Analysis: Part 36 Overrides Court’s Discretion Over Proportionate Costs Order
In the case of Webb v Liverpool Women’s NHS Foundation Trust , the Court of Appeal has given guidance on the approach to making issue-based or proportionate costs orders where a Claimant has succeeded against his own Part 36 Offer. In doing so, it awarded the Claimant her full costs even though she had not succeeded on a particular issue.
In the instant case, the Claimant (a minor) suffered injury during the course of her birth. The allegations of negligence fell broadly into 2 categories:
- a) That a caesarean section should have been performed; and/or
- b) That the vaginal delivery was negligently managed.
At trial, the second allegation was rejected but the Claimant succeeded on the first allegation and therefore was entitled to a 100% recovery of damages.
In October 2014, the Claimant had made a Part 36 Offer on liability for 65% and therefore received a judgment that was more advantageous than the Offer. On that basis, she sought her full costs, including costs on the indemnity basis from the expiry of the relevant period plus enhanced interest pursuant to CPR 36.14 (3) as applied at the time (now CPR 36.17(3)).
It was the Defendant’s case that Rule 36.14(3) should be dis-applied as it would be unjust because the Claimant had failed on the second issue, which was discrete. The original judge accepted that argument and denied the Claimant her costs of the second issue, knocking 25% off the solicitor’s time costs to reflect that decision. He otherwise awarded the Claimant costs to be assessed on the indemnity basis from the expiry of the relevant period of the offer.
The Claimant appealed.
Both parties accepted that the costs incurred up to the expiry of the Part 36 Offer fell to be determined by reference to CPR Part 44, but differed in their approach to its application to the facts of the case. The Claimant contended that the second issue was sensibly pursued and that both issues arose out of the same incident – a negligently managed birth – and although that aspect of the claim did not succeed, it was not uncommon for Claimants to win on some points but not others.
The Defendant supported the judge’s conclusion and maintained that he had not erred in denying the Claimant costs of the second issue.
Sir Stanley Burnton, when delivering the Court of Appeal’s judgment, concluded that the judge had approached the point the wrong way. Instead of first considering the question of whether, absent the Offer, an issue based or proportionate order should be made, he should have addressed separately the costs incurred before and after the effective date.
Before The Effective Date
In relation to the costs before the effective date, he said that the judge could not properly deprive the Claimant of her costs of the second allegation. The cause of the injuries was a single event and there was nothing in the case to justify depriving the Claimant of part of her costs.
After The Effective Date
Costs after the effective date required a consideration of CPR 36.14(3)(b). It was concluded that ‘costs’ within the meaning of that section meant ‘all costs’ and that therefore the Claimant should receive her full reasonable costs after the effective date unless it would be unjust. The case of Kastor Navigation Co. Ltd v Axa Global Risks (UK) Ltd (2004) was distinguished as the wording of the rules had changed since that decision.
Sir Stanley Burnton said: “In deciding what costs order to make under 36.14, the Court does not first exercise its discretion under Part 44. Its only discretion is that conferred by Part 36 itself…It follows from the above, and in particular that Part 36 is a self-contained code, that the discretion under Part 36.14 relates not only to the basis of assessment of costs, but also to the determination of what costs are to be assessed.”
He agreed that the Court is not precluded from making an issue based or proportionate order, but a successful Claimant was only to be deprived of her costs if it considers it would be unjust for her to be awarded all or that part of her costs.
The consideration of ‘all the circumstances of the case’ included taking into account that the Defendant could have avoided the costs of a trial if it accepted the Claimant’s Offer, as it could and should have done in the circumstances of this case.
The Court of Appeal therefore set aside the judge’s order and ordered that the Defendant pay all of the Claimant’s costs, to be assessed on the indemnity basis from the effective date.
Jon Lord - Senior Costs Lawyer, Civil & Commercial
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