The facts

In this case, the claimant had been involved in an accident at work in January 2010 resulting in him injuring his foot.

The claimant brought proceedings against the defendant in January 2012 and served on them a medical report from an orthopaedic surgeon which did not provide a favourable prognosis. In September 2012 the defendant made a Part 36 offer to settle the whole claim for £50,000 and the 21 day period for accepting the offer expired on 9 October 2012.

The claimant neither accepted or rejected the defendant’s Part 36 offer and in May 2013 he was granted a stay of proceedings in order for him to undergo foot surgery. The stay was lifted in April 2013 and the claimant increased his claim for damages to £248,000. He then obtained a report from a different orthopaedic surgeon in October 2014 which provided a slightly better prognosis but was still unfavourable. Following this, a joint experts’ report was obtained which provided that the claimant would still be able to work until retirement age. This was unfavourable to the claimant’s case and the claimant later accepted the defendant’s existing Part 36 offer on 2 June 2015.

An issue arose in respect of costs because the claimant had accepted the defendants Part 36 offer nearly three years late. The claimant successfully obtained an order for the defendant to pay his costs up until 30 October 2014, despite the usual rule being that he would have been liable for the defendant’s costs after the “relevant period” (21 day period) had expired for when he should have accepted the Part 36 offer.

The claimant’s case was that it would be unjust for the usual Part 36 costs consequences for late acceptance to apply because the injury had not been resolved and the prognosis had been uncertain until October 2014, which was when the claimant had obtained the further expert report.

The defendant appealed this decision arguing that the judge should not have concluded that any uncertainty regarding the claimant's prognosis until October 2014 meant that it was unjust to apply the presumption that the claimant should pay the defendant's costs.

Decision

The Court of Appeal referred to the general rule in respect of late acceptance of a Part 36 offer stating that the offeree is to pay the offerors costs from the date when the “relevant period” expired up to the date of acceptance of the offer. The Court of Appeal stated that if the offeree could show that this would cause injustice then the general rule would be disapplied.

It was concluded that although it had been difficult for the claimant to form a view on the likely outcome of the case, this was not enough to show that it was unjust for the normal Part 36 cost consequences to apply. The Court of Appeal referred to the general note on CPR, r. 36.17(5) in the White Book, which provides that Part 36 offers shift the costs risk onto the offeree. It was concluded that this purpose should not be undermined and it was not infrequent for parties to a claim to have difficulties assessing quantum and the likely outcome.

The Court of Appeal held that there was nothing to distinguish this claim from any other involving the usual risks of litigation. It was stated that the joint expert report had essentially undermined the claim and until this stage there had been the usual uncertainties and risks involved with any litigation.

It was stated that the judge’s decision could not stand because they had failed to give effect to the purpose of Part 36 and had not identified any injustice warranting a departure from the usual order.

As a result, the defendant’s appeal was successful and the claimant was ordered to pay the defendant’s costs from the date when the 21 day period expired for when the Part 36 offer should have initially been accepted.

What this means for you

This case shows the importance of carrying out a thorough assessment of any Part 36 offers received because there will be costs consequences for late acceptance, unless there is good reason for the court to depart from the usual costs order.

In this case, the Court of Appeal made clear that it is not enough for a party to argue that it was difficult to determine which way the case would go. It was specifically stated that these difficulties and decisions are normal risks faced by parties during the course of litigation.

It is interesting to note that this case was distinguished from the Court of Appeal case of SG v Hewit [2012] EWCA Civ 105, where the experts had been unable to predict the impact of a brain injury until the claimant had fully matured. Here, the experts were unable to provide a prognosis, whilst in the case in question, the claimant’s experts had provided a prognosis in their reports but the claimant did not agree with the prognosis due to it being unfavourable to the claim.

This judgment demonstrates the tactical importance of making correctly pitched Part 36 offers at an early stage in order to provide maximum costs protection in the event that the matter proceeds to trial or in the event of late acceptance of a Part 36 offer. It can be seen that the normal Part 36 costs consequences for late acceptance will apply unless it would be unjust for the rules to apply.

In the event that the “relevant period” for accepting an opponent’s Part 36 offer has expired then a costs benefit analysis will need to be carried out in respect of late acceptance of their offer. It could be that new evidence has come to light in respect of liability or quantum and it may be the case that an existing Part 36 offer is now more favourable than initially thought. In these circumstances, if there is a real risk of the opponent’s Part 36 offer not being beaten at trial or completely being withdrawn, and no better offer then being available, then action should be taken to see if the opponent will be agreeable to bearing their own costs from the date when the “relevant period” expired to the date when the offer is later accepted.

A careful balancing act needs to be made in respect of late acceptance of Part 36 offers because costs consequences are likely to follow. As a result, it is essential that any Part 36 offers received are carefully considered in order to limit the risk of the offer being accepted out of time.

It should be noted that late acceptance cannot always be avoided and in these cases there may be the potential to argue that the normal costs order would be unjust. However, it should be noted that mere litigation risk and difficulties assessing a claim will not be seen as a sufficient argument to overturn the normal costs position.