Looking into a crystal ball – Do I have the evidence to consider a Part 36 offer? The decision in Equitix Eeef Biomass 2 Ltd v Fox & Ors [ 2021 ] EWHC 2781 (TCC ) would probably say yes!
Written by Jonathan Godfrey
In any situation where a Part 36 offer has been made there are decisions to be made as to its appropriateness or otherwise. In the situation where an offer has been made, but the offeree feels that it does not have all the information to make a totally informed decision on its appropriateness, it can be a dilemma. The decision of Mr Justice Kerr in Equitix Eef Biomass 2 Ltd v Fox & Ors [ 2021 ] EWHC 2781 ( TCC ) has further compounded the dilemma and reinforced the approach adopted by the court in such circumstances.
In Equitix, the case had proceeded to trial and the claimant had achieved judgment in the sum of £11 million. During the course of proceedings, the claimant had made a Part 36 offer of just shy of £5.5 million on 25th January, 2021. An enhanced rate of interest was applied to the damages awarded due to the Part 36 offer being beaten, from the date following the requisite acceptance of the Part 36 offer. The Defendants contended that they had not been able to make an assessment of the offer that had been made until such time as Equitix’s expert’s 2nd report was served on 22nd March, 2021. They proposed that enhanced interest should only apply from that date. Kerr J roundly rejected the argument. In addressing matters in his judgment, he said [ 25 ] :
“ I reject the defendants’ contentions. As to the first part, parties frequently face the pressure of a Part 36 offer without all of the pieces of the jigsaw in place. Much of the purpose of Part 36 would be lost if it were otherwise ; the costs which the regime was intended to prevent being incurred, would have to be incurred before the normal consequences of the offer could flow. A well judged Part 36 offer is often based on inspired and educated guesswork , which the other party must also display when deciding whether to accept it “.
Kerr J went on to continue at [ 26 ] that “ part of the incentive to settle is “ upping the ante “ consideration that a recipient of the offer may pay dearly for not accepting it, if it is beaten at trial “.
Should we be surprised by the approach adopted by Kerr J to the Part 36 offer ? In truth, no. Perhaps as to the comprehensive nature of the language used , particularly that part I have underlined, but in reality, the approach adopted by Kerr J is the approach that has been adopted by the courts throughout. The courts have not adopted a laissez-faire attitude to Part 36 consideration with a paucity of evidence available.
In Briggs v CEF Holdings Ltd [ 2017 ] EWCA 2363 ( Civ ) the Court of Appeal emphasised the position that where a Part 36 offer is made where an assessment of value is not properly achievable, the fact that it is a difficult equation to solve does not normally act as a reason for displacing the normal Part 36 basis for costs.
In Briggs , the claimant who had been injured in 2010, issued proceedings. In September, 2012, the defendant made a Part 36 offer in the sum of £50,000. Having eventually completed obtaining expert reports and evaluation the claimant accepted the offer. The claimant sought an order that the defendant pay its costs up until October, 2014. They were successful at first instance, but the matter was taken by the defendant to appeal. The judge at first instance had ruled that the medical uncertainty until October, 2014 made it appropriate to make a different order to the norm. The Court of Appeal disagreed. Goss LJ remarked that “ it is very important not to undermine the salutary purpose of Part 36 offers “. He took into account that all cases are fact specific but highlighted that the general rule that emerges from Part 36 , is that if the offer is not accepted within the requisite time then the claimant bears the costs of the defendant until such time as the offer is accepted. The general rule can only be displaced if the offeree can show injustice “ but it is up to the offeree to show injustice, not simply that it may have been difficult to form a view as to the outcome of litigation “. Goss LJ considered that the more appropriate action for the claimant to have taken had it considered it did not have the necessary evidence at hand would have been to apply for a stay of the action at the time of the offer and that a stay might in many cases “ justify [ ies ] displacing the usual rule “.
The approach adopted by the courts can be further viewed in the decision of Mrs Justice Lambert in Campbell v the Ministry of Defence [ 2019 ] EWHC 2121 ( QB ). This was a personal injury case in which liability had been admitted. In January, 2018 the defendant made a Part 36 offer of £100,000, and extended for acceptance until 19th February, 2018. It was eventually accepted by the claimant on 22nd March, 2019, some 13 months after the time limit for acceptance had expired. The claimant sought an order that costs be awarded to him up until 19th February, 2018, with no order for costs thereafter, as to do otherwise would have been unjust. The claimant had contended that it was unjust for the normal costs order to be made as it was not in a position to properly quantify the case at the time that the offer was made. The claim included a claim for loss of earnings , the value of which depended upon the claimant’s acceptance or otherwise for an officer’s commission not known until October, 2018.
Lambert J went back to the basics set out in CPR 36.13 ( 4 ), at ( b ) , which provides that as in the instant case, a Part 36 offer relating to a whole claim if accepted after the expiry of the relevant period , the liability for costs must be determined by the court, unless the parties agreed. Costs not being agreed under CPR 36.13 ( 5 ), the court must “ unless it considers it unjust to do so “ , order that the offeree be awarded costs up to the date that the relevant period expired, but that the offeree thereafter should bear the offeror’s costs from the end of the relevant period until acceptance. In considering whether the normal rule would produce an unjust outcome, the court is required under CPR 36.13 ( 6 ) to take into account all the circumstances of the case, and including those matters set out in CPR 36.17 ( 5 ). Only if the court concludes that it is unjust will it go on to determine the alternative order under CPR 44.3.
Lambert J set out that in consideration of matters the court must guard against making any exception from the norm “ on the grounds that the regime itself is harsh or unjust but must find something about the particular circumstances of the case which takes it outside the norm “. Adopting the stance of Goss LJ in Briggs ibid, Lambert J reminded herself that the salutary purpose of Part 36 was to promote compromise and avoid the unnecessary expenditure of costs and court time. She continued that the burden was on the offeree to show injustice, and that “ uncertainties of litigation do not render it unjust for normal costs order to operate “.
In her judgment, Lambert J readily accepted that at the time that the Part 36 offer expired , the evidence concerning the claimant’s prospects of promotion were incomplete. She then went on to say :
“ However, in personal injury claims as in other litigation, offers to settle are often made at an early stage when the evidence is incomplete ( either in liability or quantum or both ). In these circumstances, it is the job of the claimant’s advisors to weight up the merits of the Part 36 offer and give the claimant appropriate advice. I accept that the exercise involves judgment and experience, but here, the claimant had the benefit of specialist personal injury lawyers with a sub-specialisation in military claims. As such they were in as good a position as any advisor to evaluate the claimant’s career prospects and to give him advice on the offer “.
Had the claimant’s advisors in considering the offer determined that the prospects were so uncertain as to make any evaluation wholly speculative, then the appropriate action considered by Lambert J would have been to apply for a stay of the action pending the determination of the Commission Board. In failing to do so, the claimant continued the litigation at his own costs risk. Lambert J found in the circumstances of the case she did not find that it would be unjust to make an order reflecting the normal consequences of a late acceptance of a Part 36 offer. The offer to settle “ was not a tactical offer but represented a serious attempt to resolve the claim “.
There have been decisions where the courts have considered that the “ the other side of the factual line has been crossed “ so as to allow for a departure from the normal order, most notably in SG ( a Minor ) v Hewitt [ 2012 ] EWCA Civ 1053, and more recently, Momonakaya v the Ministry of Defence [ 2019 ] EWHC 480 ( QB ). Notwithstanding these cases, the Equitix case has restated in the strictest terms and the most evocative language the courts position in relation to the consideration of a Part 36 offer. Although all the pieces of the jigsaw may not be in place the expectation is that “ inspired and educated guesswork “ can enable an informed decision to be made. While there may be some cases where the courts will exercise their discretion to depart from the normal order, in order to convince such a departure the party concerned will need to demonstrate that it would be unjust to apply the normal court order as the circumstances take it outside the norm. Where after consideration there is a decision that there is a paucity of evidence to allow for a proper evaluation of a claim, the more considered approach would be to apply to the court for a stay of proceedings in order to enable the provision and consideration of the evidence required. To merely sit back and take a decision after the obtaining of the necessary evidence is a risky tactic. Equitix is the latest in a Part 36 jurisprudence of cases where it has been established that legal advisors can apply instinct to consideration of value notwithstanding the lacuna in the totality of the evidence.
Jonathan is a specialist clinical negligence and personal injury barrister at Parklane Plowden.