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"Sorry I'm late" : costs risks and late acceptance of Part 36 Offers

A rule is made to give certainty. Part 36 of the CPR is no exception, but if the Ministry of Justice was hopeful that this rule would lead to less litigation on the thorny issue of costs they were wrong.

This article is a summary of recent judicial decisions on late acceptance of Part 36 offers and comments on the impact of those decisions for compensators.

Before we begin, a reminder: Part 36 is a rule designed to encourage parties to reach settlement, rather than resolve at an expensive trial. The earlier the offer is made, the higher the costs penalties may be for the party who falls the wrong side of that offer at trial. A Part 36 offer is open for acceptance for 21 days, after which point it can only be accepted if the parties can agree terms, or with Court approval.

Late acceptance by Defendant in fixed costs cases

The Defendant in the case of McKeown v Venton [2017] accepted the Claimant's Part 36 offer 41 days late - the Claimant sought fixed costs in the post issue/pre-allocation phase of the case but also indemnity costs for the 41 day period. Could the rule in Broadhurst v Tan apply?

On appeal, the judge held that the Claimant could only recover fixed costs. Neither standard hourly rate, nor indemnity costs applied for the 41 day period. The Broadhurst case was different because it applied to a case on which a judgment had been given following a hearing.

Does that make sense? Possibly not. The judge said exceptions to this rule would be rare and "precise fairness as to costs in individual cases is sacrificed on the altar of certainty"

Outcome for Defendants : there is no rush to accept a Claimant's offer in time but bear in mind that delay may result in a settlement falling in the next costs phase.  

Late acceptance by Claimant in multi-track cases

Sometimes a Defendant will make an early offer even though medical evidence is incomplete and valuation of the claim is, at best, an educated guess.  Is it unjust to penalise the Claimant on costs if they wait for medical evidence to provide greater certainty and then accept the offer?

In Briggs v CEF Holdings Limited [2017] the Defendants made an offer of £30,000 to the Claimant pre surgery and a higher offer of £50,000 during the Claimant's recovery after  surgery. On both occasions the Claimant responded by stating that he was not in a position to either accept or reject the offer. The case was later stayed for 10 months and the Claimant had yet further surgery. The stay was lifted and the Claimant eventually accepted the £50,000 offer, following review of the experts' post surgery joint statement and surveillance evidence - 2 year 9 months out of time.

On appeal the Court of Appeal held that Part 36 shifted the costs risk onto the offeree, and it was important not to undermine that purpose. The party accepting the offer late has the burden to show there would be injustice if the usual Rule were applied. An uncertain prognosis is not, in itself, enough to show injustice.

Outcome for Defendants : "best guess" offers can result in significant costs savings for Defendants in cases where the Claimant's long term prognosis is still not known.

Both of these cases remind compensators that an offer, if well judged, carries minimal risk and should be made as early as possible.