Judges should be “very slow to entertain a discussion as to whether parties to litigation have negotiated in a reasonable manner”, the Court of Appeal has cautioned.
Lord Justice Tomlinson said “such an enquiry opens up the prospect of undesirable and wasteful satellite litigation, as the reasonableness of a negotiating stance may and almost certainly usually will depend upon a careful evaluation of the respective states of knowledge of the parties”.
He added: “The part 36 regime is designed precisely to obviate this kind of enquiry.”
The court was ruling on an appeal against an order for indemnity costs that followed a successful birth injury claim in Manna v Central Manchester University Hospitals NHS Foundation Trust  EWCA Civ 12.
Mrs Justice Cox ordered that the defendant should pay indemnity costs from 11 June 2015 – four days before the trial – which was the day the trust rejected the claimant’s pre-trial offer of settlement.
She gave two reasons for this. First, she said the defendant had failed “to enter into meaningful negotiations in a collaborative way and to seek a sensible compromise in a quantum only trial” in a manner which “was unreasonable, especially in light of the self-evident weaknesses in their care and occupational therapy evidence”.
She also castigated the defendant’s decision to carry on to trial as “ill-judged”, necessitating an eight-day trial “at huge cost both to public funds and to the family of this severely disabled young claimant”.
The second reason was that the judge regarded the nature of the case advanced by the defendant as unsustainable and entirely inappropriate in the context of the case.
Tomlinson LJ went through the history of settlement negotiations. The defendant’s offer, made 21 days before the trial and rejected by the claimant, would have involved payment of a further lump sum of £1.25m and periodical payments of £80,000 per annum.
A week before trial, the claimant made its offer, which was not part 36 compliant, involving payment of a further lump sum of £1.65m and periodical payments of £90,000 per annum. That offer was rejected by the Defendant on 11 June 2015.
The end result at trial was that the claimant recovered a further lump sum payment of £1.75m and periodical payments of £103,000 per annum.
Tomlinson LJ said: “For my part I do not think that the defendant’s conduct in negotiations should attract any sanction in costs, and I do not consider that the judge gave adequate reasons for her conclusion that it did.”
However, rejecting the appeal, he agreed with the trial judge over the defendant’s conduct of the trial, with the claimant’s parents accused of exaggerating the difficulties involved in his care and that they were motivated by greed rather than the interests of their son.
The judge was also “very critical” of the evidence given by the defendant’s experts in the field of care and occupational therapy.
Tomlinson LJ said: “I have no doubt that had the judge acceded to the defendant’s suggestion that the claimant’s case was deliberately exaggerated, the defendant would have sought an award of indemnity costs. What is sauce for the goose should be sauce for the gander.
“I bear in mind that litigation in this field is often hard-fought. Given that litigation is necessarily adversarial, and that litigation unfortunately cannot be avoided in this field, I guard against a feeling that sometimes it is conducted in a manner inappropriate to the subject matter…
“Looked at in the round, the judge who heard the trial, and who I might add had heard many like it, plainly concluded that what had occurred fell outside the norm, although she did not express her conclusion in precisely that manner.
“That conclusion will I hope rarely be reached in litigation of this kind, but I do not consider that we would be justified in interfering with the judge’s conclusion that here it properly should be.”