Whilst it is long been established that a Part 36 offer of 100% is not considered a genuine attempt to settle for the purpose of obtaining advantages following the expiry of the relevant period of a Part 36 offer, the position in respect of some other liability offers is not always straightforward.
The issue came before the High Court in the recent case of JMX (A child by his Mother and Litigation Friend, FMX) v Norfolk and Norwich Hospitals NHS Foundation Trust [2018] EWHC 185 (QB) where the Claimant had advanced a Part 36 offer of 90% in respect of liability. The “relevant period” within CPR rule 36.3(g) and rule 36.5(1)(c) and for which cost consequences would apply came to an end one working day before the trial began.
The offer was not accepted and the matter proceeded to Trial where the Court found in the Claimant’s favour in respect of liability. Accordingly the Claimant sought to invoke the advantages of CPR 36.17 on the basis that he had achieved an outcome at least as advantageous as his Part 36 offer.
Such advantages are specified in CPR 36.17(4) and include that the court must (unless it considers it unjust to do so) order that from the date on which the relevant period expired the Claimant is entitled to enhanced interest at a rate not exceeding 10% above base rate. This is in addition to costs on the indemnity basis, enhanced interest on those costs and a 10% uplift on damages (or costs) on the first £500,000.00 and 5% above that figure (capped at £75,000).
The Defendant, however, argued the offer was not a genuine attempt to settle the case because it did not reflect any realistic assessment of the risks of the litigation, which is one of the factors listed in CPR 37.17(5) which the Court must consider when deciding if it would be unjust to apply the advantages. Particularly, the Defendant argued that the letter making the offer did not explain why only a 10% discount was being offered for settlement. The Defendant also argued that an assessment of the risks as being only 10% was a significant under-evaluation of the litigation risk and, accordingly, such an offer could not have been a genuine attempt to settle.
Mr Justice Foskett firmly disputed that argument stating at Paragraph 12:
“Whilst it is unwise ever to say “never”, I do consider this kind of argument to be one which could hardly ever succeed. How one side perceives the risks in a piece of litigation (whether in the clinical negligence sphere or any other sphere) will almost invariably be different from the way the other side perceives them.”
Mr Justice Foskett went on to state at Paragraph 14:
“When an offer to accept 90% is made in a case such as this, I would regard it as a case where the Claimant’s team regard the claim as very strong, but is prepared to offer a modest discount to secure absolute certainty of obtaining substantial compensation.”
It is, however, important to note that this was a high value case with damages likely to run into several million pounds on a traditional lump-sum basis, which Mr Justice Foskett acknowledged when agreeing with the Claimant that 10% was not a token discount. It was, however, also acknowledged and considered equally that most of the costs of a 5-day trial would have been saved.
Accordingly it was held that the offer was a genuine offer and did not militate against ordering the normal consequences for the Claimant having achieved more than his Part 36 offer.
The final issue to be determined was the level of interest and here the Judge considered that an award of 5% above base rate from 28 October 2017 would “do justice to the applicable considerations” as “whilst the case went against the Defendant… there was nothing unreasonable about the decision to contest it” although acknowledged that “the point, of course, is that now a judgment has been given, the wisdom of accepting the 90% offer is clear.”
Whilst the decision in this case is perhaps not unsurprising and withholds the importance of the benefits of Part 36 offers there does remain some uncertainty as to scope of application to other, particularly lower value cases and it is clear that each case will need to be considered on its individual merits. One of the key considerations in reaching the decision here was that 10% was not a ‘token’ discount.’ It therefore leaves uncertainty as to whether the same decision would have been reached should this have been a low value case where 10% could possibly be interpreted as a ‘token’ discount.