Holmes v West London Mental Health Trust
In this exceptionally serious case of mismanagement of a Claimant resulting in Lithium poisoning, the Judge examined the Part 36 rules when considering the appropriate order to make on costs liability resulting in an award of indemnity costs for the Claimant. The case is indeed some welcome news for receiving parties who attempt to utilise the Part 36 regime to compromise difficult issues early on. However, the case once again flags up the ethereal creature that is “exceptional circumstances”. Whilst hope for a “one size fits all” approach to give certainty on this test may always be out of reach by definition, this case makes further strides towards some clarification.
The stage is set early on and initially, neither party escapes the shaming laid down by the aptly named HHJ Gore QC whose, at times, scathing commentary highlights such “bimbling” in litigation as “sadly commonplace”; the most notable yardstick held up for delay in this case being the trial window set to 30th April 2019, no less than 7 years after the material events. Whilst the advent of the 28 day leash for extensions gives the parties the ability to conduct themselves sensibly in litigation with costs savings in mind, this case highlights just how far protraction of a court timetable can extend when one party’s conduct is unbecoming – set this against the fact the Claimant was still a patient of those responsible certainly makes for distressing reading for any litigant.
Deep into the litigation, and in the face of an invitation to discontinue the proceedings and “walk away” in February 2017 the Claimant made the index Part 36 offer to settle at 95% of liability. It is widely known that Part 36 is a prescriptive code all its own and here we see it used to its best effect, in a case which is strong on breach and against an opponent unwilling to recognise its own defensive shortcomings.
The Part 36 code is designed to allow the maker of a good one to reap the benefits of enhancement at trial if beaten. However, a Part 36’s fundamental purpose (to settle a case without court trifle) can still come a little unstuck as it tries to realise this destiny. The rule drafters anticipated this. The advantage for paying parties is clear; accept out of time, you pay my standard basis costs for the period of delay. For a receiving party however, things are less certain on costs if you don’t want to bat on to trial. One only has to take a look at the handbags at dawn in fixed costs case law to see the effects of such uncertainty.
The liability offer was rejected and various counter offers were made against it at “50%, to 65% then 75%, then 85%”, a rate of acceleration only equalled by Donald Trump’s receding hairline.
The capitulation occurred in May 2018 when the Defendant finally provided Notice to accept the Part 36 offer with an added embellishment of an offer for the Claimant’s costs.
In considering his powers and discretion to deal with the point, we disappear down the 36.13 rabbit hole with HHJ Gore looking for a path for receiving party recourse to judicial jurisdiction on costs in these circumstances. It is par for the course in any case law involving a discussion of the Part 36 mechanism that the twists and turns depend on whether you are paying or receiving, offeror or offeree, but this case demonstrates the finely balanced house of cards we have in Part 36, great effort having gone into the drafting and amendment of the same to cover almost every eventuality.
Put simply in this case, the court’s authority at 36.11(4) wasn’t available because the case didn’t concern a question of getting court permission to accept the Part 36 offer. The offer was always there to accept as it wasn’t withdrawn and the acceptance was good despite the issue of the Defendant’s attempts at limiting their costs exposure by return.
Jump to 36.13 (4) where the same authority lurks, but we get there as the Judge decides that the Part 36 offer of 95% on liability is not a “whole” of the claim deal, therefore bypassing the circular loop back to (2) which applies only to Defendant offers.
Now the Judge can deal with the liability for costs and paragraph 22 moves on to discuss offer and acceptance in contract and Part 36. Conditional acceptance is a myth in both arenas. Pure contract law would have turned the Defendant’s “acceptance” into a counter offer and therefore, no deal. However, under Part 36 the Defendant’s acrobatics to take the deal and limit their costs exposure thereby “oust[ing]” the court’s power to determine costs, failed. The Defendant’s Notice sent in May 2018 was therefore acceptance of the offer in correct form, which could not be conditional, allowing the court to step in on costs due to lack of agreement thereon.
The crux of this decision is undoubtedly the examination as to whether the costs should be on the indemnity basis from date of expiry. The Claimant sought to invite the court to make such an order by relying on five factual issues extending to the content of the SUI report (considered damning) and further failures in the Defendant’s expert evidence to appreciate the issues, the Master’s comment at CMC on prospects, the pessimistic view held of their own case (demonstrated by the increasing and successive percentage offers), and the lack of meaningful responses to invitations on ADR (as PGF II forewarns).
Of critical import to any indemnity basis decision is the principle that the matter must have something that “takes it outside the norm”. By reference to the Excelsior case the Defendant sought to simplify the factual position. Excelsior indicated that to satisfy exceptional circumstances, the test would be very high indeed if all there was in evidence was a “failure to accept a reasonable offer’. The Defendant purported that “that is this case”. The Judge rejected this assertion.
In this case the Judge found he was fairly well spoilt for choice on circumstances. Thankfully, he hastened to clarify his original comment that the commonality of this litigation situation did not move the goalposts of “exceptional”, thus heading off reams of satellite litigation on the number of badly conducted cases becoming a beacon of “norm”.
What is important to note as both warning and reassurance is that the full background of the case was considered, even the somewhat zealous comment from the CMC Master regarding the “worse than hopeless” case of the Defendant as it then appeared, albeit only on the strength of their own statement of case at that point.
It is critical in the current climate for parties to conduct themselves appropriately in litigation and whilst this seems like an obvious point to make, standing behind a case with little prospects is likely to have serious costs consequences. Whilst one of the main benefits of Part 36 remains the encouragement of paying parties to make offers and engage in claims, it is comforting to see Judges exercising their discretion to rebalance costs in these scenarios with recognition of specific conduct. It is not quite a blue-print but the test takes further shape with each useful insight. However, we have to hope that examples of these cases remain the exception and not the rule.