Accepting Part 36 Offers Out of Time - IEH v Powell [2023] EWHC 1037 (KB)

In this case, Master Fontaine had to decide whether normal Part 36 consequences should apply where the brain damaged child C accepted a Part 36 offer over 18 months after the relevant period. 

On 1 September 2016, 8-year-old C suffered a traumatic brain injury in a car accident. 

By the time of a CMC October 2018, C, who was living in Morocco, had served medical evidence in paediatric neurology and neuropsychology.  Both experts thought it was too early to provide a reliable prognosis in respect of the brain injury; reassessment would be required after secondary education.

In November 2020, before obtaining his own medical evidence, D made a Part 36 offer to settle the entire claim.  Counsel advised that the offer should not be accepted, and C’s solicitors requested that D leave the offer open for acceptance until March 2022.  D declined to do so.    

C obtained further evidence and accepted the offer in July 2022. 

C sought to recover his costs of the action, arguing that it would be unjust for him to recover his costs only up to the expiry of the relevant period and thereafter to have to pay D’s costs (CPR 36.13(5)). D opposed the application, and argued that the normal rule should apply. 

Master Fontaine considered the parties’ competing positions.  Applying CPR 36.17(5), she found that it would be unjust to disallow C’s costs of the whole action, for the following reasons:

• C was a child and it is well recognised that the long term effects of a brain injury cannot be known until later in life; this was not simply one of the “ordinary contingencies of litigation” but a factor which necessitated waiting before an offer could be accepted.
• The litigation friend did not have sufficient evidence to enable an informed decision to be made in respect of the offer within the relevant period, despite the C’s solicitors attempts to gather information about his educational progress. Importantly, the Master also found that it was “extremely doubtful” that the court would have been willing to approve the acceptance of the offer in late 2020.
• The fact that C lived in Morocco, making obtaining factual evidence more onerous was not a factor relevant to whether the offer could have been accepted any earlier.
• There had been a necessity to obtain a new litigation friend, which had caused some delay, though this did not affect the ability to obtain witness evidence and medical reports.
• C’s conduct following the expiry of the relevant period and receipt of counsel’s advice not to accept the offer, was reasonable and proportionate. C’s solicitors took significant steps, obtaining updated disclosure from C’s school, witness evidence from the family and C’s teachers, and updated medical evidence from the instructed experts.
• By June 2022, having received the updated information, counsel advised that the offer should be accepted. The Master took into account that the Claimant made a significant, and unexpected recovery from his injury.  The Claimant’s solicitors had acted reasonably in taking the steps that they did.

However, not all went C’s way. In considering C’s conduct, the Master noted that it was not until the day before the hearing that the Defendant was provided with any of the updated evidence obtained. She held that that C’s failure to provide this information to D was conduct that was relevant to the application and the award of costs. If C had concerns about disclosing privileged documents to D before the approval hearing, C should have asked for the approval to be heard first, and separately, from the application to disapply rule 36.13(5). This conduct, although serious, did not mean that it would not be unjust for the normal rules to apply (the other factors being heavily in favour).  The Master reserved the decision on whether the Claimant would receive all his costs for the entirety of the period, because of the conduct issues.  

This judgment makes very clear that protected parties should not simply assume that normal Part 36 consequences will be disapplied when an offer is accepted late.  Where the uncertainties in the medical evidence are merely the “ordinary contingencies of litigation” it is highly unlikely to be unjust to apply the normal rules.

Each case will turn upon its own facts; however, once an offer is rejected, claimants will need to be proactive in obtaining the evidence required to reach settlement.  The steps taken will need to be clearly explained in a witness statement, and any delay justified.  Updated advice to facilitate settlement will need to be promptly sought.   Claimants will need to keep defendants updated; a failure to do so may expose a claimant to cost penalties. 

Defendants will also want to have in mind that a well-pitched early Part 36 offer may not provide costs protection where the claimant’s recovery is better than expected.  Keeping Part 36 offers under review remains vital!