Marsh v Ministry of Justice
The Claimant brought a claim against the Defendant for personal injury which was resolved in the sum of just over £286,000.00 at trial.
During the course of the case the Claimant made genuine attempts to settle by way of Part 36 offers; the first was made on 20 March 2014 in the sum of £223,500 and the second made on 14 October 2016 for £180,000. The Defendant refused to engage in mediation.
Ultimately the Claimant had beaten both of its own Part 36 offers; however, the judge held that the 2014 offer was only beaten due to the change in the discount rate on 20 March 2017. The court held that it would not be unjust to award the Claimant the consequences of successfully beating a Part 36 offer pursuant to CPR 36.17…..because the Claimant had been successful in spite of the change in the discount rate and the Defendant’s conduct in filing an amended defence which failed.
The issues to be determined were as follows:
1. “Whether or not the Claimant should recover his costs of the action in full having won the case or whether as the Defendant submits he should recover only a proportion; the Defendant suggests 70%."
2. “Whether the Claimant is right in arguing that costs should be paid on the indemnity basis, whether as a result of the Defendant’s conduct or as a result of provisions of part 36, or both”;
3. “Whether any further awards should be made in accordance with part 36”;
4. “The costs of the strike out application by the Claimant”;
5. “”Whether there should be a payment in respect of costs on account and if so, at what amount”.
On determination of issue 1, the Defendant’s argument relied upon the fact that the Claimant failed to establish a number of allegations. However, aside from one allegation regarding the Defendant’s negligence all the other issues raised by the Claimant were considered arguable by the Judge, “Accordingly I am satisfied that the Claimant should have the whole of the costs of the trial without any reductions”.
On issue 2, the Defendant argued that but for the change in the discount rate the Claimant would not have exceeded the offer of £223,500 made on 20 March 2014 and relied upon the case of Novus Aviation Ltd Vs Alubaf Arab International Bank (2016) EWHC 1937 (Comm) where it was found that it would be unjust for the consequences of Part 36 to apply when the reason that the sum had been exceeded was because of a dramatic fall in sterling just after the EU referendum on 23 June 2016 and held that had judgement been entered at anytime the Claimant would not have beaten its offer; the Defendant argued that the same principle applied in this case. The Judge in the present case agreed with the Claimant that the Lord Chancellor had been reviewing the discount rate since 2012 but when considering the whole context of the case it would not be just for the usual consequences of Part 36 to flow from the March 2014 offer. The court however, considered the Claimant's later offer in October 2016 was clearly a genuine attempt to avoid the trial. The court also noted that the Defendant's amendment to their defence in July 2016, which failed, was made between these two offers and was a significant misjudgement by the Defendant. The court concluded that there was no injustice for the consequences of Part 36 to flow and accordingly indemnity basis costs were awarded from the date of the amended defence in July 2016 as opposed to the offer made in October 2016. The court stated "it seems to me that the conduct of the defence was such that from that date indemnity costs are payable".
In terms of the third issue, the court having made a determination that the consequences of Part 36 were just, the court awarded interest from the 8 November 2016 (date of expiry of the second offer made in October 2016) at 8.5% on general damages and 10% on past losses. In addition the court also awarded the 10% uplift on damages. Furthermore, the court also awarded the Claimant interest on their costs of the action at 10.5% from the expiry of the 2016 offer.
The fourth issue addressed dealt with costs implications of the application made by the Claimant. The Judge held that although she did “not think it unreasonable that the application was made given the state of the evidence in the period just before trial and the dismissive approach taken by the Defendant to the Claimant’s legitimate concerns which were expressed in clear terms at the PTR” she found that the Defendant was the successful party and should have its costs of the strike out application on the standard basis.
In considering the last issue of whether to make an order for payment on account the court referred to CPR 44.2 (8) and found there was no good reason not to order a reasonable sum on account. The court stated in passing that there was no evidence of any technical issues with the CFA and there was an overwhelming likelihood that the Claimant would get a 100% uplift. The court considered that the Claimant's overall recovery was unlikely to be less than £900,000 and held that a reasonable proportion of this to be paid on account was £600,000.
The conduct of the parties has once again influenced the Judge’s decision when awarding costs. The interesting fact that the Judge awarded indemnity basis costs from the date of the amended defence rather then the Part 36 offer itself demonstrates that all parties have a duty under the Rules to help the Court achieve their aims and bad conduct will not be taken lightly. Furthermore, a genuine attempt to settle the proceedings made pursuant to a Part 36 offer has proven to be a tactical step to secure the benefits of the incentives provided by the Rules; in this case the Judge, having considered the consequences of the Part 36, not only allowed the change in the discount rate to be applied from the date of the Claimant’s last offer in October 2016 but also awarded interest and a 10% uplift on damages.