Part 36 offers when the prognosis is unclear

This article explores the following issues:

What happens in a clinical negligence or personal injury case where a Defendant makes a Part 36 offer at a stage when the Claimant’s prognosis is still uncertain?

If a Claimant waits until the picture becomes clear and then accepts the offer late, will the Defendant be able to recover its costs, or will the court consider that to be unjust in the circumstances?

The background

As has been widely publicised, QOCS cases issued before 6 April 2023, rule 44.14 allows a Defendant to enforce a costs order made in its favour, but only where there has been an Order for damages and interest made in favour of a Claimant.

Cases issued after 6 April 2023 will be subject to the new rule.  This allows a Defendant in a QOCS case to enforce a costs order in its favour against a Claimant’s order or settlement for damages, interest and costs.

Where a Defendant makes a Part 36 offer and it is accepted after the 21 day ‘relevant period’, rule 36.13(5) provides that the Claimant will recover costs to the end of the relevant period and the Defendant will recover its costs from the end of the relevant period to the date of acceptance.  However, if the court considers that it would be unjust to apply this rule, it will not do so.

Following the rule change, Claimants receiving a Part 36 offer will have in mind the risk that late acceptance of that offer might now go beyond not recovering their costs from the end of the relevant period.  They might also face a Defendant being able to enforce its costs order against the Claimant’s damages, interest and costs obtained in that settlement.

As the initial paragraph signposts, this gives rise to two principal issues:  What happens in a clinical negligence or personal injury case where a Defendant makes a Part 36 offer at a stage when the Claimant’s prognosis is still uncertain?  If a Claimant waits until the picture becomes clear and then accepts the offer late, will the Defendant be able to recover its costs or will the court consider that to be unjust in the circumstances?

This issue arose in the High Court decision in IEH v Powell [2023] EWHC (KB), before Senior Master Fontaine.

An open link to the decision is here: https://www.bailii.org/ew/cases/EWHC/KB/2023/1037.html

Key facts

The Claimant was 8 years old when he was injured in a road traffic collision in 2016.  He sustained a traumatic injury to the brain, along with other injuries.  Judgment was entered for the Claimant in August 2018.

The Defendant made an offer to settle in November 2020, with the end of the relevant period being in December.  The offer was accepted (subject to the court’s approval) in July 2022 (i.e. about 20 months later).   This was a claim issued before the rule change, so the issue was not whether the Defendant could enforce a costs order against the Claimant’s settlement amount or costs.

The issue was whether the Claimant could have his costs of the action up to the date of approval.  In other words, the court had to decide whether it would be unjust to follow the provision in rule 36.13(5) which would otherwise result in a costs order in the Defendant’s favour from December 2020 to the date of approval of the settlement.  The Claimant had the burden of establishing that it would be unjust.

Medical reports were served with the Particulars of Claim addressing the Claimant’s brain injury.  These were from a Consultant Paediatric Neurologist and a Consultant Neuropsychiatrist.  Following a stay, the Claimant was ordered in December 2019 to serve updated medical reports by March 2022.  The Defendant’s Part 36 offer therefore came long before the date for the Claimant to serve his updated evidence.

The position of the Claimant’s experts when proceedings were served was that it was too soon to provide a reliable prognosis, given the possibility of latent disability which might not become evident until the Claimant got older.  The neurologist recommended reassessment in three to four years’ time and the neuropsychologist at the ages of 13, 16 or 18, depending on the Claimant’s progress.

Following the Part 36 offer, the Claimant’s legal team took several steps.  They obtained updated evidence from the original experts and additional reports from a Child and Adolescent Psychiatrist and a Speech and Language Therapist.  They obtained evidence from the Claimant’s teacher and family (complicated by the fact that the Claimant lived abroad).  They then obtained advice from Leading Counsel.  Having taken these steps which showed a significant improvement in the Claimant’s condition, they were able to advise acceptance of the Part 36 offer.

The decision

The court held that it would be unjust to follow the usual rule and make a costs order in the Defendant’s favour.  The court considered the particular facts of this case and the matters contained in rule 36.17(5).  The following points were central to the judgment:

1. Following SG (A Child) v Hewitt (Costs) [2012] EWCA Civ 1053 and Briggs v CEF Holdings Ltd [2017] EWCA Civ 2363, the court avoided where possible analysis of the facts in other costs authorities, instead concentrating on the principles and the facts of this particular case.
2. The fact that the Claimant is a child may not always be relevant to an issue under rule 36.13(5) but in this case, it was because the long term effects of a traumatic brain injury cannot usually be known until later in a child’s development.
3. Having to wait to determine the effects of the Claimant’s injury was not ‘a normal contingency of litigation’.
4. It was reasonable for the Claimant not to accept the offer within 21 days on the evidence then available. At the time of the offer, the Claimant’s solicitors were working towards obtaining updated evidence in line with the court’s timetable and their conduct in doing so was reasonable.
5. There were added complications in that the Claimant lived abroad and both his ability to travel for expert assessments and his ability to attend school were affected by the pandemic. The need to appoint the Official Solicitor as litigation friend owing to the Claimant’s mother’s illness added a further delay (although it did not delay the updating of the medical evidence).
6. It was “extremely doubtful” that the court would have been able to approve the Claimant’s acceptance of the offer in late 2020 on the basis of the evidence as it was. It was more likely that the court would have adjourned the approval hearing and given directions for updated evidence.

There was an issue about how much information had been given to the Defendant about the steps that the Claimant had taken.  Whether this would affect the amount of costs recovered by the Claimant would be a matter for detailed assessment.

The key takeaway from this decision

The approach taken by the court in this case should provide some reassurance to Claimants facing Part 36 offers where the prognosis is unclear, particularly given the importance of the rule changes regarding recoverability of Defendant’s costs.  However, it was important in this case that the Claimant was able to show that active steps had been taken to move the medical evidence forward and not simply wait for time to pass.  In doing so, the Claimant’s improvement was confirmed, and the offer was deemed acceptable.

The lesson for Claimants appears to be to take active steps to review the Claimant’s progress in the face of an offer and keep the Defendant informed that you are doing so.

Article by Vanessa McKinlay