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Part 36 TRUMPS Part 44 – Webb v Liverpool Women’s NHS Foundation Trust [2016] EWCA Civ 365

Perhaps the best place for us to start this Part 36 blog is with a quote from this recent Judgement: “It is a sad fact that the provisions of Part 36, intended to promote the settlement of litigation, and thus to minimise costs, have themselves been productive of numerous appeals to [the Court of Appeal], and in consequence substantial costs in what is effectively satellite litigation. This is presumably because Part 36 is highly prescriptive (so that even experienced lawyers may fail to make a compliant offer) and the financial consequences of the application of the provisions of Part 36, or the failure to comply with the requirements of Part 36, may be substantial.” Per Sir Stanley Burton in Webb v Liverpool Women’s NHS Foundation Trust [2016] EWCA Civ 365.

This rather world-weary sounding quote comes at the beginning of Sir Stanley Burton’s Judgment in this case, in which the costs consequences following a Claimant bettering her Part 36 offer at trial were in issue. The Judgment is yet further reinforcement of the prime status of Part 36 and indeed sets out a quote from an earlier Court of Appeal case:

“Part 36 is a separate, self-contained code. It must be applied as such. If the offer is one to which the costs consequences under Part 36 apply, then it cannot be taken into account under Part 44 because, although CPR 44.3(4)(c) requires the court to have regard to “any payment into court or admissible offer to settle”, those words are qualified by the words which follow namely ‘which is not an offer to which costs consequences under Part 36 apply’. Part 36 trumps Part 44”

Ward LJ in Shovelar v Lane [2011] EWCA Civ 802

In Webb, the Claimant had pursued a clinical negligence claim on 2 main grounds, the 1st being the failure to perform a cesarean section and the 2nd being the negligent management of the birth itself. At trial, she succeeded on the 1st ground but failed on the 2nd. The Trial Judge had felt it appropriate (and permissible) to make an issues-based costs order, depriving the Claimant of her costs in relation to the 2nd ground.

The position on costs had been made somewhat more complex due to the Claimant’s Part 36 offer to settle liability at 65% of the damages which would have been recoverable on a 100% basis. Notwithstanding the fact that the Claimant bettered that offer, as noted, the Trial Judge, whilst accepting that Part 36 was a self-contained code which contain no mention of the ability to make issues-based orders, felt that it was nevertheless permissible to do so because the rule could surely not prevent the Court from making an Order which would be unjust in all the circumstances.

On Appeal, the Court found that whilst the Claimant had a high hurdle to overcome in securing the overturn of the exercise of discretion of the Trial Judge, in this case the decision would indeed be overturned. The Court of Appeal found that the Trial Judge should have looked at the costs incurred prior to the “effective date” of the Claimant’s Part 36 offer separately from those incurred thereafter.

In relation to those prior costs, on principles quite distinct from the main arguments about the effect of Part 36, the Judge found that where there was no indication in the original Judgment that the Claimant had unreasonably pursued the 2nd ground, then by applying the principles in CPR 44.2 (which explicitly mention considering all the circumstances and bearing in mind whether a party has succeeded in part even if not wholly successful) that there was nothing in this case so out of ordinary such as to merit the Claimant being deprived of her costs. It was not unusual to succeed on some but not all grounds and the Court could not properly deprive the Claimant of her costs of the 2nd ground here.

In relation to costs incurred after the effective date of the Part 36 offer, the Court of Appeal closely considered the meaning of the word “costs” in CPR 36.14 (3) – now CPR 36.17. It found that previous judgments of the Court of Appeal on the interpretation of Part 36 and Part 44 could be distinguished because the Rules had changed significantly such that Part 44 previously required the Court to take account of Part 36 offers when considering all of the circumstances, but the present rule had changed such that Part 36 offers were expressly excluded. Further, Part 36 now requires the court to consider all the circumstances in the case when looking at whether it would be unjust to award a party the costs flowing from a successful offer, where as previously did not. This all went to reinforce the fact that Part 36 is indeed a self-contained code. The Court of Appeal therefore found that the meaning of the word “costs” in CPR 36.14 (3) means all costs and not simply costs which might be recoverable after consideration of factors within CPR 44 which might lead to an issues-based order. The reasoning was summed up as follows:

“It follows from the above, and in particular that Part 36 is a self-contained code, that the discretion under 36.14 relates not only to the basis of assessment of costs, but also to the determination of what costs are to be assessed. I agree with the Judge that Part 36 does not preclude the making of an issue-based or proportionate costs order. However, a successful claimant is to be deprived of all or part of her costs only if the court considers that would be unjust for her to be awarded all or that part of her costs. That decision falls to be made having regard to “all the circumstances of the case”. In exercising its discretion, the Court must take into account that the unsuccessful defendant could have avoided the costs of the trial if it had accepted the claimant’s Part 36 offer, as it could and should have done”.

It can be seen therefore that this is another Judgement which strongly reinforces the primacy of Part 36 offers on questions of costs and the great value placed upon them by the Courts as a means to promote settlement on a sensible basis, with heavy adverse consequences flowing to a party who misses the opportunity to compromise the matter appropriately.

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