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Late acceptance of Part 36 offers – latest judgement on Indemnity Costs

Only a couple of weeks ago, the Court of Appeal handed down their eagerly awaited decision on late acceptance of Part 36 offers and how the same may affect the provisions of CPR 45 and fixed costs, much perhaps to the disappointment of those who have been on the receiving end of such in the past.

However, we are able to report a further decision more recently handed down, this time by His Honour Judge Gore QC, finding that a Defendant, who had a case which was described by the Master at the Case Management Conference as “…worse than hopeless…”, must pay indemnity costs covering the period of delay.

In the matter of Holmes v West London Mental Health NHS Trust the Defendant faced a claim for clinical negligence arising out of the prescribing of lithium to the Claimant over a period spanning from 1994 to 2012 when, in 2012, she became ill and was admitted to hospital whereupon she was diagnosed with severe lithium toxicity, which caused her to be admitted to intensive care for 19 days and to stay in hospital for two months.

As a consequence of the Defendant’s negligence, proceedings were issued in February 2015 and matters were initially addressed by the Defendant proactively, with various offers being made by them between January and April 2017, none of which proved agreeable to the Claimant. As part of this process, and in the spirit of compromise, in February 2017, the Claimant proposed settlement with a Part 36 offer of 95% of the claim’s full value. The Defendant rejected that offer in March 2017.

Following this, there is invitations were made to the Defendant to enter into ADR to which they failed to respond and, further, served witness statements and experts reports late, further failing to agree agendas required for joint expert’s meetings and failed to respond to advances to resolve the matter by way of Mediation, the judge noting with “…utter dismay…” that the trial window being set for between October 2018 and April 2019, preparation for trial had “…dawdled along…”.

Finally, on 30 May 2018, the Defendant elected to accept the Claimant’s offer originally made in February 2017, but attached to that acceptance the condition that the Claimant’s legal costs should be assessed only on the standard basis. The Claimant, perhaps unsurprisingly, was not agreeable to this condition given that significant costs had been incurred in the intervening 15 months, and thus the issue was placed before the court for determination as to the basis of assessment.

In handing down his ruling, His Honour Judge Gore QC addressed the contentions made on behalf of the Defendant with regard to the purported strength of their defence, dismissing the same as being inconsistent with the trust “drip feeding” settlement offers before “capitulation” after 15 months, noting that it was “…a little difficult to characterise the conduct of the Defendant is reasonable pursuit of a defence when it eventually capitulates…” and that further he could not accept the alternative contention that the letter accepting the Claimant’s offer could be construed as a Part 36 offer of its own.

Finding to the contrary, exercising his wide discretion as to costs and acknowledging that the Defendant’s conduct of this matter had taken the same “out of the norm”, His Honour Judge Gore QC helped that this was a matter where it was suitable that the burden of proof should shift and the Defendant be ordered to pay costs on the indemnity basis from the date by which the Part 36 offer should have been accepted.

Whilst, of course, Part 36 provides a very valuable tool by which parties can protect themselves and, in the normal course of events, the consequences of late acceptance do not go beyond those more normally applied, this matter should act as a salutary lesson to parties who adopt an unreasonable and unsustainable stance, only then to seek settlement at the last minute, that the court does retain a very broad discretion as to costs in such circumstances, to include an award of indemnity costs in the event that a party acts unreasonably.

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