“It is a sad fact that the provisions of Part 36, intended to promote settlement of litigation, and thus to minimise costs, have themselves been productive of numerous appeals to this Court, and in consequence substantial costs in what is effectively satellite litigation.”
This quote is from the beginning of Sir Stanley Burnton’s judgment in the recent case of Webb v Liverpool Women’s NHS Foundation Trust, where the Court of Appeal had to consider whether a claimant who had beaten her own Part 36 offer should be deprived of some of her costs because she was only successful in respect of one of her two allegations. Although it is lamentable that a great deal of costs have been incurred by litigants simply on the meaning of Part 36, this case has clarified some of the issues and will hopefully prevent more satellite litigation in this area of the law.
Court’s discretion as to costs
When considering the issue of costs at the conclusion of a case, the court has discretion as to what order to make. CPR 44.2 sets out the court’s discretion and, as we all know, while the general rule is that the unsuccessful party will be ordered to pay the costs of the successful party, the court may make a different order. It is important to note, however, that in deciding what order to make about costs, the court will have regard to all the circumstances, including:
- The conduct of all the parties.
- Whether a party has succeeded on part of its case, even if that party has not been wholly successful.
- Any admissible offer to settle made by a party which is drawn to the court’s attention, and which is not an offer to which costs consequences under Part 36 apply.
But what happens to this rule when there is a Part 36 offer to consider, and that Part 36 offer has been made by the claimant and beaten at trial, but the claimant has not succeeded on all of their case?
That was the issue that had to be decided in the case of Webb. The court has always had discretion to make an issue-based costs order if a party has succeeded on only some parts of its case. However, is an issue-based costs order appropriate in circumstances where a claimant has beaten their own Part 36 offer, and is therefore considered by most to have “won”?
The first instance decision
The decision in Webb at first instance generated a lot of commentary. It was a clinical negligence case in which the claimant made two allegations of negligence against the trust in respect of her birth. The judge upheld the first allegation, but not the second. As regards the claimant’s costs, the judge held that, although there had been a Part 36 offer made by the claimant which had subsequently been bettered, Part 36 does not prevent the court from making an issue-based costs award. The judge therefore considered it just in the circumstances to make an issue-based proportionate costs order under which the claimant would only recover her costs of the successful first allegation, but not those related to the unsuccessful second allegation. Many commentators held the view that this was not the right approach and that if the defendant had accepted the Part 36 offer then the whole trial would have been avoided, saving a significant amount of costs, especially since it was common practice to bring a number of allegations but not succeed on all of them.
What did this judgment mean for the certainty of Part 36 and where did Part 44 fit in to all of this? One thing was clear: if more issue-based awards were going to be made in circumstances where a successful Part 36 offer had been made, then the costs and administrative burden of reviewing which costs were attributable to which issue would lead to yet further increases in the costs of litigation, despite the purpose of the rule being to reduce costs.
The claimant appealed, knowing that it would be difficult to overturn a costs order where the court was entitled to use its discretion. However, the Court of Appeal allowed the appeal.
Firstly, the court looked at the costs before the effective date and after the effective date separately, which the trial judge had not.
The Court of Appeal held that in relation to the costs incurred before the effective date, the claimant could not properly be deprived of her costs relating to the second allegation because, although the allegation related to separate parts of the claimant’s birth, they were part of one event and she had not been unreasonable in pursuing the second allegation. As set out above, in accordance with CPR 44.2, the court will have regard to “all the circumstances”, including the conduct of the parties, which includes whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue. Sir Stanley said he saw nothing to take the case out of the ordinary or to justify the claimant being deprived of part of her costs.
In relation to the costs incurred after the effective date, the court found that the wording of CPR 36.14 (now CPR 36.17) meant that a successful party was entitled to “all his costs” on an indemnity basis, unless it would be unjust for that party to be awarded all of his costs. It further held that in deciding what costs order to make under CPR 36.14, the court does not first exercise its discretion under Part 44. Its only discretion is that conferred by Part 36 itself, which is a “self-contained code”. In referring to Part 36 being a self-contained code, Sir Stanley referenced Ward LJ in Shovelar v Lane and this seems to me to be an important principle to remember when considering Part 36 offers, especially Ward LJ’s conclusion that Part 36 trumps Part 44.
Sir Stanley concluded by saying that he agreed with the trial judge that Part 36 does not preclude the making of an issue-based or proportionate costs order, however, a successful claimant is to be deprived of all or part of their costs only if the court considers that it would be unjust for them to be awarded all of that part of their costs. That decision falls to be made having regard to “all the circumstances of the case”. Importantly, he also stated that the court must take into account that the unsuccessful defendant could have avoided the costs of the trial if it had accepted the claimant’s Part 36 offer as it could, and should, have done.
In terms of implications for practitioners, many people will see this judgment as the right result and consider that order has been restored to Part 36, under which a winner is a winner unless something takes the case out of the ordinary. Part 36 should be seen as an incentive to settle. The decision also reinforces the importance of Part 36 and the fact that really serious consideration should be given to any sensible offers, as the consequences of not accepting an offer which is subsequently beaten can be substantial.