Do the benefits of Part 36 always kick in when a Claimant beats the offer at Trial?

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Do the benefits of Part 36 always kick in when a Claimant beats the offer at Trial?

Published 8 May 2018

The recent decision of Foskett J in the case of JMX v Norfolk & Norwich Hospitals NHS Foundation Trust [2017] EWHC 3082 (QB) concerned a claim relating to a brain injury suffered by the Claimant as a result of placental abruption that occurred shortly before his birth in 2008. After a five day liability trial in the High Court, Foskett J found in favour of the Claimant, but perhaps the most instructive aspects of the case happened subsequently, when Foskett J clarified the costs consequences and application of Part 36 of his judgment in two subsequent rulings.

The first costs issue – indemnity basis and interest

After judgment was given the Claimant's counsel made written submissions that the provisions of rule 36.17 of the Civil Procedure Rules should be applied, because a Part 36 Offer to split liability on a 90/10% basis in his favour had been made on 6 October 2017, 25 days before the trial commenced. The relevant part of the CPR provides that a Claimant who beats his own Part 36 Offer should be entitled to:

  1. His costs on the indemnity basis after expiry of the relevant period specified in the offer,
  2. Interest on those costs at a rate not exceeding 10% above base rate,
  3. An uplift on his damages of up to £75,000.

It was argued on behalf of the Trust that it would be unjust for the Claimant to receive these additional amounts, because the 90/10% offer was not a genuine offer to settle, but merely a tactical ploy by the Claimant's representatives. The basis of this argument was principally that, according to the Trust's counsel, the risk to the Claimant of losing at trial was significantly more than 10% and therefore the Part 36 Offer was unrealistic and not made in a genuine attempt to settle.

Foskett J rejected the Trust's argument. He referred heavily in his judgment to his own experience as a practitioner, mediator and judge, from which he concluded that cases are frequently settled on a 90/10% basis and he accepted the Claimant's counsel's submission that he genuinely considered the Claimant's case to be very strong at the time that the offer was made, but that the Claimant was willing to accept a 10% deduction for the sake of certainty. He therefore held that the Claimant was entitled to the benefits of rule 36.17 of the CPR and he assessed the Claimant's entitlement to interest on the indemnity costs at 5% (from 28 October 2017, when the costs consequences of the Part 36 Offer commenced).

The second costs issue – uplift on damages

Foskett J then delivered a further judgment on 28 March 2018, because the Trust's counsel sought clarity as to whether the damages uplift required by CPR 36.17 should be payable in this case. The point made by the Trust's counsel was that the damages had not yet been assessed, and therefore the court did not have the power to order an uplift on the damages, in accordance with CPR 36.17, and furthermore that the uplift could only be applied when the Claimant had beaten a Part 36 Offer to settle the whole of the claim, including damages. Foskett J agreed with the first point, but disagreed with the latter. He therefore declined to order payment of the damages uplift, but left it open to the Claimant to seek the uplift in due course, when the damages aspect of the claim was settled or decided by the court.

Conclusion

The most important lesson arising out of this series of judgments is that, despite Foskett J's decision in this particular case, it is not necessarily the case that every offer to settle on a 90/10% basis will confer the benefits of Part 36 on the Claimant who beats that offer. It can be discerned from Foskett J's judgment that, in a case where the Claimant's prospects of success were plainly much better than such an offer would suggest, and if no rationale was provided by the Claimant's representatives as to the basis for the offer, there is a chance that the court might deem the offer not to have been a genuine offer to settle. However, the presumption should nonetheless be that such an offer probably will give the successful Claimant the benefits of Part 36.

Authors

Ciaran Claffey

Ciaran Claffey

Winchester

+44 (0) 1962 705502

Benjamin Newall

Benjamin Newall

Winchester

+44(0)1962 70 5549

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