No CPR rule has kept the lawyers and the rule drafters as busy as Part 36. 25 years ago, only a defendant could make an offer to settle which had deemed costs consequences if it was accepted, or was not beaten by the plaintiff (as the claimant then was) if the matter went to trial. That was by making a payment into court under Order 22 of the Rules of the Supreme Court (RSC). There was nothing in the RSC which permitted a plaintiff to make an offer which had deemed costs consequences if the defendant refused to accept it when that would have been the correct thing to do.
The implementation of the CPR on 26 April 1999 changed all that. Not only were claimants as well as defendants permitted to make offers under the new rule in Part 36, but also there were penalties which befell defendants who turned them down only to find that the claimants had done better at trial. It has followed that since 1999, where they achieve a more advantageous result, claimants can expect indemnity basis costs from the last date upon which the offer could have been accepted (usually when 21 days have elapsed from the date of the offer), an additional sum of 10% of damages recovered or costs assessed, plus enhanced interest at up to 10% over base rate (see CPR 36.17(4)), unless it is unjust for those benefits (or some of them) to apply.
Noteworthy, however, is that where the boot is on the other foot, and it is the defendant’s offer which the claimant has failed to beat, although there is still a deemed costs order in the former’s favour, it is only on the standard basis (see CPR 36.17(3)) and, of course, none of the CPR 36.17(4) benefits apply. In either eventuality, the court will decide by detailed assessment what sum is a reasonable one for the other party to pay, where agreement cannot be reached about what that figure should be.
All sounds simple, but Part 36 has led to challenges of a legalistic, tactical and technical nature as no other, such that the rule has needed to be revised with what appears to be unseemly regularity. While the last such wholesale change took effect on 6 April 2015 under the Civil Procedure (Amendment No. 8) Rules 2014 (SI 2014/3299), as recently as 6 April 2021 more alterations came into force under the Civil Procedure (Amendment) Rules 2021 (SI 2021/117) (see my previous blog post). Nonetheless, tactical and technical challenges continue. Here are a couple:
- If, as a claimant, you make an offer to settle under Part 36, exclusive of interest, is it a valid offer under the rule capable of conferring the CPR 36.17(4) benefits? The answer is “no”, because the offer must be inclusive of interest, but it took a decision of the Court of Appeal to make that ruling, something with which Arnold LJ was so unhappy that he urged the Civil Procedure Rule Committee to look at the rule again (see King v City of London Corporation, at paragraph 86).
- If, as a defendant, you accept a Part 36 offer one day late (and deliberately at that), can you escape the costs order against you under CPR 36.13(1) which would automatically apply had you accepted it 24 hours earlier? The answer is “yes””, because where there has been a late acceptance, the court must then decide under CPR 36.13(4) whether it is just for that order to apply if the parties cannot reach agreement themselves about the liability for the costs (see Pallett v MGN Ltd).
Those are but two examples which might be regarded as “tactical game-playing” albeit within the rules but perhaps not within the spirit of them. Such mild invective, however, cannot be directed at the timing of the acceptance of the Part 36 offer in Wormald v Ahmed, in which the considerations were driven by the melancholy rather than by the tactical.
Facts
The facts are sad. The claimant was catastrophically injured in a road traffic accident on 26 August 2009, aged 20. By November 2014, the court had resolved liability on the basis of 60% in his favour. Just before that, on 15 October 2014, the defendant had made a Part 36 offer of £2 million in respect of the whole claim, which the claimant’s litigation friend had turned down.
By the autumn of 2020, matters had progressed to the stage that the quantum trial had been given a provisional listing to be heard in October 2021. However, on 14 September 2020, the claimant had gone into hospital. Urgent discussions followed between the litigation friend, her solicitors and leading counsel, and it was decided to accept the Part 36 offer out of time, albeit in the knowledge that adverse costs consequences would follow. Notice to that effect was served under CPR 36.11 at 8.09 am on 18 September, but also that day, at 7.30 pm, the claimant had died. Prima facie, the position in law was thus that the Part 36 offer had been accepted, since it had never been withdrawn. It followed that all that was required of the court was to approve the settlement under CPR 21.10, and if needed, to determine liability for the post-offer costs under CPR 36.13(4), if agreement could not be reached about who should pay them.
That, at least, would have been the position had the defendant not acted differently. On 25 September, his solicitors purported to withdraw the offer on the basis that his untimely death meant that the claimant would no longer need his damages for his continuing care and that if the acceptance was permitted to stand, his estate would enjoy a windfall. That was disputed by the litigation friend on the basis that £279,000 had already been spent on the claimant’s care up to May 2020 and the estate would have significant liabilities in costs covering six years of litigation by reason of the late acceptance of the offer.
Decision
In the view of the deputy judge, Clare Ambrose, these unusual facts raised novel questions as to the application of Part 36 and whether an offer made under the rule could be withdrawn after acceptance by a protected party. Did it made a difference where, as was the case, there had been no CPR 21.10 approval and on the facts, should the court grant permission for the offer to be withdrawn or, instead, approve the settlement?
In contrast to the technical and tactical cases described above, the judge acknowledged that the claimant’s solicitors had been placed in a difficult situation in responding to their client’s critical illness. He had been in fluctuating health due to his traumatic brain damage and on their case, it was mere happenstance that he had died on the same day as the offer had been accepted. They invited the court to approve the acceptance and to rule that the purported withdrawal was ineffective.
The defendant understandably advanced a different case. His submission was that where a minor or protected party were involved, Part 36 was modified and the offer could be withdrawn but that if that was wrong, the settlement should not be approved. In any case, refusing approval would not result in any disadvantage to the claimant as he had already received interim payments reflecting the likely value of the claim, and the withdrawal of the offer (as opposed to the consequences on a late acceptance) meant that it was unlikely that his estate would be adversely affected in costs.
The judge preferred the defendant’s arguments. Here the claimant had sadly died after acceptance but before the court had approved the terms under CPR 21.10. It followed in her judgment that:
- A compromise made on behalf of a protected party by acceptance of a Part 36 offer required the approval of the court under CPR 21.10 (paragraph 59(a)).
- Where a protected party accepted a Part 36 offer, neither the offer nor its acceptance could be binding so as to make the settlement valid until that court approval had been given (paragraph 59(b)).
- Until that approval, the offeror could resile from the offer by giving notice of withdrawal (paragraph 59(c)).
- It was open to all parties to apply for approval of the settlement (paragraph 59(f)).
The judge continued that in deciding whether to approve the settlement, the key question was whether, in all the circumstances, approval would be unjust. One such circumstance was whether the protected party had died leaving no dependents (as the claimant had done), in which event, protection of their interests as a vulnerable person would become less significant and the need to control the proceeds would fall away. While the court was not policing the compromise to see whether it was too generous to the protected party or to the estate, or gave rise to a financial windfall, if it was clear that the settlement would result in the protected party doing significantly better financially than would have been the position had the matter gone to trial, “this may go into the balance” (paragraph 63).
Drawing these treads together, the judge recognised that the litigation friend had been in an exceptionally difficult situation and she rejected any suggestion that the acceptance had been opportunistic. However, the circumstances supported the defendant’s contention that the decision had been made hastily and under pressure. Had he pulled through, it would have been unjust to have held the claimant to the concluded Part 36 compromise. His prognosis had been critical to any fair assessment of the value of the claim, as had the defendant’s lack of opportunity to take advice and to respond to that changed prognosis.
It followed that it would be unjust for the defendant to remain bound by the accepted offer, but that was not quite the end. Having decided that the court’s approval was required under CPR 21.10 but that no evidence had yet been deployed in support, the court’s decision was that final determination would be reserved until the estate had an opportunity to apply for that purpose, so in effect, both the issue of withdrawal and approval have been put off until another day.
Comment
There can be no doubt that the melancholy circumstances arising in this case will be helpful should a claimant in the future suffer the misfortune of meeting their maker at an inopportune moment in the action. The novel questions addressed by the court will assist the lawyers left behind to decide how to deal with them, as happened here, where the judge went out of her way to commend them for the manner in which they had dealt with the issues, in the absence of any prior judicial guidance.
