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The Dekagram: 5th June 2023

Articles, News | Mon 5th Jun, 2023

Last week we were asking ourselves whether the courts’ introduction of artificial intelligence is imminent. This week we read that the time it takes to bring a claim to trial has reached an all-time high of just under 80 weeks, up six weeks from a year ago. Although there has been an increase in the total number of claims issued in the first quarter of the year, the number of personal injury claims has reduced by 8% to 17,000, which may reflect the fact that during the pandemic there was less scope for fault related injuries, or may (alternatively) suggest that the drive to discourage claims has started to have some effect. In 2022 there were just over 17,500 barristers in practice in England and Wales…

Genuine and Sham Liability Settlement Offers: a Guide

Part 36 describes itself as a ‘self-contained procedural code about offers to settle pursuant to the procedure set out in this Part’ (CPR 36.1) and contains a balance of financial incentives to settle claims without recourse to litigation. It also applies to parts of claims: rule 36.2(3) provides that ‘a part 36 offer may be made in respect of the whole, or part of, or any issue that arises in [a claim]’. It is therefore a legitimate and common occurrence that offers are made to settle the liability aspect of a claim, with damages to be decided by the court thereafter.

The benefit of making such an offer is of course that the offeror may be able to take advantage of the financial incentives set out in rule 36.17. Where judgment against a defendant is at least as advantageous to the claimant as the proposals contained in a claimant’s part 36 offer, the court must, unless it considers it unjust to do so, order that the claimant is entitled to enhanced interest on the damages awarded, costs on an indemnity basis from the end of the relevant period, interest on costs and an additional lump sum (all set out in rule 36.17(4)). Rule 36.17(5) sets out the factors that the court must take into account when considering whether it would be unjust to make the 36.17(4) orders. Those factors include the stage in the proceedings at which the offer was made, the information available to the parties at the time the offer was made and the conduct of the parties.

When considering how to approach the issue of whether it would be ‘unjust’ to order the specified costs consequences, the courts have given the following guidance:

  • A finding that it would be unjust is a departure from the norm and a judge must not therefore make that exception just because s/he thinks the costs regime itself is harsh or unjust. There has to be something about the particular circumstances of the case that takes it out of the norm (Downing v Peterborough & Stamford Hospitals NHS Foundation Trust [2014] EWHC 4216);
  • A finding that it would be unjust is therefore the exception not the rule and the burden of satisfying the court that it would be unjust is a heavy one/ a formidable obstacle (Smith v Trafford Housing Trust [2012] EWHC 3320).

An amendment to rule 36.17(5) in April 2015 added a fifth factor: ‘(e) whether the offer was a genuine attempt to settle the proceedings’.  This factor was added in response to the increasing incidence of claimants making offers giving only a marginal concession on the point in issue, with the aim solely of putting defendants at risk of the specified costs consequences. How then have the courts treated offers to settle the issue of liability?

  • 100%: It will come as little surprise that an offer to settle liability 100% in the offeror’s favour is unlikely to be held to be a genuine attempt at settlement. In AB v CD [2011] EWHC 602, when assessing the claimant’s offer, which represented 100% recovery, the court held that the concept of settlement involves an element of give and take and a settlement offer must involve some genuine element of concession. The claimant’s offer was, by contrast, a demand for total capitulation. AB pre-dated the introduction of the ‘genuine settlement attempt’ factor to rule 36.17(5), but the same conclusion was reached in the later case of R(MVN) v Greenwich LBC [2015] EWHC 2663.

However, case law suggests that it does not take much of a concession for an offer to be held to be a genuine attempt at settlement.

  • 99.7%: Where the case was very strong, there was clearly no defence and success was a near certainty, an offer of 99.7% in the offeror’s favour was a genuine settlement attempt (Rawbank SA v Travelex [2020] EWHC 1619);
  • 96-97%: The Court of Appeal upheld a High Court finding that an offer equivalent to 96-97% of the full value of the claim was a genuine settlement attempt. The High Court observed that if a claimant makes an offer with a very small discount, he cannot be assured that it will necessarily afford him costs protection(Telefonica UK Ltd v Office of Communications [2020] EWHC 1619);
  • 95%: In Huck v Robson [2002] EWCA Civ 398 the claimant offered to settle liability 95% in his favour. The Court of Appeal, whilst acknowledging the potential for abuse of Part 36 and stating that the costs consequences should not be applied where the offer was merely a tactical step designed to secure the benefits of [Part 36], held that the costs consequences should apply to that offer. Although Huck pre-dated the introduction of the ‘genuine settlement attempt’ factor to rule 36.17(5), the same conclusion was reached in the later case of Jockey Club Racecourse Ltd v Willmott [2016] EWHC 167 (where the court held that as the claim was an open and shut case, an offer of 95% was a genuine settlement attempt). 
  • 90%: In JMX v Norfolk & Norwich Hospitals NHS Foundation Trust [2018] EWHC 185 the Court held that 10% was not a token discount when considered in the context of a clinical negligence claim worth several million pounds.

Clearly there can be no hard and fast rule as to what level of concession is required to constitute a genuine settlement attempt: each offer must be considered in the context of the claim in which it is made. In a very strong, high value case, a smaller discount may be held to be genuine; in a finely-balanced, low value case a greater discount is likely to be required.

The issue was recently considered by the High Court in the case of Mundy v TUI UK Ltd [2023] EWHC 385 (Ch). The claimant brought a claim for damages for food poisoning and made an offer to settle liability 90/10% in his favour. At the conclusion of the claim judgment was entered for him. Although the claimant did obtain 100% judgment in his favour (and to that extent bettered his offer of 90/10), he had valued general damages at £25,000 – £35,000; had (on the same date as making his 90/10 offer) offered £20,000 in full and final settlement; and at trial was awarded £3,700 in general damages (because the court held that the illness caused was less severe and long-lasting than he had claimed). The claimant therefore failed to better the defendant’s offer of £4,000. The county court judge refused to order any costs consequences to flow from the claimant’s offer. Permission to appeal was granted to the claimant by Foxton J, who observed that the practice of making 90/10 offers was widespread and a High Court authority on the point would be beneficial. Collins J dismissed the appeal, finding that the decision of the court below was not wrong.

This case should be treated with caution: it cannot be taken as authority for a general proposition that an offer of 90/10 is not a genuine attempt at settlement.

At first instance the judge held that the costs consequences did not apply because the offer could only sensibly be interpreted as the claimant offering to accept 90% of the value of the claim and the claimant did not obtain a judgment at least as advantageous to him as his offer i.e. the claimant did not get over the first hurdle of showing that rule 36.17(1)(b) applied. It seems that the judge must have had in mind that the judgment was less than 90% of the claimant’s valuation of the claim. If the claimant’s offer was interpreted as being an offer to accept 90% of the damages assessed by the court and he in fact obtained 100% of those damages, the judgment was clearly ‘at least as advantageous’ to the claimant as his offer. However, the High Court was not persuaded that the judge had made that mistake.

The High Court upheld the county court judge’s decision but did not expressly endorse all his conclusions. The judgment notes (para. 49) that the county court judge had apparently found the submissions made on behalf of the claimant to be ‘strongly counter-intuitive, if not to a degree baffling’ and some of his explanatory reflections ‘reflected rather than resolved that degree of bafflement’, but as a whole his decision was not wrong. The High Court found that the decision of the court below was not wrong because, firstly, the judge was right to conclude that the claimant had failed to obtain a judgment more advantageous than the defendant’s offer (of £4,000. Note: this is confirmation that 36.17(1)(a) does apply, rather than confirmation that 36.17(1)(b) does not).

The judge at first instance also considered whether, if 36.17(1) did bite, it would be unjust to order the costs consequences. He held that the offer was not a genuine attempt at settlement:

  • Although the defence pleaded contributory negligence, ‘no competent legal advisor could have regarded the contributory negligence plea as having the slightest chance of success’ and therefore if the offer was intended to be effectively a concession of 10% contributory negligence it was not a genuine offer to settle but was instead a tactical device, to take advantage of a foolish piece of pleading. (That decision seems contrary to the earlier authorities, such as Rawbank, set out above: if a party decides to make a concession on a point that it is bound to win, surely that should constitute a genuine attempt at settlement?)
  • The offer could not be interpreted as a proposal to settle the issue of breach of duty, with the issues of causation and quantum to proceed to trial, because if no causation was found there would be no liability anyway and causation was the only aspect of liability in real issue.

The High Court held that the judge was right to find that it would be unjust to order costs consequences to flow from the claimant’s 90/10 offer. The most significant factor relevant to that decision was the fact that the claimant had failed to better the defendant’s offer. Rule 36.17(1) provides that the rule applies where (a) a claimant fails to obtain a judgment more advantageous than a defendant’s offer or (b) judgment against the defendant is at least as advantageous to the claimant as the proposals contained in the claimant’s offer. The High Court held that the apparent intention is that either (a) or (b) (and their respective costs consequences) will apply (see para. 24 of judgment) and contemplating a situation where both 36.17(1)(a) and (b) could apply cuts across the binary structure of that rule (para. 32).

In cases where liability is a live issue (e.g. where there is a prospect of a finding of contributory negligence, or the claimant failing to prove breach of duty) a 90/10 offer (which would dispose of the liability issue) is still worth making – particularly in high value claims. It remains the case that whether such an offer will attract costs consequences will depend on the particular facts of the case.

About the Author
Linda Nelson was called in 2000 and is ranked in both the Legal 500 and Chambers and Partners for her travel law work. Linda regularly advises in international personal injury cases with cross-border issues, particularly those falling within the jurisdiction of the Admiralty Court. She is well-versed in claims involving the international carriage conventions, the package holiday regulations, Merchant Shipping regulations, ship collisions and issues of jurisdiction, applicable law and limitation. She is a contributing author to Munkman on Employers’ Liability (writing the ‘Shipping and Workers on Ships’ chapter) and co-authored ‘Work Accidents at Sea’ (now in its second edition).

The Intermediate Track: The Civil Procedure (Amendment No. 2) Rules 2023

A longer article will follow, but for starters let’s address the 10 key points:

  1. All hail the new Intermediate Track (“IT”) spanning claims valued between £25,000 and £100,000. Be prepared, if the results are positive then £100k will not prove a permanent ceiling. Next stop £250k?
  2. Fixed Recoverable Costs will apply to the IT. Will the quality of litigation suffer a la bulk FRC Fast Track claims?
  3. The changes will apply to claims commenced on or after 1st October 2023. Will there be a pre-deadline glut of hastily issued claims?
  4. Claims on both the Fast Track and Intermediate Track will be allocated to one of four complexity bands, with the Fixed Recoverable Costs ascending accordingly. How much satellite litigation will this inflict, as claimants and defendants bitterly contend for higher and lower bands respectively?
  5. Certain claims are exempt e.g. mesothelioma, clinical negligence (unless breach of duty and causation have been admitted), harm/abuse/neglect of or by children or vulnerable adults. The distinction between clinical negligence (exempt) and professional negligence (not exempt) seems hard to justify.
  6. Part 36 will operate differently. Where a claimant beats her offer, instead of her costs being assessed on the indemnity basis she will receive an uplift of 35% on the difference between the Fixed Recoverable Costs for the costs for the stage applicable when the relevant period expired until the stage applicable at the date of judgment. Greater costs exposure certainty for defendants but has Part 36 been de-fanged?
  7. Trials on the Intermediate Track are limited to three days, and oral evidence at trial is limited to two experts per party.
  8. Judges retain the discretion to allocate more complicated cases valued at sub-£100k to the Multi-Track.
  9. Fixed Recoverable Costs are being extended across all civil cases on the Fast Track bar housing disrepair claims which are deferred until October 2025. The brave new world of fixed costs…
  10. Fixed Recoverable Costs on the Fast Track will be uprated in line with inflation. Finally some good news…

About the Author
Richard Collier was called to the Bar in 2016. Before that, he had worked as a Judicial Assistant to Lord Justice Jackson in the Court of Appeal. He is now instructed by solicitors for both Claimants and Defendants in cross border disputes, package travel and other related claims.

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