Judges can make issues-based costs orders under part 36 but only if it is unjust to deprive a successful claimant of all or part of their costs, the Court of Appeal has ruled in overturning such an order.
The court also bemoaned the fact that part 36 – which was intended to promote settlements – had caused so much satellite litigation.
Webb v Liverpool Women’s NHS Foundation Trust  EWCA Civ 365 was a clinical negligence case arising from a birth where the claimant beat her rejected part 36 offer at trial.
There were two main allegations, only one of which succeeded. But having established that her injury was caused by the defendant’s negligence, His Honour Judge Saffman, sitting as a High Court judge in Leeds, ruled that the claimant was entitled to full recovery of damages for her injury and loss.
However, he decided that in the circumstances it was just to make an issues-based proportionate costs order, under which the claimant would not recover her costs of the second allegation.
On appeal, both parties accepted that the claimant’s entitlement to costs before the part 36 offer had been rejected (called the ‘effective date’ in the ruling) was to be determined in accordance with part 44.
Giving the appeal court’s ruling, Sir Stanley Burnton said: “This is a relatively straightforward issue. I have not found it easy, but have been persuaded that the judge could not properly have deprived the claimant of her costs relating to the second allegation, essentially for the reasons put forward by the claimant.
“Although the two allegations related to separate parts of the claimant’s mother’s labour, they were part of one event, namely the claimant’s birth. Her injuries were such as would not in general be caused without negligence in the care of her birth.”
There was no suggestion that it had been unreasonable to pursue the second allegation and so “I see nothing in this case to take it out of the ordinary or to justify the claimant being deprived of part of her costs”.
In relation to the costs after the effective date, Sir Stanley agreed that an issue-based or proportionate costs order could be made under part 36.
But he continued: “However, a successful claimant is to be deprived of all or part of her costs only if the court considers that would be unjust for her to be awarded all or that part of her costs. That decision falls to be made having regard to ‘all the circumstances of the case’.
“In exercising its discretion, 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.
“I am clear that, for the reasons I have given in relation to the claimant’s costs before the effective date, it cannot be said that it would be unjust for her to be awarded all her costs.
“Furthermore, in making his determination, the judge did not take into account, as he should have, the fact that the defendant could have avoided all the costs of the trial by accepting the claimant’s favourable part 36 offer.
“The considerations to which I referred apply even more strongly in relation to her costs after the effective date, when the question is not whether it is just for her to be awarded all her costs, but whether it would be unjust for that award to be made.”
Lord Justice Simon and Lady Justice Gloster agreed that the appeal against HHJ Saffman’s order should be upheld.
More generally, Sir Stanley said: “It is a sad fact that the provisions of part 36, intended to promote the 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 is presumably because part 36 is highly prescriptive (so that even experienced lawyers may fail to make a compliant offer) and the financial consequences of the application of the provisions of part 36, or the failure to comply with the requirements of part 36, may be substantial.”