Huntley v Simmonds (Costs)

I circulated a draft judgment in this case on 4 February 2009. The draft required the parties to do some arithmetic before the final value of the award could be calculated; and as it transpired there were two aspects which required clarification. There was accordingly a further short hearing on 13 February. It was however clear that, whatever the final figure turned out to be, the Claimant had failed to obtain a more advantageous award than had been offered by the Defendant some three or four weeks before the start of the assessment of damages hearing. On that basis Mr Walker asked at the hearing on 13 February for an order under CPR 36.14(2) that the Defendant have his costs from 21 days thereafter. That application was opposed by Mr Wilby. Because one aspect of the facts required clarification I reserved my decision and allowed the parties to put in further written submissions. This is my judgment on the costs issue.

The essential facts can be summarised as follows:

On 10 October 2008 Blake Lapthorn (‘BL’) for the Claimant made what purported to be a Part 36 offer (subject only to the fact that any settlement would require the approval of the Court). The offer was to accept a lump sum of £1,000,000 net of interim payments and a PPO in the sum of £1,000 p.a.

On 13 October Irwin Mitchell (‘IM’) for the Defendant made an offer, purportedly pursuant to Part 36, of a lump sum of £3,600,000.

On 15 October BL offered to accept a somewhat reduced offer.

On 16 October IM made a counter-offer in the following terms:

On 17 October BL replied as follows:

That offer was not accepted. On 10 November, i.e. on the first day of the hearing, BL made clear that they would recommend acceptance of IM’s first offer if it were to include a substantial PPO element; but the Defendant was not interested.

The capital value of my award has not, as I have said, been definitively calculated; but it was accepted before me that it was less than £2,926,000 (though not by very much).

At first sight the Defendant’s offer of 16 October falls squarely within the terms of CPR 36.14(2). (I disregard the offer of 13 October because it did not include an offer of a PPO.) Mr Wilby did not seek to suggest that this was a case where, if CPR 36.14(2) did apply, I should regard if as unjust to make an order that the Claimant pay the Defendant’s costs. But he submitted that the letter failed to comply with the requirements of CPR 36.5(4). Specifically, he submitted, the offer:

failed to state the duration of the PPO offered, as required by para. 4(c)(i);

failed to give sufficient details of the index by reference to which the PPO was to vary, as (at any rate implicitly) required by para. 4 (c)(iii), because it referred only to ASHE 6115, without identifying a centile;

failed to include the requisite statement under para. 4 (d) that continuity of payment would be assured.

Mr Walker submitted that those points were the purest technicalities. Either they were not such as to render the offer non-compliant at all; or, if they were, I should exercise my discretion under CPR 44.3(4)(c) to produce the same result as if the offer had formally complied with CPR 36. He pointed out that the Claimant’s offer shared the same alleged defects as the Defendant’s: in particular, BL too in their letters of 10 and 15 October did not state the duration of the PPO or definitively state the centile under ASHE 6115. He submitted that BL could or should have had no real difficulty in understanding the offer; but he submitted that in any event confirmation of any formal points could have been obtained by use of the clarification procedure under CPR 36.8(2). Specifically:

As for (1), it was too obvious to need stating that the PPO offered was for the rest of the Claimant’s life: that was why BL themselves had not specified it in their letters.

As for (2), BL had in their first letter identified the centile as “probably 75^th”, though they had said that advice would be needed from a specialist financial adviser: the 75^th centile has of course been the norm in these cases since the decision of Swift J in Thompstone v Tameside and Glossop Acute Services NHS Trust [2006] EWHC 2904 (QB) (now confirmed by the Court of Appeal – [2008] 1 WLR 2207). The Defendant’s offer could only reasonably have been understood as being on the same basis; but if there were any uncertainty about that it could have been resolved by a request for clarification.

I am inclined to think that Mr Walker is right about points (1) and (2): I see no reason why purported Part 36 offers should not be construed in the context of any chain of correspondence of which they form part. But the omission of the statement required by para. (4)(d) is in my view a formal defect; so, whatever the position about the other two points, it seems to me that the offer of 16 October did not formally comply with the requirements of CPR 36.5(4).

That leaves Mr Walker’s alternative submission. In my judgment, the defects relied on by Mr Wilby are indeed purely technical and can, for the reasons given by Mr Walker, have caused no real uncertainty or other prejudice to the Claimant or his advisers. That is indeed illustrated not only by the presence of equivalent defects in the Claimant’s offers but by the fact that in their letter of 17 October responding to IM’s offer (which they referred to as “your Part 36 offer”) BL’s only question was about the quantum of the offer: there is no suggestion whatever that they failed to understand its terms or were concerned about security of payment. On the particular facts of this case, I believe that it is right to exercise my discretion under CPR 44.3(4)(c) to provide for the same costs consequences as would have applied if IM’s offer had been “Part 36–compliant.”

Mr Wilby submitted that it was wrong in principle to put a party who had failed to comply with the rules in the same position as if he had done what he should: what, he asked rhetorically, was the point of having the rules? But that does not trouble me. A defendant who makes a non-compliant offer is in a worse position because he is at the mercy of the Court instead of being able to rely on the strong presumption that the costs consequences specified by CPR 36.14 will apply. It would not be in every case that the Court would be prepared to overlook any defects, even if they could be characterised as technical. But in a proper case – and I think, for the reasons advanced by Mr Walker, that this is such a case – I see no reason why a party should be penalised for what are in truth purely technical failures. I was referred to Mitchell v James [2004] 1 WLR 158 and Hertsmere Primary Care Trust v Estate of Rabindra–Anandh [2005] EWHC 320 (Ch), in which the Court gave effect to a non-compliant Part 36 offer in broadly analogous circumstances. Those cases are not directly applicable because they relied on the terms of CPR 36.1(2), which has since been amended; but they reinforce my view that there is nothing wrong in principle in the approach which I propose to take.

I will accordingly make the order sought, subject to one refinement. Applying the ordinary period of 21 days from 16 October would mean that the Defendant’s liability for the Claimant’s costs ceased, and the Claimant’s liability for the Defendant’s costs commenced, on 6 November. But I think it right to postpone that date to 7 November, to reflect the fact that, notwithstanding my conclusions above, the Claimant would have been entitled for good order’s sake to require formal confirmation of the omitted points, or in any event “point (3)”, which might have taken 24 hours to provide.