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Who is paying what after a Part 36 offer is withdrawn?

View profile for Janina Muromceva
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Another week and another judgment on a “proper” application of Part 36 provisions. This time in the case of Gemma Ballard v Sussex Partnership NHS Foundation Trust [2018] EWHC 370 (QB) Mr Justice Foskett sitting in the High Court was asked to consider an appeal arising from a costs order made by HHJ Simpkiss at Brighton County Court.

Background

The claimant brought a claim for damages for personal injury and associated losses after she was seriously assaulted by a patient during the course of her employment. Liability was admitted by the defendant but the parties were unable to agree on quantum. As a result the matter proceeded to a two day Trial where the claimant was awarded a total sum of £23,315.13 for damages and interest.

During the proceedings various settlement offers were made. The defendant's first settlement offer was a Part 36 offer in the sum of £50,000 which was made on 25 January 2016. The defendant's offer was not accepted. In February 2017 the defendant sent two letters to the claimant. The first letter referred to the defendant’s first Part 36 settlement offer and advised that they “had instructions to withdraw the offer”. The second letter was a further settlement offer in the gross sum of £30,000 which stated that "This is a Part 36 Offer and all previous offers in this matter are withdrawn".  

At the conclusion of the Trial HHJ Simpkiss was requested to decide on the issue as to an appropriate costs order to be made in this case. The judge exercised his wide discretion in relation to costs and ordered the claimant to pay the defendant’s costs from the expiry of the Part 36 offer made in January 2016.

Appeal

On appeal the claimant did not dispute that they were liable for the defendant’s costs from the date of expiry of the defendant’s second Part 36 settlement offer (in February 2016) but submitted that HHJ Simpkiss was wrong in awarding the defendant their costs from the expiry of their first Part 36 settlement offer. Consequently Mr Justice Foskett was tasked with making a decision as to which party was liable for costs for the period between the expiry of the first (withdrawn) offer and the commencement of the Trial (16 February 2016 and 1 March 2017).

In addition the claimant disputed HHJ Simpkiss’ finding that the defendant’s second Part 36 settlement offer bore no relevance when deciding on the issue of costs in this case. The claimant submitted that the defendant's second Part 36 settlement offer made it clear that if the judgment obtained was not more advantageous than the offer, the offer stated that the order for the claimant to pay the defendant’s costs was expressly stated as from 1 March 2017.

Mr Justice Foskett addressed the issue of whether or not the defendant's first Part 36 offer should have been taken into account when making an appropriate order for costs. The defendant’s argument was that, although the first Part 36 settlement offer was withdrawn, the Court had entitlement to take the existence of this offer into account given that had it been accepted, costs would had been saved by both parties starting from 16 February 2016.

Reference was made to the decisions in Fox v Foundation Piling Ltd [2011] EWCA CIV 790 and Uwug Ltd & Anor v Ball [2015] EWHC 74 (IPEC) and Mr Justice Foskett considered that there was a tension between the provision that an offeror who withdrew a Part 36 offer could not “reap the benefits” of Part 36 costs consequences and the proposition that such an offer should still have relevance on the issue of costs.

The parties argued about the impact of the wording of the defendant’s second Part 36 settlement offer. The claimant reiterated that it was crystal clear from this letter that the claimant would have been responsible for costs after 21 days if she failed to obtain a more advantageous judgement. On the other had the defendant argued that the claimant had to demonstrate some reliance on the wording of the second offer. Mr Justice Foskett was unimpressed with the defendant's argument.

Finally it was decided that HHJ Simpkiss misdirected himself when making a finding that the defendant’s second Part 36 offer was “irrelevant”. In his decision Mr Justice Foskett stated that the defendant could not escape the precise terms of this offer which meant that in reality the first Part 36 offer was irrelevant.

The appeal, therefore, was allowed and the previous costs order was replaced by an order that the claimant be entitled to their costs up to and including 1 March 2017 and the defendant was entitled to their costs thereafter.

The moral of this judgement is that, had the defendant not withdrawn but instead amended their first Part 36 settlement offer, they would had fully benefitted from the costs consequences attached to that offer. Conversely if the defendant’s second Part 36 settlement offer had included the term that the claimant paid costs from 16 February 2016, this would not have been deemed a valid Part 36 settlement offer on the basis that the defendant sought to vary usual costs consequences (see James v James & others [2018] EWHC 242 (Ch))

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