Part 36 CPR offers to settle, late acceptance and the consequences in Personal Injury claims

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Introduction

In personal injury litigation, it’s not uncommon for parties to disagree fiercely on how a Court will assess damages when the issue of quantum is considered. There are so often numerous uncertain contingencies and fact-based outcomes that the parties take polarising views.

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As matters come closer to trial and evidence crystalises, parties may well conclude their position is not maintainable and previous offers made by another party, need to be accepted. In personal injury litigation, there has been a question mark over how QOCS applies in such cases when it comes to seeking to offset costs against damages. On this point, the recent case of University Hospitals of Derby & Burton NHS Foundation Trust v Harrison [2022] EWCA Civ 1660 gives us that clarity.

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The basic facts of Harrison as to the costs issue

As far as the claims chronology goes (helpfully set out at paragraphs 5 – 11 of the Judgment) the following is of note;

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1. The Claimant brought a claim for clinical negligence in February 2019
2. The Defendant made a part 36 CPR ?offer to settle on the 6th December 2019;
3. The Defendant admitted liability on the 14th ?January 2020;
4. At a CCMC on the 27th January 2020, District Judge Hassall ordered that Judgment be entered for the Claimant with damages to be assessed and, amongst other things, required the Defendant to make a payment on account of costs of ￡75,000;
5. Experts' reports were prepared and an updated schedule of loss was provided, dated the 8th October 2021, in which the Claimant sought damages to a maximum amount of ￡5.7m.
6. Shortly thereafter, the Defendant applied to adduce at trial evidence collected in various ways which, so it was said, was inconsistent with the Claimant's account of the effect of the negligence upon her health and way of life;
7. ?Permission to adduce this evidence was granted on the 22nd October 2021;
8. There was an unsuccessful mediation on the 3rd November 2021;
9. On the 8th November 2021, the Claimant indicated that she wished to accept the Defendants part 36 CPR offer made in December 2019.

The Defendants' part 36 CPR offer

On the 6th December 2019 the Defendant made a part 36 CPR offer in the sum of ￡421,362.88. As was permitted by part 36.22 (3) CPR), the Defendant chose to stipulate that the amount offered included any deductible amounts, meaning benefits that might be paid by the Department of Work and Pensions to the Claimant between the date of the offer and the date of its acceptance. The offer sets out that “if this offer is not accepted by 27 December 2019 [the date of the expiry of the relevant period for the purposes of part 36.3 (g) CP and further deductible benefits have been paid, the Claimant will require the Court's permission, pursuant to part 36.11 (3) (b) CPR, to accept this offer.”

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The Judgment of HHJ Sephton KC

The parties were unable to agree on their respective liability for costs and that issue came before HHJ Sephton KC on the 7th March 2022 where he gave the Claimant permission to accept the Defendants part 36 CPR offer and directed;

1. That the deductible benefits (i.e., the benefits paid by the DWP to the Claimant by way of disability allowance, etc since the date of the negligence) were ￡48,206.17;
2. Following the additional deduction of the interim payment of ￡75,000, the net sum due to the Claimant was ￡298,156.16.

As to costs, HHJ Sephton KC ordered that the Defendant was to pay the Claimants reasonable costs until the 27th December 2019. He ordered that the Claimant should pay the Defendants reasonable costs from the 28th December 2019 but, crucially, that “the Defendant may not set-off or enforce this costs order against the Claimant pursuant to part 44.14 CPR.” In doing so, the Claimant's QOCS protection was preserved. .

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The appeals nucleus

The Defendant appealed on the basis that the order made by HHJ Sephton KC ?was an order awarding damages and therefore caught by part 44.14 (1) CPR .

In doing so, and as set out in paragraph 18 of the Judgment, on analysis, the Defendant was seeking to argue that as the Courts permission was required, this resulted in “a Court order awarding a sum of money and was therefore within ?part 44.14(1) CPR” . It was contended therefore that the Defendant could set off the costs it had incurred since the expiry of the offer against the settlement sum due to the Claimant.

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The outcome

The appeal was dismissed. In doing so Lord Justice Coulson identified 5 main reasons for doing so;

1. What the Court does Under part 36.22(9) CPR (see paragraph 22 – 35);
2. The Elevation of Form Over Substance (see paragraphs 36 – 38)’
3. Policy Considerations (see paragraphs 39 -0 44);
4. The Authorities of Cartwright and Adelekun v Ho (see paragraphs 45 – 48); and
5. What the Present Rule Does Not Say (see p[paragraphs 49 – 53)

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These paragraphs need to be read fully since it is nearly impossible to distill a detailed and focused Judgment into but a few lines.

That said, the Court of Appeal concluded that the order made by the HHJ Sephton KC ?had not been an order within the scope of part 44.14 CPR as an order under part 36.22 (9) CPR was not “an order for damages and interest made in favour of the Claimant” within the meaning of part 44.14(1) CPR. HHJ Sephton KC had given effect to part 36.22 (9) CPR and other relevant provisions by granting the Claimant permission to accept the offer and directing the amount of the deductions to be applied.?

The Court of Appeal firstly identified that in most cases where a matter resolves through the procedural application of part 36 CPR, an accepting party would not require the Court’s permission to accept an offer whether within or without the prescribed period. Such settlements are between the parties and would not involve the Court at all, and importantly, were not orders made by the Court for damages. The direction of HHJ Sephton KC as to the deductible amounts paid did not morph the parties agreed position into a Court order for damages in favour of the Claimant.

Secondly, on the Defendant's analysis, Claimants who placed their agreements into a schedule annexed to Tomlin order or who required permission to accept an offer would on the Defendant's analysis lose their QOCS protection creating a conflict of form over substance.

Thirdly, the Court identified in tandem with the above point, that whilst there here were various situations where part 36 CPR required the Court to make an order to reflect the parties’ settlement, for example where a Claimant lacked mental or legal capacity, these were exactly the type of cases where QOCS protection was needed. On the Defendants analysis, such protection could and would be lost because an order had to be made by a Court as required by the CPR.

Fourthly, the Court considered in detail, Cartwright v Venduct Engineering Ltd [2018] EWCA Civ 1654, and Ho v Adelekun [2021] UKSC 43, and concluded on analysis at paragraphs 47 and 48 of the Judgment that;’

“The Supreme Court did not differentiate between different kinds of settlement. Although, on the facts of Adelekun v Ho , the acceptance of the part 36 CPR offer led to a Tomlin Order by consent, and so was similar to Cartwright , that difference of form did not matter to the Supreme Court. They appeared to treat all types of settlement interchangeably, whether that was an offer and acceptance by way of part 36 CPR , or by way of a Tomlin Order. They did not suggest that there was any meaningful difference between the two: they worked on the basis that, if there was a settlement of any kind, part 44.14 (1) CPR did not apply.

Accordingly, it seems to me that the authorities – and in particular Adelekun v Ho – lead to the conclusion that a settlement achieved by an offer and acceptance under the part 36 CPR regime, whether it is recorded in a Tomlin Order or howsoever, is not “an order for damages and interest in favour of the Claimant” within the meaning of part 44.14(1) CPR”.

Finally, and in my mind most practically, Lord Justice Coulson pointed out that the rules committee had agreed to a proposed amendment to part 44.14 (1) CPR so that it covered “agreements to pay”.?That indicated that the committee did not think that the current rule covered such agreements between parties since if not, why change it?

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Conclusion

The Judgment warrants reading for an authoritative application of the law to a not-uncommon set of facts.

The main takeaway from the point however is not just the clear conclusion reached, but also the force with which it presented, clarifying any uncertainty generated by Cartwright.

Harrison sets out that compensation payable as a result of a settlement by way of part 36 CPR is not an “order for damages and interest” within the meaning of part 44.14 CPR and gives clear explanation as to the reasoning behind the conclusion. The consequence is that in the absence of any agreement to the contrary between the parties, a settlement sum should not be subject to costs set off. Whilst the CPR may well be subject to future change on this point, this is the current lay of the legal landscape.

One small point of contention from the Judgment is the apparent inconsistency with situations where a Claimant in a similar position, pushes on to trial and fails to better a Defendant’s part 36 CPR offer. A Defendant in this position is going to have protection as to payment of the Claimants costs, but also be able to offset its costs post expiry of the offer against the Claimants Damages. Why not extend this to late acceptance of part 36 CPR offers?

The outcome some Defendants may argue appears to be that there is not really a clear penalty to a Claimant directly (other than the denial of their legal costs) in accepting expired and stale offers. It may well be that practically, these risks are being pushed away from Claimants, and onto legal representatives which comes with other determinants. It's also right to identify that the rules committee appears to be looking to address this issue and inconsistency, but those changes are not yet in effect.

However, I am not entirely certain that this is a needed change. The overriding objective works at its core to resolve matters without the parties having to have trials. The approach of Harrison encourages this through practical and straightforward means. It is commendable and I for one am grateful for the clarity.