In this case the margin by which a party beat their own Part 36 offer was not relevant in determining costs consequences. The case also highlights the risk taken in relying on beating part 36 offers and the massive cost of clinical negligence claims-better to mediate using ProMediate at an early stage. Then you don’t need to gamble with Part 36 offers. Much better to meet and negotiate with the other party, even about costs, than making a blind part 36 offer. Exercise your freedom to choose your mediator and don’t accept the NHSR panel mediators.
The High Court has found that, where a claimant beat its own Part 36 offer by only a very small amount relative to the size of the claim, in costs proceedings that was not a relevant factor in determining whether it would be unjust to award the claimant the Part 36 costs consequences in full: JLE v Warrington & Halton Hospitals NHS Trust  EWHC 1582 (QB).
The judge referred to the widely criticised decision in Carver v BAA plc  EWCA Civ 412, which meant that a party who beat an opponent’s offer by only a small margin could be penalised in costs as if it had failed to beat the offer. That decision was effectively reversed by the Civil Procedure Rules Committee following a recommendation by Lord Justice Jackson, so that the rules now expressly provide that an offer will be beaten if the court’s award is better in money terms by any amount, however small. In the present case, the court was keen not to re-introduce Carver by depriving the offeror of the Part 36 costs consequences (or some of them) simply because it beat its own offer by only a small amount.
The decision re-emphasises the high hurdle required before the court will find that a party who makes a well-judged Part 36 offer will be deprived of the costs consequences that would otherwise follow: the test is whether it would be unjust to award the usual costs consequences (or any of them), and that is a stringent test.
The claimant succeeded in her clinical negligence action against the defendant and was awarded her costs. In the subsequent detailed assessment proceedings, she put forward a Part 36 offer of £425,000, in respect of a total claim for costs of some £615,000. She was awarded costs of almost £432,000. That meant she beat her Part 36 offer by just under £7,000.
Part 36 applies to detailed assessment proceedings, by virtue of CPR 47.20(4), with the receiving party treated as the claimant and the paying party the defendant for these purposes. Under CPR 36.17(4), where a claimant obtains a judgment that is more advantageous than its own Part 36 offer, the court must (unless it considers it unjust to do so) order that the claimant is entitled to indemnity costs, 10% interest and 10% damages.
In this case Master McCloud did not award the additional amount. She rejected the claimant’s argument that the test of whether it would be unjust to apply the Part 36 costs consequences had to be considered once and for all, as opposed to separately for each individual element. She concluded that, in this case, it would be unjust to award the additional amount, which she described as “a clearly disproportionate sum”.
She pointed to the following three factors as the most significant in exercising her discretion:
- the very small margin by which the offer was beaten relative to the much greater size of the bill;
- the fact that where a bill is reduced significantly, it will generally be very difficult for a paying party to know where to pitch an offer; and
- the large size of the 10% “bonus” award relative to the margin by which the offer was beaten.
The claimant appealed and the High Court (Stewart J) allowed the appeal and awarded the additional amount.
The judge agreed with the Master that the test of whether it would be unjust to order the Part 36 costs consequences could be applied separately to each of the sub-paragraphs of CPR 36.17(4).
However, the judge held that the Master had erred in principle in relying on the factors referred to above in concluding that it would be unjust to award the additional amount. Those factors were irrelevant to the court’s discretion.
Having found that all three reasons for the Master’s conclusion were inadmissible, the judge held that there was nothing unusual about the circumstances of this case so that the high threshold of proving injustice could be properly regarded as met.
The defendant sought to argue that the court could and should award a lesser percentage than the 10% prescribed percentage, ie that it was not an all or nothing award. The judge said it was too late to raise the point but considered, obiter, that in fact there is no such power. In the judge’s view, if awarded at all (ie unless it is unjust to award it), the additional amount must be awarded in full.
The decision highlights the reluctance of the Court to depart from Part 36 consequences when an offer is beaten. A party should not be penalised for judging correctly the level of an offer. Also, in my view, this illustrates the high level of costs that can be incurred in a clinical negligence case: better to mediate early on before £600,000 of costs are spent.
To mediate in a clinical negligence claim get in touch with us at ProMediate. Put us forward to NHSR instead of their selected panel and exercise your freedom of choice of mediator.