The High Court recently allowed for a late lodgment to be made by the defendants in the medical negligence case of O'Malley v Hermann & Anor[1] despite the plaintiff’s claim that she had “showed her hand” to the defendants during without prejudice settlement negotiations. The plaintiff contended that granting leave to make a lodgment would give the defendants litigation advantage and would unfairly prejudice her position. The High Court took the view that there is a public interest in allowing even late lodgments and that showing one’s hand would not be sufficient reason to refuse the other party leave.

What is a lodgment?

A lodgment is an offer to settle, generally made by the defendant in a case by way of lodging monies in court to satisfy the plaintiff’s claim.

When can a lodgment be made without permission?

In High Court personal injury actions, a defendant can make a lodgment or top-up lodgment once without the permission of the court either:

  • When delivering a defence, or
  • Within a period of four months from the date of the Notice of Trial[2]

Otherwise, a defendant can make lodgments or top-ups of existing lodgments without permission of the court if made:

  • Within 21 days of the receipt of replies to particulars or unrequested additional particulars from the plaintiff, or
  • In a 21-day period starting immediately after 18 months have passed from the date of the Notice of Trial, or
  • Due to a very recent change in the rules effective from 26 April 2022[3]. within 21 days of service by the plaintiff of a report of a medical practitioner in accordance with the Disclosure Rules[4]

Outside these periods permission of the court must be sought to make a lodgment or a top-up. If granting this permission, the court has a wide discretion as to whether to impose any terms it sees fit[5].

It is worth nothing that in all of these scenarios, the lodgment should be notified to the plaintiff and neither the fact that a lodgment has been made nor the amount of the lodgment is disclosed to the court until the conclusion of the action.

How can a plaintiff accept a lodgment?

A plaintiff can accept a lodgment by giving a notice of acceptance to the defendant. This can be done within 14 days of the receipt of the notice of lodgment without the defendant’s consent. After 14 days has expired, the consent of the defendant is necessary.

The purpose of a lodgment

The purpose of a lodgment invariably is:

  • To encourage early settlement and avoid parties going to court
  • To enable the defendant to protect themselves from incurring further litigation costs where they are prepared to pay the value of the plaintiff’s claim in advance of the case going to court

When lodgments are refused

Where a lodgment has been made, but not accepted by the plaintiff, there can be costs implications. The plaintiff must obtain an award greater than the amount of the defendant’s lodgment or else the plaintiff will generally be liable to pay the defendant’s costs from the date the lodgment was made. This is commonly referred to as the Plaintiff “beating the lodgment”.

The court’s decision

This is a short judgement from Judge Coffey from January 2022 dealing with an application for leave by the defendants to make a late lodgment, which had occurred off the back of considerable unsuccessful “without prejudice” settlement negotiations. In essence, the defendants had forgone their opportunity to make a lodgment without leave at various stages throughout the proceedings. The defendants subsequently made an application for leave three months before the hearing date but over three years after the last pleading was exchanged between the parties.

The plaintiff argued that leave should be refused in this instance because she had shown her hand to the defendants during settlement talks. She further argued that to allow leave would provide the defendants with a litigation advantage and unfairly prejudice her position.

The court took the view that it had an unqualified discretion which should be read in the widest terms when it comes to the granting of permission. The court further said that it must engage in a balancing exercise in having regard to the public interest in allowing even late lodgments to deter unnecessary litigation. It must also take account of the issue of fairness to ensure unfair litigation advantage is not conferred on the defendants that are seeking to make the late lodgment. Relying on the reasoning in the case of Ely v Dargan[6], Judge Coffey concluded that a lodgment can only be disadvantageous to a plaintiff if it is an amount that exceeds the amount they are awarded at trial. As a result, there is a strong public interest in permitting even a late lodgment to provide some measure of protection to a defendant who has offered more than the value of the plaintiff’s claim. In addition, this avoids wasting of the court’s time hearing cases that are effectively moot.

Judge Coffey determined that special circumstances might warrant a refusal of leave if the defendants were found to have acted in bad faith by engaging in spurious settlement negotiation for the purpose of informing the amount of a late lodgment. The judge did not find any evidence of bad faith in this case. The judge also stated that there is no rule which states that leave to make a late lodgment may not be granted merely because the claim has been the subject of settlement negotiations or a mediation which had failed to resolve the proceedings.

As an acknowledgement of how late in the day the defendants made their application for leave, the court granted leave but directed that the lodgment would not take effect until the second day of trial. This was to ensure the plaintiff would be entitled to her costs up to and including the first day of trial if she accepted the lodgment any time prior to that date.

Key takeaway message

Where a defendant makes an application for permission to make a lodgment at a very late stage of the proceedings following unsuccessful settlement talks or mediation, the court has a broad discretion to grant permission unless there is evidence of bad faith. That said, it is likely that the court will balance the justice between the parties by allowing a plaintiff an extended period of time within which to accept such a late lodgment. This has the effect of reducing the financial benefit to the defendant in seeking to limit costs if the plaintiff does not ‘beat the lodgment’ at trial.