The two recent cases discussed below are cases which examine CPR Part 36 and the Court’s discretion therein.
Summers v Bundy [2016] EWCA Civ 126
The recent Court of Appeal Decision in Summers v Bundy concerns the application of a 10% uplift on damages brought into play by virtue of CPR Part 36 as part of the LASPO 2012 reforms. It was initially understood by the legal profession that Jackson’s intention was that the 10% uplift on damages would serve to compensate Claimants in cases where they were liable to pay their solicitor a success fee, but where the additional liabilities element was no longer recoverable between the parties. However, the case of Simmons v Castle [2012] EWCA Civ 1039 clarified that the 10% uplift would apply to all cases post April 2013.The question of when to apply the 10% uplift has reared its head again here in the recent case of Summers v Bundy.
This was a personal injury claim for damages in excess of £100,000. The claim was assigned to the multi-track. Although this was a clinical negligence action, the Defendant, Dr. Bundy, did not take part, nor was he represented in the proceedings at any stage. On 1 May 2014 judgment was entered against the Defendant in default and the assessment of damages was thereafter conducted in circumstances where he again was neither present nor represented. The Claimant, Mr. Summers, was at all relevant time legally aided.
The assessment of damages came before Judge Gargan, sitting in Sheffield County Court, on 8 July 2015. Judge Gargan awarded damages in the circumstances of the case for pain, suffering and loss of amenity in the sum of £27,500. Judge Gargan noted, during the course of his judgment:
“I am asked to consider whether or not there should be a 10 per cent uplift. I am advised that whether or not that should be granted to a legally aided party is a discretionary matter.”
Judge Gargan concluded that, as the Claimant was in receipt of legal aid and therefore was not required to pay an uplift to his solicitor from his general damages, on balance he was not persuaded to exercise his discretion in favour of the 10% uplift.
The Appeal
An application for permission to appeal, which was granted and the appeal came before Lord Justice Jackson. The question which Lord Justice Jackson was faced with was whether the judge had erred in using his discretion in reaching the decision not to award the 10% uplift in addition to the general damages in the initial judgment.
In his judgment Lord Justice Jackson considered the case of Simmons v Castle and made it abundantly clear that the Claimant's case was not one which fell within the ambit of section 44(6) of LASBO 2012 (i.e pre 01.04.13). He subsequently went on to state that, in failing to award a 10% uplift to the general damages, the judge had considered that a further exception was available to him to apply, as a matter of discretion, in the withholding of the 10% uplift.
Jackson LJ affirmed that Simmons v Castle had set a precedent in that an exception to an award for general damages including a 10% uplift, arose only in circumstances where section 44(6) of LASPO 2012 applied. Such circumstances had not been present in this case, and therefore, the judge had been required in statute to apply the 10% uplift on the award of general damages. Ultimately it was held that the Claimant “was entitled as of right to an award of general damaged including the 10 per cent uplift and the judge had no discretion to depart from that".
Sutherland v Khan
The case of Sutherland v Khan (Kingston-Upon-Hull County Court, Case number A81YM424) was a fixed costs case where the Claimant had brought a road traffic claim which was subject to Part 45.29A of the Civil Procedure Rules (CPR). The relevant facts of the case in relation to this article is that the Claimant had made a Part 36 offer to settle; the offer was accepted by the Defendant some 28-30 days following the expiry of the ‘relevant period'. As a result of the purported late acceptance, the Claimant sought costs in excess of those prescribed under the applicable fixed costs regime.
The case came before Judge Besford who noted that as an RTA claim, the claim fell within the scope of CPR45.29A; namely the claim was a fixed cost case. However, broadly speaking the Claimant was seeking to claim costs in excess of fixed costs, with reference to CPR45.29J which provides:
(1) If it considers that there are exceptional circumstances making it appropriate to do so, the court will consider a claim for an amount of costs (excluding disbursements) which is greater than the fixed recoverable costs referred to in rules 45.29B to 45.29H.
There was some uncertainty and debate as to whether the Claimant was making an application under CPR 45.29J (Claims for an amount exceeding fixed recoverable costs) or under CPR 36.13 and 36.14. Judge Besford concluded that that Claimant’s application had been made under Part 36 and not under Part 45.29J.
It is important to note here, as was highlighted in the judgment, that whilst Part 36 deals with situations where the Claimant accepts (out of time) a Defendant’s offer, it appears to be silent as to a Defendant accepting a Claimant’s offer out of time, prior to trial. The nearest analogy is 36.17 but it is accepted that Part 36.17 applies where judgment has been entered. This is not the case here.
As the parties were unable to agree costs, the Claimant issued their application under 36.14(5)(b) and 36.13(5). Where an agreement as to costs is not reached part 36.14(5) provides that:
(5) any stay arising under this rule will not affect the power of the court
a) to enforce the terms of a part 36 order, or
b) to deal with any question of costs, including interest on costs, relating to the proceedings.
Part 36.13(5) governs when a Part 36 offer relating to the whole of the claim has been accepted after the expiry of the relevant period, but the parties cannot agree the liability for costs. It states that the court must, unless it considers it unjust to do so, order that:
(a) the Claimant be awarded costs up to the date on which the relevant period expired; and
(b) the offeree do pay the offeror’s costs for the period from the date of expiry of the relevant period to the date of acceptance.
Judge Besford was faced with the task of determining liability for costs. He noted that he must take into account all the circumstances of the case, including the matters listed in 36.17(5). He acknowledged the question around whether he should award costs on the standard or the indemnity basis. In the absence of judgment being entered, the question arose as to whether late acceptance resulted in the Defendant being liable to pay indemnity costs.
Counsel on behalf of the Claimant quoted Broadhurst v Tan and Taylor v Smith [2016] EWCA Civ 94 when addressing the importance of Part 36 offers and the notion that they have ‘teeth’.. In this case it was established that a successful Part 36 Claimant, this is one who matches or beats her or his own offer, is entitled to indemnity costs on an open basis; ultimately meaning that those indemnity costs are not limited to a sum equal to fixed costs.
On behalf of the Defendant, counsel referred to Fitzpatrick Contractor Ltd v Tyco Fire v Integrated Solution (UK) LTD [2010] 2 Costs LR 115 in support of their argument that, in order for an indemnity basis costs award to be made, it needs to be shown that there has been some bad faith, unreasonable conduct, or something to warrant an indemnity costs order against the Defendant, i.e the indemnity award represents a penalty.
In his judgment Judge Besford distinguished Fitzpatrick Contractor Ltd v Tyco Fire v Integrated Solution and stated that the case was “statement of the law as it was in 2009, but not necessarily the way the law in respect of Part 36 is being interpreted in 2016”.
In short, Judge Besford reiterated that the overriding intention of Part 36 offers was to encourage savings of time and money by settling costs prior to issuing a claim. He commented that “if there was no incentive or penalty there would be little point in a Defendant accepting offers early doors, as opposed to waiting immediately prior to trial”. He subsequently expressed the view that it is unsatisfactory that there should be penalties flowing if you do not beat an offer at trial, whereas if you settle before trial there are none, [as] this position does not sit comfortably with the overriding objective of saving expense.'
In conclusion he held that the court does not have “to find that the Defendant has, in some way been guilty of inappropriate behaviour or conduct capable of censor before [it] can consider making an order for costs on an indemnity basis”.
He went on to state that for the court to deny the consequences that flow from accepting a Part 36 out of time the court has to make an exceptional finding and there has to be some very good reason as to why it is unjust not to make the usual order.
It was held that the Claimant would receive fixed costs up to the expiry of the relevant period for acceptance of the Part 36 and thereafter an indemnity costs award after the expiry date for acceptance.
The effect of Sutherland v Khan is that, where a Defendant accepts a Claimant’s Part 36 offer out of time, the normal costs consequences of failing to accept apply (indemnity costs after the relevant date). Further, it would require exceptional circumstances for the court not to make the usual order for costs against the Defendant following late acceptance. The outcome of this case supports the principle that Part 36 was meant to bring clarity to the parties as opposed to bringing increasing amounts of satellite litigation.
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