In Campbell v Ministry of Defence  EWHC 2121 (QB) the High Court provided useful guidance for practitioners as to how an offeree should proceed when a Part 36 offer is received at a stage in litigation at which it is difficult to evaluate the offer.
The Claimant brought an action for damages for personal injury in which liability was admitted. The Defendant made a Part 36 offer to settle the claim, which was accepted by the Claimant some 13 months after the time limit for acceptance had expired.
The issue for the Court was whether the usual cost consequences applied. The Claimant sought an order that the Defendant do pay the Claimant’s costs up to the end of the relevant period, with no order for costs thereafter, arguing that applying the usual rule would be unjust.
CPR r.36(14)(b) provides that where a Part 36 offer which relates to the whole of the claim is accepted after expiry of the relevant period, the liability for costs must be determined by the court unless the parties have agreed otherwise.
In such circumstances, as per r.36.13(5), the usual order would require the offeree (Claimant in this case) to be awarded costs up to the date on which the relevant period expired, with offeree to pay the offeror’s costs for the period from the date of expiry of the relevant period to the date of acceptance.
Unless costs are agreed between the parties, the offeree will not avoid the cost consequences of r.36.13(5) unless the circumstances are such that the standard order would be “unjust”. In considering whether such would be unjust, the court is required to take into account all the circumstances of the case including the matters listed in r.36.17(5).
The jurisprudence in this area suggests that parties are unlikely to overcome this hurdle in cases where mere uncertainty regarding prognosis impedes valuation, such being part of the usual risks of litigation. Rather, the circumstances of the case would need to be such that the risks posed were other than those which parties should be expected to deal with in the ordinary course of litigation; an example of the same being a case of an infant claimant with serious head injuries, the long-term prognosis of which could not be ascertained until the claimant matured, as per SG (A child by his mother and litigation friend AG) v HK Hewitt  EWCA Civ 1053.
Lambert J provided a helpful summary of the law in this area, reinforcing the challenges facing offerees seeking to disapply the usual order . She stated that:
“Importantly, had a stay been granted then the defendant would not have incurred costs after the time for acceptance of the offer had expired”. [9(b)]
Should an offer be considered viable, and the offeree genuinely cannot evaluate the offer in the relevant period, the offeree should consider applying for a stay, thereby preventing the offeror from accruing further costs. Such steps would provide some protection to the offeree’s position in the event that the usual order be made.
The case provides helpful advice for practitioners who find themselves in the difficult, albeit not abnormal, circumstance of being faced with a potentially attractive Part 36 offer. Whilst a stay would not necessarily strengthen the offeree’s position in any later application made under r.36.13(5), it would restrict the extent of any costs for which the offeree may find themselves liable on later acceptance.
Bethan Davies (Pupil)