Over the years, claimants who make an offer to settle their claim in a format proscribed by ‘Part 36’ of the Civil Procedure Rules (CPR), have come to expect certain costs protections against the costs risks of proceeding to trial and associated benefits.
One such benefit that was introduced by an update to the CPR several years ago is the discretionary award of an additional 10% uplift on an award of damages if the claimant achieves a more advantageous outcome at trial than their Part 36 offer (for awards of up to £500,000).
A recent case in the High Court upheld an appeal from a medical negligence claimant who had been denied a 10% uplift on an assessed award of legal costs despite obtaining an award at a final hearing that was higher than a Part 36 offer they had made prior to the hearing.
The dispute came about when the claimant’s costs of a medical negligence claim were assessed by the court at almost £432,000. The claimant had made a Part 36 offer to accept £425,000 in settlement of the costs claim, plus the costs of the assessment about a month prior to the court assessment taking place. The claimant had, therefore, beaten the offer by around £7,000 which was less than 2% of the sum they had offered to accept before the final hearing.
When considering whether it would be unjust to award the 10% uplift, the court must take into account all the circumstances of the case including:
(a) The terms of any Part 36 offer;
(b) The stage in the proceedings when any Part 36 offer was made, including in particular how long before the trial started the offer was made;
(c) The information available to the parties at the time when the Part 36 offer was made;
(d) The conduct of the parties with regard to the giving of, or refusal to give, information for the purposes of enabling the offer to be made or evaluated; and
(e) Whether the offer was a genuine attempt to settle the proceedings
Master McCloud, who had made the costs assessment of £432,000, disallowed the 10% uplift on the assessment reasoning that the uplift was “all or nothing” and should be awarded in full unless it was unjust to do so. In giving her judgment, Master McCloud concluded that awarding the 10% uplift against the defendant would be disproportionate. The reasoning was that the offer had only been beaten by a small margin and a “bonus” award (as she described it) would be unjust because it is difficult for a party to assess exactly the level at which to make an offer.
On appeal, Judge Stewart J reversed the judgment of Master McCloud stating that the additional award should not be characterised as either a “bonus” or “compensation”. The purpose of the introduction of an uplift on damages where a claimant beats their Part 36 settlement offer was intended to be a “penal element” (JLE v Warrington & Halton Hospitals NHS Trust Foundation Trust).
This case highlights that when considering the various factors of relevance to an award of an uplift, on damages where a Part 36 offer is beaten at trial, the court should not be considering the margin by which the offer is beaten no matter how small that margin. It is now even more important to consider the value of a claim very carefully when receiving Part 36 settlement offers and to take appropriate legal advice on any such offers.
