10 January 2013Print This Post

High Court wrestles with costs consequences after part 36 offers are accepted out of time

High Court: ruling attacked as illogical

Part 36 continues to trouble the courts, with two rulings recently involving parties seeking to overturn the usual costs consequences of accepting an offer after the usual 21 days.

Both cited last year’s Court of Appeal ruling in SG v Hewitt, where a two-year delay in accepting an offer to settle a claim by a boy who suffered a head injury was held to be justified because his lawyers wanted to wait for him to reach adolescence for a proper diagnosis of the long-term effects of the injury.

Webb Resolutions Ltd v Waller Needham Green [2012] EWHC 3529 (HC) was a negligence claim against solicitors, settled a year after the claimant made a part 36 offer. The defendant argued that the claimant should not have its costs after the acceptance period had expired because it had failed to disclose certain documents in accordance with the pre-action protocol, meaning it could not make a decision on the claim.

John Baldwin QC, sitting as a deputy High Court judge, essentially agreed, saying the claimant was entitled to its costs up to the point (a month after the part 36 offer was made) it had written to the defendant rejecting any obligation to provide further disclosure until liability was admitted.

It also ordered the claimant to pay the defendant’s costs thereafter because “it is significantly more likely than not that those costs would not have been incurred had the claimant acted reasonably and properly to the letters of request for disclosure”.

Raggett v The Governors of Preston Catholic College [2012] EWHC 3641 (QB) concerned a claim by a one-time solicitor of sexual abuse against his former school from the 1970s. In June 2009, shortly after Mrs Justice Slade’s decision on limitation and liability, the defendants made a part 36 offer of £350,000. In November 2012, she awarded him £55,000.

The claimant argued that at the time the offer was made, the value of the case could not be reasonably assessed as work needed to be done to investigate quantum – he argued that the abuse was the cause of subsequent problems in his life – and this process was also interrupted by the defendants’ unsuccessful appeal.

However, the judge ruled that by the time of the offer was made, “the claimant and his advisers had ample information on which to make an assessment of the risks associated with the litigation…

“The facts of this case are very far from those in SG and, in my judgment, there can be no injustice in requiring the claimant to pay the defendants’ costs from the date of the expiration of the time for accepting the part 36 offer.”

The ruling in Webb Resolutions has been attacked as “harsh and illogical” by solicitor Michael Lent, underwriting director at after-the-event insurer Temple Legal Protection.

Writing on the firm’s website, he said: “This is, we submit, a wholly distinct situation from SG v Hewitt, where it was impossible for solicitors to form a view about the extent of their client’s entitlement to damages because no accurate prognosis of their client’s condition could be made at the time that the offer was made.

“The decision will encourage behaviour on the part of defendants where they will refuse to accept offers on the basis that they cannot make a decision because there are further details that they claim have not been provided to them. When they eventually get around to accepting the offer, they will then argue about costs and indeed seek recovery of their own costs.”

He suggested that a claimant in this situation should withdraw their offer in writing and make the offer again or a similar offer when they are able to fulfil the demands of the defendant. “It seems to us that this is completely contrary to the spirit of the part 36 regime and can only encourage satellite litigation about the acceptance of offers and the costs orders associated with acceptance of those offers.”

 

By Neil Rose

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