Master McCloud in the Royal Courts of Justice recently handed down a judgment in MRA v Education Fellowship [2022] EWHC 1069 (QB) which considered the impact of late acceptance of an offer made under Part 36 in the context of an abuse claim where the prognosis was uncertain at the time when the offer was made.
Notwithstanding the understandable sympathy for the claimant and the effect that late acceptance was likely to have on the damages recovered, it was determined that the consequences of late acceptance did still apply and, therefore, the defendant’s costs from the date of the expiry of the ‘relevant period’ were to be deducted from the claimant’s damages.
This case involved a teacher who exploited her position of trust to abuse a child with severe autism and ADHD. The abuse suffered was described by Master McCloud as serious and greatly harmful to the child. The defendant to the civil action was the school, which was vicariously liable for the actions of their employee. The teacher in question had been convicted. Breach of duty was not an issue in this claim, having been admitted prior to proceedings being issued. The issues in proceedings were those of quantum and causation.
The claim was issued in 2017 and valued at £100,000. On 19 January 2018 the defendant made a Part 36 offer to settle the whole of the claim for £80,000. The claimant’s medical evidence diagnosed him with PTSD, depression and suicidal thoughts, but could not comment on the prognosis as this would depend on treatment and intervention. When the defendant’s offer was made, the claimant’s medical evidence was still pessimistic and stated that the PTSD had in fact worsened and still no prognosis could be given. The claimant made then two requests for extensions to accept the defendant’s offer and neither request was granted nor were the requests chased.
Subsequent medical evidence obtained was then more optimistic, but to a point where the claimant was unlikely to improve further. In addition, the defendant had also obtained medical evidence which disagreed with the diagnosis of PTSD.
As a result, the claimant chose to accept the defendant’s Part 36 offer of £80,000 on 2 April 2020 (over two years after the expiry of the relevant period) and requested payment of their costs to the date of acceptance. The defendant refused to pay on the basis that the offer had been accepted well beyond the expiry of the relevant period for the purposes of Part 36. The matter, therefore, came before Master McCloud for determination on the issue of costs.
It has long been established that Part 36 is intended to encourage parties to make reasonable offers and settle claims early by imposing costs sanctions on parties who do not accept an offer and later fail to better the offer at trial. The effect of the claimant accepting the offer outside the 21-day period is that the defendant’s costs from the end of the relevant period to the acceptance of the offer are deducted from the claimant’s damages.
There is, however, an exception to this rule under CPR 36.13(5) and the court can disapply the costs consequences if they find that it would be unjust to order the claimant to pay the defendant’s costs. The rule is, therefore, clear: the costs consequences must apply unless it is unjust to do so and the burden is on the claimant to establish that it would be unjust.
The claimant’s main arguments were that at the time that the offer was made the prognosis was uncertain, and it was only after the latest medical report that the offer could be competently assessed. Furthermore, the claimant was a minor and so the court would have to approve the settlement in any event and the court would not have been able to do so at the time the offer was made due to the lack of prognosis.
It was also argued that to deduct the costs from the damages would reduce the claimant’s settlement. As the claimant was a victim of abuse this was said to be unjust.
The defendant argued that the offer was made deliberately high and was reasonable. The claim value was stated at £100,000 and the offer was 80% of this. The offer was made on the basis of a worst case evaluation and was based on an assumption of a lack of improvement. The worst possible prognosis had already taken into account. It would, therefore, have been possible to ask the court to approve the settlement on the basis that it was a very reasonable offer given the evidence available.
It was further argued by the defendant that the claimant had been diagnosed by their expert at the outset and it was just the prognosis that was unclear. The range of possible prognosis in this case was simply a normal risk of litigation and such risks were intended to form part of Part 36. If the claimant’s arguments were right then this case could potentially set a worrying precedent where any uncertainty over prognosis makes a case exceptional and, therefore, the rules under Part 36 would never apply.
Finally, the defendant disputed that the court should consider the effect of the deduction on the claimant’s damages as this would mean all deductions would likely be considered unjust and not just in abuse claims.
In her judgment Master McCloud found that:
Two other interesting points were raised in the judgment.
Firstly, Master McCloud questioned whether this issue may have been avoided had there been an abuse-specific Pre-Action Protocol. This was proposed by the Historic Abuse Litigation Forum. To date, there is no proposal to implement such a protocol. It may be that this option is raised again in the future.
Secondly, claimant’s counsel raised an issue regarding the wording of Part 36 potentially prejudicing claimants who require the court to approve their settlements. This is due to Part 36 requiring a judgment or order for damages before costs consequences apply. It follows that claimants who have to bring their settlement before the court for approval attract these consequences automatically. This issue was not fully argued by either side so Master McCloud did not come to any conclusions regarding this in her judgment.
Comment
This judgment provides a clear reminder about the importance of Part 36 and the consequences of making well-judged reasonable offers at an early stage in proceedings. Reasonable offers under Part 36 made at an early stage can be of significant financial benefit to defendants who are later able to offset their costs against the claimant’s damages. This serves to encourage early settlement and avoid unnecessary litigation. It is clear that this is a key principle that courts do not wish to undermine.
The judgment also places significant emphasis on the fact that the offer was high and well-judged. It remains to be seen how a court would approach a similar issue where a lower offer had been made.
Finally, the case shows that an uncertain prognosis is not a barrier to settlement and will not prevent a court approving a settlement for a child or protected party.
For further information please contact Anna Churchill.
Anna Churchill
The service you deliver is integral to the success of your business. With the right technology, we can help you to heighten your customer experience, improve underwriting performance, and streamline processes.