SG v Hewitt

Background

Rule 36.14 essentially provides that the defendant may recover costs incurred after expiry of the offer (i.e. 21 days after it was made) up to its later acceptance or trial if it is not beaten, from the claimant. However, the Court has authority to depart from this rule and, in the event the claimant succeeds at trial, to order that the defendant pays the claimant’s costs incurred after expiry of the offer, unless it is unjust to do so. The Court may consider whether it is unjust by taking into account all the circumstances of the case, including the terms of the Part 36 offer; the stage in the proceedings that the offer was made; the information available to the parties at the time of the offer; and the conduct of the parties (CPR 36.14(4)).

Facts

In March 2003, SG, who was at the time 6 years old, suffered injuries arising from a road traffic accident, caused by Hewitt’s negligence. On 2 April 2009, the defendant made a pre-action Part 36 offer of £500,000 by way of final settlement. The offer was not withdrawn. Due to SG’s age and the nature of his injuries, the medical evidence at that time was that it was not possible to predict the full impact of the injuries until he had matured. The offer was later accepted by SG in 2011, when the long term effects were more accurately known.

The settlement was approved by the Court in December 2011 and it was agreed that Hewitt would pay SG’s costs of the main claim up to and including 22 April 2009 (which was 21 days after the offer was made.)

At the time of approving the settlement, a costs related issue arose before the Court, namely, which party should be liable to pay the costs incurred after expiry of the 21 day period i.e. from 23 April 2009?

At first instance, the Court decided in favour of the defendant and ordered the claimant to pay the defendant’s costs incurred after 23 April 2009. SG appealed.

Appeal Judgment

The Court considered the case of Matthews v Metal Improvements Co Inc [2007] CP Rep 27 (“Matthews”), on which Hewitt sought to rely. In Matthews, the claimant, who suffered head injuries at work, was diagnosed with a further unrelated illness which significantly reduced his life expectancy, prior to issuing proceedings. In that case, the claimant accepted the defendant’s Part 36 offer in light of his decreased life expectancy, after the expiry of the 21 day period. The Court held that the claimant was liable for the costs incurred following expiry of the relevant period.

The Court of Appeal distinguished the present case from that of Matthews on the facts. In the present case, the issue was that the relevant circumstances could not yet be known (as a reliable prognosis of the SG’s injuries could not be made until further time had passed).  TheAppeal Court held that the Judge at first instance had not given sufficient weight to the relevant factors and the appeal was allowed.

Comment

This case provides a good example of when the Court will, by exception, deviate from the rules contained in Part 36.14. The Court’s main reasoning in this case for departure from the general rule was on the grounds of fairness. It found that the uncertainty as to the severity of the claimant’s injuries, made it impossible for the claimant to assess accurately the quantum of this claim.

The Court ultimately made an Order contrary to Part 36.14 due to the fact that the claimant was able to evidence that it was not in a position to assess quantum at the time the Part 36 Offer was made. However, the Court’s findings need to be viewed in context of the case. It is important to note that the inability of the claimant to assess the quantum was not due to lack of disclosure by the parties or due to the fact that either party had acted unreasonably. The Court held that even if all the information that both parties had was placed before it at the time the Part 36 Offer was made, it could not have assessed the quantum accurately.

It is also important to highlight the final comments made by the Court. Black LJ made it clear that the reasoning applied in this case and the conclusions made were fact specific and he did not envisage that there would be many instances where a departure from Part 36.14 would be justified. It was his opinion that this case could not easily be compared with other cases as each fact present in this case was relevant to the ultimate decision made.

This case reminds us that the Court has discretion to depart from Part 36.14. It also highlights the advantages of making a Part 36 offer as the Court made it clear that there are few instances where the Part 36 rules will be departed from, generally only when it would result in an Order that could be considered to be unjust or unfair.

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