on the indemnity basis is an assessment of the work actually done (see page 9).
It follows that, compensators need to make early decisions on reasonable claimant Part 36 offers otherwise a late acceptance close to trial could well give rise to the assessment on the indemnity basis for the work actually done rather than fixed costs.
The case of Shepherd v Hughes & QBE (2015) clarifies how Part 36 offers within cost proceedings interact with provisional assessments, specifically whether a Part 36 offer can be accepted after completion of a provisional assessment hearing.
Costs were presented by the claimant. Prior to service of Points of Dispute the defendant made a Part 36 offer of £16,800 in compliance with CPR 47.20(4). Agreement could not be reached and the matter proceeded to provisional assessment where the Court assessed the bill at a lesser sum of £13,489.69.
In response to the provisional assessment outcome the claimant attempted to accept the defendant’s Part 36 offer, rather than request an oral hearing. The claimant argued the Part 36 offer had not been withdrawn and therefore was open for acceptance. The defendant disagreed, as they considered the provisional assessment to be the commencement of the detailed assessment hearing, therefore rendering the offer incapable of acceptance.
An application was made by the claimant with the matter heard before Judge Seys Llewellyn in Mold County Court. Fundamentally the matter turned on the following:
CPR 36.5(9) provided:
Unless the parties agree, a Part 36 offer may not be accepted after the end of the trial but before judgment is handed down.
CPR 47.20(4) provides:
The provisions of Part 36 apply to the costs of detailed assessment proceedings with the following modifications:
(b) ‘trial’ refers to ‘detailed assessment hearing’;
(c) in rule 36.9(5), at the end insert ‘or, where the Part 36 offer is made in respect of the detailed assessment proceedings, after the commencement of the detailed assessment hearing.’;
The defendant argued under CPR 47.15 that provisional assessment and a potential subsequent oral hearing replaces detailed assessment, therefore the above provisions should be applied accordingly, rendering the Part 36 offer incapable of acceptance.
The claimant sought to differentiate between detailed assessment and provisional assessment, suggesting the rules committee could have easily included provisional assessment within CPR 47.20(f)(b) if that was their intention. Further, clear differentiation is made between the two terms in CPR 47.14 and 47.15.
Judge Seys Llewellyn focused on CPR 47.15 concerning provisional assessment which “applies to any detailed assessment proceedings”. It was considered reasonable to conclude the reference to a detailed assessment hearing in CPR 36.9(3) should also include a provisional assessment hearing.
Therefore, the matter went in favour of the defendant, CPR 36.5(9) applied rendering the defendant’s Part 36 offer incapable of acceptance.
Amendments to the CPR have changed the position slightly however fundamentally the issues remain unchanged. CPR 47.20(4)(c) now states;
“a detailed assessment hearing is “in progress” from the time when it starts until the bill of costs has been assessed or agreed”.
CPR 36.11(3) now reads:
The court’s permission is required to accept a Part 36 offer where…(d) a trial is in progress.
Importantly, it is still not expressly stated that a trial equates to provisional assessment, therefore the scenario of Shepherd v Hughes & QBE could well be repeated. However, the approach taken by Judge Seys Llewellyn remains valid. Any application to accept a Part 36 offer post provisional assessment will turn on the facts but in most circumstances the application, as in Shepherd v Hughes & QBE, would fail.
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