Sir David Eady recently gave judgment in one of the early cases that looked at the operation of the ‘new’ Part 36 rules. These are designed to encourage parties to consider settlement early.

Downing v Peterborough & Stamford Hospitals NHS Trust was a clinical negligence claim where the claimant suffered serious complications following surgery designed to ameliorate his snoring. He was left with a multitude of problems including a diagnosed pain disorder. Liability was admitted and the matter proceeded to trial on quantum only as the parties were unable to agree settlement.

Several months before trial, the claimant made a Part 36 offer to settle his claim in the sum of £1.2m inclusive of interest but the defendant did not accept this offer. At trial, Sir David Eady awarded the claimant just over £1.5m. Representations were made to the judge regarding Part 36 benefits to be awarded because the claimant had ‘beaten’ his own offer.

The trial judge heard representations from both sides. The defendants argued that the fact that the experts had changed their position at trial from the one at the time of the offer should be taken into account. For the judge to apply all of the penalties envisaged by Part 36 would, in this case, be punitive due to the level of the case’s indemnity costs, interest on costs and a separate uplift on damages.

Sir David held that, in relation to the request for costs to be awarded on the indemnity basis from the relevant date and for interest on those costs to be at a rate not exceeding 10% above base rate, “the court is obliged to make such an order unless it considers it “unjust” to do so …”. He added “ It is elementary that a judge who is asked to depart from the norm, on the ground that it would be “unjust” not to do so, should not be tempted to make an exception merely because he or she thinks the regime itself harsh or unjust. There must be something about the particular circumstances of the case which takes it out of the norm.

“The defendant’s advisers made a particular judgment call which turned out (at least at first instance) to have been wrong. Such an award does not carry with it any implied criticism of their professional skill or of their conduct. It is just one of the consequences imposed by the rules. I rule, accordingly, that costs should be assessed from the relevant date on the indemnity basis and, further, that there should be interest on those costs at 10% above base rate under CPR 36.14(3)(c).”

There is also provision in CPR 36.14(3)(d) for an additional sum, not exceeding at the moment £75,000, to be paid in accordance with a sliding scale there set out. Sir David said: “I cannot see any reason why, under this new regime, the claimant should not receive the maximum figure” and made such further award.

Philippa Luscombe, partner in the clinical negligence and personal injury team at Penningtons Manches LLP, comments: “It is quite early days in the ‘new’ Part 36 rules and many have wondered how firm the judges will be in applying the potential penalties under the rules. This case is a clear statement that the rules are clear and there has to be a very good reason to depart from them. The emphasis is on the fact that parties are encouraged to make offers to try to resolve matters early and that there are real risks to a party in rejecting an offer – even when the evidence at that stage may not be complete or may later change. This case should encourage both parties not only to be sensible about settlement but also to keep offers under review as prospects on ‘beating’ an offer from the other side can change as the case evolves.”