Introduction

In the case of Beasley (by his litigation friend) v Alexander [2012] EWHC 2715 (QB) the court ordered a split trial on liability and quantum. At the trial on liability, Sir Raymond Jack (sitting as a judge of the High Court) found in favour of the claimant. Upon the parties failing to reach agreement on what sum, at that stage, the defendant should be ordered to pay on account of the claimant’s costs, the defendant advanced that the effect of CPR 36.13(2) was that the court should make no order as to costs until the issue of quantum had been decided.

The previous rules

Prior to April 2007, restrictions on disclosure of Part 36 offers to the trial judge were dealt with by CPR 36.19 (the Previous Rules). These provided as follows:

(1) A Part 36 offer will be treated as 'without prejudice except as to costs'.

(2) The fact that a Part 36 payment has been made shall not be communicated to the trial judge until all questions of liability and the amount of money to be awarded have been decided.

(3) Paragraph (2) does not apply...

(c) where  -

(i) the issue of liability has been determined before any assessment of the money claimed; and

(ii) the fact that there has or has not been a Part 36 payment may be relevant to the question of the costs of the issue of liability

and therefore expressly catered for the circumstances of a split trial.

The effect of CPR 36.13

In April 2007 CPR 36.13 replaced the Previous Rules. CPR 36.13(1) and (2) now provide as follows:

(1)A Part 36 offer will be treated as ‘without prejudice except as to costs’.

(2)The fact that a Part 36 offer has been made must not be communicated to the trial judge or to the judge (if any) allocated in advance to conduct the trial until the case has been decided.

The issue in dispute

The defendant argued that CPR 36.13 prevented the court from making an order as to the costs of the issue of liability as it prevented disclosure of any Part 36 offers until all matters in the case had concluded.  To make an order as to costs in circumstances where the parties are prevented from disclosing the existence of Part 36 offers to the court, would fly in the face of the costs regime imposed by Part 36.  

The claimant argued that CPR 36.13 had no such effect as the words 'until the case has been decided' should be construed to include the conclusion of a trial on liability and that the court should exercise its discretion as to costs pursuant to CPR 44.

The HSS case

In reaching its findings the court considered the judgment in the 2005 case of HSS Hire Services Group plc v BMB Builders Merchants Ltd (HSS). In HSS the court considered how the Previous Rules fit with CPR 44.3 which provides a list of circumstances to which the court must have regard when exercising its discretion as to costs, one of which is whether any payment into court or admissible offer to settle which does not attract the costs consequences of Part 36 has been made.

Waller LJ found that the Previous Rules provided that the existence of a Part 36 offer was disclosable to the court where the issue of liability, but not quantum, had been determined, but that the amount of the offer was not, further stating:

“The consequences of that being the correct interpretation of Part 36.19 seem to me to be as follows. If the court is told that there has been no payment in, then the court is free to exercise its discretion to award costs in relation to the preliminary issue and there is no difficulty with Part 44.3(4)(c). If however it is told that there has been a payment in, then, in any but perhaps the most exceptional case, I find it very difficult to think that there could be circumstances where if the issue of damages remains to be decided, the judge can do otherwise than to reserve the question of costs until after the determination of that issue.”

Conclusion

Sir Raymond Jack proceeded on the basis that, when replacing the Previous Rules with CPR 36.13, the Rule Committee must have had split trials in mind, as they had been dealt with in the Previous Rules but excluded from CPR 36.13. He also commented that, to his mind, the wording of CPR 36.13(2) was clear: 'the case' refers to the action or the proceedings and, if CPR 36.13(2) had been intended to also refer to circumstances where liability is decided in isolation, different wording would have been used.

The court therefore found with the defendant on the issue and concluded that it must reserve any costs order until the issue of quantum had been decided