Source: http://www.familylawweek.co.uk/site.aspx?i=ed24743
Timestamp: 2018-01-17 10:42:13
Document Index: 578234079

Matched Legal Cases: ['art 36', 'art 36', 'art 36', 'art 36', 'EWCA ', 'art 36', 'art 36', 'art 36', 'art 36', 'art 36', 'art 36', 'art 36', 'art 36', 'art 36', 'art 36', 'art 36', 'art 36', 'art 36', 'art 36', 'art 36', 'art 36', 'UKHL ', 'art 36', 'art 36']

Family Law Week: Everything You Thought You Knew About Part 36 Is Wrong
Everything You Thought You Knew About Part 36 Is Wrong
Mark Jones, of 3 Dr Johnson's Buildings, highlights the recent case of Carver v BAA and the impact it can have on costs in cohabitation or trusts of land claims under the CPR
Mark Jones, 3 Dr Johnsons Buildings
As most family practitioners will be aware, the spectre of the Civil Procedure Rules haunts the growth area of proceedings under the Trusts of Land and Appointment of Trustees Act 1996. The modern approach of the Courts is very much to seek to coax the parties in any case towards settlement at the earliest possible stage. The procedures to be adopted are largely governed by the provisions of CPR Part 36, the detail of which rewards scrutiny, not least in that failure to make and/or to accept reasonable offers will lead to inevitable costs consequences. These issues have recently been considered in detail by the Court of Appeal in the context of a personal injury case that has resonance for all forms of civil proceedings. In this article I will seek to explore recent changes to the law, the Court of Appeal’s decision and the implications for practice.
A Claimant in a relatively low-value personal injury claim beats a Defendant’s part 36 payment by £51. She should automatically be entitled to her costs, right?
She has to pay the Defendant’s costs.
Although this may at first blush offend instinct, this was precisely what happened in the recently-reported case of Carver v BAA Plc [2008] EWCA Civ 412; [2008] WLR (D) 122; The Times June 4th 2008, decided by the Court of Appeal (Ward, Rix and Keene LJJ) on the 22nd April 2008. This was the first time the Court of Appeal had considered the implications of the revisions to Part 36 of the Civil Procedure Rules ushered in on the 6th April 2007, insofar as they related to purely monetary claims.
The Old Part 36
Prior to April 2007, a part 36 payment was required (as opposed to a mere offer) before the terms of the part were to bite. CPR Part 36.20 governed the issue:
(1) This rule applies where at trial a claimant –
(a) fails to better a Part 36 payment;
(b) fails to obtain a judgment which is more advantageous than a defendant’s Part 36 offer; or
(c) in a claim to which rule 36.2A applies [PI claims for future pecuniary loss], fails to obtain a judgment which is more advantageous than the Part 36 offer made under that rule.
It was the generally accepted practice that beating the payment in by as little as £1 was better than the payment into court and a claimant would therefore escape the costs liability of Part 36.20, subject to the injustice provision of Part 36.20(2).
As from April 6th 2007, payment into court no longer plays a role in the Part 36 settlement offer procedure. Instead, where an offer is or includes an offer to pay a sum of money, that sum must be paid within 14 days of the date of acceptance, and if not so paid judgment may be entered for the unpaid sum (see CPR 36.11(6) and (7)).
The (new) costs consequences following judgment are set out in CPR 36.14 as follows:
(1) This Rule applies where upon judgment being entered –
(b) judgment against the defendant is at least as advantageous to the claimant as the proposals contained in a claimant's Part 36 offer.
(b) his costs on the indemnity basis from the date on which the relevant period expired and
(4) In considering whether it would be unjust to make the orders referred to in paragraph (2) and (3) above, the court will take into account all the circumstances of the case including –
(b) the stage in the proceedings when any Part 36 offer was made including in particular how long before the trial started the offer was made;
(d) the conduct of the parties with regard to the giving or refusing to give information for the purposes of enabling an offer to be made or evaluated.
The significant change between the old and the new regimes is that to escape liability for the Defendant’s costs, rather than ‘beating’ an offer a Claimant must now obtain a result ‘more advantageous’ than the Defendant's Part 36 offer and ‘at least as advantageous’ to the Claimant as the proposals contained in the offer. The stated purpose of the change was to provide an incentive to Claimants to settle claims. The implications were considered in the case of the unfortunate Miss Carver.
Miss Lisa Carver (‘C’) was an air hostess flying in and out of Gatwick Airport. On making her way to the terminal building en route to work on the 31st March 2003, she stepped into a lift which, due to a mechanical defect, had stopped two feet below floor level. She fell and sustained an injury to her left ankle. Her solicitors notified an intention to make a claim on her behalf, liability was fairly swiftly conceded by the Defendant (‘BAA’), and in the event the matter went to trial on quantum alone.
The relevant developments in the case were as follows. On the 9th February 2004 BAA made an interim payment of £520 to cover medical costs. An offer of £3,486 plus the interim payment (total of £4,006) was rejected by C and proceedings were issued in March 2006. The crucial event was a payment into Court (under the old regime) made by BAA on the 6th June 2006, in the sum of £4,000 plus the interim payment, a total of £4,520.
The offer was rejected and the matter proceeded to trial before HHJ Knight QC in the Central London County Court where, on the 4th June 2007 he gave judgment for C in the sum of £4,686.26 inclusive of interest. Counsel agreed that, making allowance for interest as at the date of the payment in and at the date of judgment, the latter exceeded the payment in by £51.
C's Counsel argued that she should receive her costs, which amounted (with an uplift) to some £48,000 plus £9,000 for disbursements and VAT.
HHJ Knight QC applied the new Part 36 and considered that on no view could it be said that the monetary judgment was more advantageous than the position in June 2006. He awarded costs to BAA from the 27th June 2006, the date the offer period ended. The Judge also made no order for costs in respect of the costs from November 2005 to June 2006 on the grounds that the pre-issue offer of £4,006 was "adjacent" to the sum awarded. The approach to the proceedings taken by C was criticized, the judge finding that her legal team had failed to engage in any meaningful settlement negotiations or put forward a reasonable offer on her behalf.
C sought and obtained permission to appeal the costs order from a single lord justice. Unfortunately for her, the Court dismissed the appeal. Lord Justice Ward summarised the issue the Court had to decide as follows:
"…if a claimant beats a payment of money into court by a modest amount, even £1, has she obtained a judgment more advantageous than the defendant's Part 36 offer or is the Court entitled to look at all the circumstances of the case in deciding where the balance of advantage lies?"
The Court of Appeal stated that in considering whether a result at trial was truly more advantageous to a litigant, it was not merely financial factors that should be taken into account. As Ward LJ put it:
"The Civil Procedure Rules, and Part 36 in particular, encourage both sides to make offers to settle. Compromise is seen as an object worthy of promotion for compromise is better than contest, both for the litigants concerned, for the court and for the administration of justice as a whole. Litigation is time consuming and it comes at a cost, emotional as well as financial. Those are, therefore, appropriate factors to take into account in deciding whether the battle was worth it. Money is not the sole governing criterion ... No reasonable litigant would have embarked on this campaign for a gain of £51."
15. "More advantageous" is, as Rix L.J. observed in the course of argument, "an open-textured" phrase, which permits a more wide-ranging review of all the facts and circumstances of the case in deciding whether the judgment, as the fruit of the litigation, was worth the fight.
Carver was in some respects an extreme case. The level of costs that had accrued was deplored, both at first instance and on appeal. They were on any view disproportionate to the sum finally recovered at trial. With the benefit of hindsight, C’s solicitors had been unrealistic in their efforts to settle the claim on her behalf, rejecting the June 2006 offer of £4,520 in September, when a schedule of special damages claiming some £19,000 was filed, which was later reduced after an experts’ meeting to just £2,700. Shortly before trial, in May 2006, BAA’s solicitors had offered £20,000 inclusive of costs, which was answered by C’s solicitors offering to accept £12,500 plus costs, and then £20,000 plus costs. The Judge at first instance was unimpressed with their approach, a view upheld by the Court of Appeal.
Notwithstanding the extremes in Carver, not least the very narrow margin by which the Defendant’s offer was beaten, the clear line in the sand that existed under the old regime has been swept away. The ‘more advantageous’ criterion requires a far more wide-ranging review of all the facts and circumstances of the case in deciding whether the game was worth the candle.
This permits all manner of arguments to be advanced in an attempt to demonstrate that a Defendant’s offer, albeit somewhat lower than a Claimant finally achieved at trial, was nevertheless more advantageous, had it been accepted at the time, than the final judgment sum. Quite apart from the aggravation, stress and emotional toll of litigation, there will usually be an element of irrecoverable cost incurred by even a successful litigant, whether assessed on the standard or the indemnity basis, which must be weighed in the balance.
And what of interest? The door seems now to be open submissions to the effect that had the Claimant accepted the (earlier) offer, s/he could have made far better use of the money in the interim. For example, in Sempra Metals v Commissioners for Inland Revenue [2007] UKHL 34, [2007] 3 WLR 534, the House of Lords indicated a greater willingness to award interest on a compound basis, and indeed interest as damages generally. Several law lords noted that compound interest is an economic reality and the law was stated by Lord Nicholls to be ‘out of step with everyday life in the 21st century’. The principles of the benefit of accelerated receipt must be relevant to an assessment of whether an offer was more advantageous than a final judgment sum.
The changes to Part 36 may well have the laudable effect of augmenting the Court’s ability to do justice between the parties in individual cases. The corollary is that it comes at the obvious price of certainty. It is likely to strengthen significantly the hand of Defendants in that Claimants are far more likely now to feel pressurised to accept Part 36 offers, being deterred from proceeding to trial for fear of how a court is likely to engage in the somewhat nebulous exercise of ascertaining whether a judgment is indeed more advantageous than a rejected offer. Claimants that take the risk of going to trial should prepare for costs arguments concerning disadvantage, both pecuniary and non-pecuniary. Conversely Defendants will of course be seeking to demonstrate just such disadvantage. The door is also now open to Claimants to argue that Defendants should have accepted their offers, notwithstanding that they were awarded a lower sum at trial.
The practical effect is that significant amounts of Court time are likely to be taken up with such arguments. They risk throwing one-day time limits in fast-track cases into jeopardy. I would express the tentative hope that Carver will be viewed as an extreme case and that the Appellate courts will lay down further guidelines to assist practitioners in considering offers made and the advice to be given to clients.
Perhaps the key issue to note, in these times of uncertainty, is the ever-increasing emphasis placed by the Court upon negotiation, in which the parties will be expected to be reasonable. When considering costs, the Court will inevitably examine the history of negotiations. A wise (or well-advised) litigant will wish to be in a position to demonstrate that every reasonable effort to settle has been made.
Mark Simeon Jones