Part 36: is it worth the fight?

Lisa Carver v. BAA PLC [2008] EWCA Civ 412 C/A (22/04/08)

Following Lisa Carver v BAA Plc [2008] the cost consequences of “beating” a Defendant’s Part 36 offer to settle by a nominal amount are no longer so clear cut.

Prior to the introduction of the revised CPR Part 36 on 6 April 2007, a Claimant who beat a Defendant’s Part 36 offer to settle by as little as £1 would be deemed to have been the successful party in the litigation, and could expect a costs order in its favour. Following the change in the rules in April 2007 and the above Court of Appeal decision this is no longer the case. 

The Facts

Miss Carver, an air hostess, injured her ankle entering a defective lift which had stopped 2 feet below floor level at Gatwick Airport on her way to work on 31 March 2003. BAA accepted liability before the proceedings were started and the only issue was quantum. BAA had made an interim payment to the Claimant of £520 in February 2004 and, in addition to this payment, in June 2006 made a payment into Court of £4,000. Various other offers were also made in the interim but all offers and payments into Court were ignored by the Claimant.

The Award

The matter proceeded to trial in April 2008. After trial the Claimant was awarded the sum of £4,686.26 inclusive of interest but her costs totalled £80,000. Taking interest into account, the Claimant “beat” the Part 36 offer by only £51. Given that the Claimant “beat” the Part 36 offer by only a very small margin, the Judge at first instance awarded BAA their costs from the date of the offer. The Claimant appealed to the Court of Appeal. Lord Justice Ward took a dim view of the Claimant’s conduct, commenting “to have incurred about £80,000 in costs to contest a claim under £5,000 fills one with despair”. Even though it was recognised that in monetary terms the Claimant had “beaten” the offer, the Court of Appeal awarded the Defendant its costs from June 2006, the date of the final payment into Court. 

Analysis

• Old Rules
 Fails to better a Part 36 payment

• New Rules
 Fails to obtain a judgment more advantageous than a defendant’s Part 36 offer

Under the old CPR Part 36, a marginal difference of £51 would have been sufficient to entitle the Claimant to her costs of the proceedings (following the general rule that the “loser” pays the “winner’s” costs). Under the new rules, however, even though in monetary terms the Claimant had “beaten” the Defendant’s offer, the Court of Appeal concluded that the sum awarded was not “more advantageous” (applying the wording of the revised Part 36) than BAA’s payment into Court, taking into account all the circumstances, including the level of irrecoverable costs incurred by the Claimant in taking the matter to trial.

The Future

The Court of Appeal’s decision has stressed the significance of assessing all the circumstances (not purely from a monetary perspective) in terms of deciding whether a Claimant has “beaten” a Part 36 offer. This in turn means that a recipient of a Part 36 offer and his advisers cannot simply assess the likely quantum of the award in deciding whether to accept an offer safe in the knowledge that if he beats it, he will be awarded his costs. Instead, a far broader assessment will be required as to whether by fighting the case the Claimant’s position will be more advantageous than it would have been had he accepted the offer. That assessment is far less tangible than the old regime, where all that was required was a cold, hard assessment of quantum.

The upshot is that a Claimant will have to think long and hard before rejecting a marginal offer of settlement even if he is confident that it falls somewhat short of his likely assessed liability.

joe.okeeffe@incelaw.com

camilla.leslie@incelaw.com