Two Recent Important Part 36 Decisions
Decision No.1 - Pallett v MGN Ltd  EWHC 76 (Ch) (19 January 2021)
The Claimant brought a claim against the Defendant for infringement of privacy rights by phone hacking. On 20th October 2020 the Claimant made a Part 36 offer to settle for £99,500 and ancillary relief. As is required by the rules governing Part 36, the offer specified that if accepted within 21 days the Defendant would be liable for the Claimant’s costs of the action. The Defendant accepted the offer on the 22nd day and consequently sought that pursuant to CPR 36.13(4)(b), the liability for costs must be determined by the court unless the parties have agreed the costs.
The Defendant requested a departure from the ‘normal consequences’ provided by CPR 36.13(5) that:
Where paragraph (4)(b) applies but the parties cannot agree the liability for costs, the court must, unless it considers it unjust to do so, order that—
(a) the claimant be awarded costs up to the date on which the relevant period expired; and
(b) the offeree do pay the offeror’s costs for the period from the date of expiry of the relevant period to the date of acceptance.
The Defendant sought that the court disallow the Claimant's costs from 26th March 2019 on the basis that they did not engage properly in the settlement process. To this Mann J provided:
“In my view the claimant's attitude of declining to negotiate until she was better informed was an entirely reasonable one, bearing in mind the one-sided nature of the possession of information in all these cases and, in this one, the failure of the defendant to comply with the early disclosure regime.”
The Judge concluded that the Claimant should not be punished for failing to negotiate prior to October 2020 and certainly not to such an extent that it would be unjust to allow the normal consequences of the acceptance of a Part 36 offer.
It was therefore found that the Claimant would have all of their costs of the proceedings on the basis of the normal template order. However, the Judge followed their decision with some words of warning:
“…..should not be taken as a green light for all Claimants to decline to enter into negotiations before disclosure is complete………there may be other cases in which a non-engagement will be unreasonable……… Claimants should not seek to apply this case too generally.”
This decision outlines the potential for an offeree to accept a Claimant’s Part 36 offer out of time and seek to obtain an order from the Court that some/all of the Claimant’s costs of the proceedings should not be payable if their conduct has been sufficiently unreasonable.
The acceptance of the offer on the 22nd day was a deliberate tactic to attempt to persuade the Court that they should be making a different order to the ‘usual’ one. If used correctly this could allow a paying party to settle a claim but invite the Court to consider its liability for the costs of the action, which of course would have been automatically awarded to the receiving party had the offer been accepted within the relevant period. This begs the question, should receiving parties be withdrawing Part 36 offers immediately after 21 days to protect against this? Surely this was not the intention behind CPR 36.13(4)(b).
Decision No.2 - Natalie Best v Luton & Dunstable Hospital NHS Foundation Trust (29 January 2021)
A clinical negligence claim was listed for a detailed assessment of the Claimant’s costs on 10 & 11 November 2020. However, the Defendant accepted, after the date of expiry, a Part 36 offer made by the Claimant against the bill and for interest to the date of expiry. The hearing was therefore relisted for 2 hours on 10 November to deal with the summary assessment of the Claimant’s costs of the assessment. The summary assessment was subsequently completed and the parties agreed a figure of £58,119.80.
The Claimant, immediately following the completion of the hearing, sought to reconvene all parties to the proceedings as they had beaten a Part 36 offer in the sum of £52,000. They were therefore seeking the benefits of doing so, including an uplift in the sum of £5,800. The Claimant relied upon the “slip rule” at CPR 40.12, advised that the omission to raise the Part 36 offer was quickly identified and the matter brought back to the hearing within the original allocated time. Therefore, there had been no real prejudice to the Defendant in seeking the benefits of beating the Part 36 offer following the conclusion of the hearing.
The Defendant argued that it was too late to raise this issue and that the Claimant was required to file an application. Master Leonard reminded the Claimant of his decision in Bourne v West Middlesex University Hospital NHS Trust (SCCO reference CL1702494, 2 October 2017) where he had concluded that a Part 36 offer could not be made in relation to the costs of detailed assessment proceedings and requested that the parties provide written submissions.
Issues to be determined
The first issue requiring determination was whether the Claimant was permitted to raise the issue ‘post hearing’. On this point the Judge found that the omittance of raising this point was a mere oversight and that:
“Given that Ms McDonald was able to raise her point within the time originally allocated for the hearing, I think it is fair to approach the issue on the basis that she did in fact do so before the hearing ended.”
The second issue was whether the Claimant could rely upon a Part 36 offer in relation to the costs of detailed assessment.
The Claimant sought to rely on CPR 36.2(3), arguing that the quantification of the costs of assessment fall within the “any issue that arises in” element of that rule.
Master Leonard disagreed with the Claimant and provided that:
“If the Claimant is right then any Part 36 offer made as to the costs of assessment would, on acceptance, result in a further deemed order for costs under CPR 44.9(1)(b)………… the receiving party would be entitled to draw up another bill to cover its costs of working on the costs of the detailed assessment…………… there is the potential for an indefinite cycle of Part 36 offers and new detailed assessment proceedings…………that is not consistent with the overriding objective.”
In conclusion the Judge stated that the Claimant’s submission was inconsistent with the manner in which CPR 36 had been interpreted since it’s modification in 2013 and that the costs of the detailed assessment proceedings therefore did not fall within “any issue that arises in the claim”.
This second Part 36 decision seems entirely sensible, to have found in favour of the Claimant could have led to an unending cycle of Part 36 offers and new detailed assessment proceedings.