An exception to the rule ? Late acceptance of a Claimant’s Part 36 offer can result in adverse costs consequences (indemnity basis award) in certain cases

An exception to the rule ? Late acceptance of a Claimant’s Part 36 offer can result in adverse costs consequences (indemnity basis award) in certain cases

The Claimant was awarded indemnity costs after the Defendant’s late acceptance of Part 36 Offer

Holmes v West London Mental Health Trust [2018] Unreported Queen’s Bench Division 29 June 2018

At a hearing in the Queen’s Bench Division of the High Court, His Honour Judge Gore QC held that the Defendant’s conduct prior to accepting a Part 36 offer on liability was such that the Claimant was entitled to indemnity costs. 

By way of background the Claimant was a vulnerable patient who was prescribed lithium from 1994 to 2012. She developed disturbing symptoms and deteriorating health in early 2012 as a result of which she was admitted to Hammersmith Hospital in February 2012. Tests showed that the lithium levels in her body were at severe toxicity. The Claimant was so ill that she remained in the intensive care unit for 19 days and an inpatient for in excess of two months.

In February 2015 the Claimant issued a claim against the Health Trust claiming damages for clinical negligence.

The Defendant denied liability.

In February 2017 the Claimant made a Part 36 offer to settle to receive 95% of the full value of the claim. This offer was rejected by the Defendant in March 2017.

Some negotiation took place and the Defendant made various offers to settle the claim:  from the so-called drop hands deal which invited the Claimant to discontinue the proceedings on the basis that each of the parties bore their own costs to 50%, to 65% then 75%, then 85% and ultimately more than 15 months later to the offer made by the Claimant in the sum of 95%.

The Defendant failed to agree to agendas required for joint experts meeting and failed to respond to request for mediation.

In May 2018 the Claimant issued an application seeking the Defendant’s compliance with the Order concerning case management.

On 30 May 2018 the Defendant eventually accepted the Claimant’s Part 36 offer of 95% liability, but on the condition that the Claimants legal costs were awarded on the standard basis. This offer was disputed by the Claimant as the Defendant took 15 months to accept the offer, and as a result significant costs were incurred.

The Defendant attempted to justify their stance on liability and submitted that their case was supported by the expert evidence, that the diagnoses of lithium toxicity was questionable and that the current version of the draft agendas showed a change in the Claimant’s case. Further, the Defendant argued that in order to justify costs on the indemnity basis the Claimant had relied solely upon the Defendant’s failure in a timely fashion to accept the Claimant’s Part 36 offer.

His Honour Judge Gore QC dismissed the Defendant’s arguments. He said that serious lithium toxicity was an established fact, albeit that there may have been issues about its cause and whether any breach of duty gave rise to it. He also found that there were no striking changes in the Claimant’s case; it had remained the same since it had been pleaded.

The Judge noted that the rejection of the Part 36 offer does not mean that the offer had lapsed.  That would only be the case if the Claimant had withdrawn the offer, which she had not. He also noted that in CPR Part 36 there is no such thing as conditional acceptance of an offer. It was either accepted or it was not. He said that the way for the Defendant to have achieved their goal in this case was to make a CPR Part 36 offer themselves to pay 95% of the full liability value of the claim on the basis that only standard costs would be recoverable. However, that is not what the Defendant did. 

Turning to conduct of the parties, His Honour Judge Gore QC said that conduct was an issue in this case: litigation had been very slow and it was difficult to characterise the Defendant’s conduct as reasonable when they eventually capitulated by acceptance of the Claimant’s offer of 95% of the full liability value of the claim.

Furthermore, it was found that the Claimant’s case did not rely solely on the Defendant’s failure to accept the Claimant’s Part 36 offer in a timely fashion. The Claimant’s case also relied upon the Serious Untoward Incident report, Master Roberts’ observations at the case management hearing, the Defendant’s expert’s failure to deal with the key issues on liability, the Defendant’s negative assessment of the prospects of defending liability as demonstrated by the Defendant’s offers and the Defendant’s failure to respond to requests for Alternative Dispute Resolution.

In conclusion His Honour Judge Gore QC reminded that the indemnity basis does not entitle the receiving party to recover any more than reasonably incurred costs and in reasonable amounts and proportionate to the claim.  It only has the effect of reversing the burden, shifting it from the Claimant to satisfy those criteria to the Defendant to show non-satisfaction.

Thereafter he concluded that this is a case in which he is satisfied that the burden of proof should be shifted by ordering that the costs in this case should be paid by the Defendant from the end of the relevant period for acceptance of the Part 36 offer on an indemnity basis.

The Judgment is significant in that it emphasises the point that when conduct is an issue, sanctions will be imposed by the Court.

Tanya Bland

9th August 2018