Head over heart: late acceptance of Part 36 Claims in MRA -v- Education Fellowship Ltd [2022] EWHC 1069 (QB)

This case focused on the application of the CPR Part 36 rules where an offer is accepted after expiry of the relevant period. In particular, the Court was asked to examine the parameters of what would be considered “unjust” for the purposes of CPR Part 36.13 and 36.17 and, specifically, whether this extended to circumstances where prognosis was not certain at the time of the offer and the Claimant’s damages would ultimately be significantly reduced by the payment due to the Defendant. It is a key example of where a Judge is faced with the challenges of applying the law irrespective of the sympathy felt for the Claimant, even in the most sensitive of claims. It is, to use the Defendant’s Counsel’s terminology, and as adopted by Master McCloud throughout her Judgment, a case of applying the “head over heart” principle.

Relevant CPR Rules - Part 36

CPR Rule 36.13(1) states that:

“Subject to paras (2) and (4) and to rule 36.20, where a Part 36 offer is accepted within the relevant period the claimant will be entitled to the costs of the proceedings (including their recoverable pre-action costs) up to the date on which the notice of acceptance was served on the offeror”.

CPR Rule 36.13(4) states that:

“Where … (b) a Part 36 offer which relates to the whole of the claim is accepted after expiry of the relevant period [21 days] … the liability for costs must be determined by the court unless the parties have agreed the costs”. 

CPR Rule 36.13(5) states that:

“Where para 4(b) applies but the parties cannot agree the liability for costs, the court must, unless it considers it unjust to do so, order that –

1. The claimant be awarded costs up to the date on which the relevant period expired; and
2. The offeree to pay the offeror’s costs for the period from the date of expiry of the relevant period to the date of acceptance”.

 CPR Rule 36.13(6) states that:

“In considering whether it would be unjust to make the orders specified in para (5), the court must take into account all the circumstances of the case including the matters listed in rule 36.17(5)”.

CPR Rule 36.17(5) states that:

“In considering whether it would be unjust to make the orders referred to in paragraphs (3) and (4), the court must take into account all the circumstances of the case including –

1. the terms of any Part 36 offer;
2. the stage in the proceedings when any Part 36 offer was made, including in particular how long before the trial started the offer was made;
3. the information available to the parties at the time when the Part 36 offer was made;
4. the conduct of the parties with regard to the giving of or refusal to give information for the purposes of enabling the offer to be made or evaluated; and
5. whether the offer was a genuine attempt to settle the proceedings”.

Facts of the case

In brief, on 7 June 2017 a claim was issued arising from a serious instance of child abuse by a female teacher, who exploited her position of trust to abuse a child who had autistic spectrum disorder and ADHD. Proceedings were served on 7 September 2017. Liability had been admitted at the pre-action stage. The case was assigned to Master McCloud for case management.

The Claim Form limited the value of the claim to £100,000 and the Schedule of Loss served with proceedings was mainly TBC. Condition and Prognosis reports of a psychiatrist and educational psychologist were cited and relied upon. 

On 19 January 2018, the Defendant made a Part 36 offer in the sum of £80,000.

On 30 January 2018, during the relevant period of the Part 36 offer, the Claimant’s psychiatrist produced an addendum report which indicated that the Claimant’s PTSD had worsened and stated that a report from an Autism and Learning Disability specialist was required.

The Claimant’s solicitors requested an extension to the relevant period on the basis that the Claimant’s prognosis remained unclear. The Defendant did not agree the extension.

On 2 April 2020, the Claimant accepted the £80,000 Part 36 offer. As the offer was accepted outside of the relevant period, and the Parties could not reach agreement, the issue of costs came before Master McCloud to determine.

Judgment

In this case, the costs consequences of CPR Part 36 were favorable to the Defendant, as the burden was on the Claimant to demonstrate that it would be unjust to award the Defendant their costs (subject to assessment) from the date of expiry of the relevant period through to acceptance of the offer.  

In an attempt to persuade Master McCloud that it would be unjust, the Claimant argued the following:

1. That prognosis was unclear at the time the offer was made and this was recognized by both Parties;
2. That the case of SG v Hewitt [2012] EWCA Civ 1053; [2012] 5 Costs LR 937 applied, where the Court of Appeal held that, despite the offer being accepted two years after it was made, the Defendant should bear its own costs;
3. In cases involving Protected Parties, the Court has to approve a settlement and has a duty not to approve a settlement unless it is reasonable and appropriate. Absent finalised prognosis advice, which the Claimant considered was not available, the Court could not approve such a settlement. Furthermore, the Defendant would not have been able to recover their costs had settlement not required approval by the Court i.e. if the matter did not involve a Protected Party, and had settled in the pre-action phase, there would be no damages Order for the Defendant to enforce against the Claimant’s damages;
4. That it would have a “disastrous” and “completely unjust” impact on the Claimant, as a victim of abuse, to have the Defendant’s post-offer costs deducted from the Claimant’s award, thus reducing the ultimate damages figure he actually received.

The Defendant advanced various arguments to rebut those of the Claimant and, ultimately, Master McCloud accepted that, when considering the criteria as clearly set out in CPR Part 36.17(5), the offer was a “high offer” and was early and well judged, but not so early that the Claimant could not undertake a reasonable evaluation. She also considered that “sufficient material” was available to advise the Claimant, even if the expert evidence was not finalised. Finally, there were no relevant conduct issues and it was a genuine offer to settle.

In view of the above, Master McCloud held that it would not be unjust to allow the rule to apply, and the Defendant (subject to assessment) could make the relevant deductions from damages under CPR Part 36.

Comment

This case is a cautionary tale to those Claimants who might seek to argue that any hesitancy in their expert evidence as to prognosis, or the overall reduction of the Claimant’s damages, are sufficient grounds for CPR Part 36.17(5) to not apply. However, whilst Master McCloud found for the Defendant on this occasion, she did make clear that in cases where prognosis really is uncertain, where an offer is made in an attempt to “ambush" at an unreasonably early stage and/or where a stay is agreed in the claim, the application of CPR Part 36.17(5) may not be so favourable for the Defendant.