England and Wales High Court (Queen's Bench Division) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		05/03/2009

Mr Justice Underhill:

1. I circulated a draft judgment in this case on 4 February 2009. The draft required the parties to do some arithmetic before the final value of the award could be calculated; and as it transpired there were two aspects which required clarification. There was accordingly a further short hearing on 13 February. It was however clear that, whatever the final figure turned out to be, the Claimant had failed to obtain a more advantageous award than had been offered by the Defendant some three or four weeks before the start of the assessment of damages hearing. On that basis Mr Walker asked at the hearing on 13 February for an order under CPR 36.14(2) that the Defendant have his costs from 21 days thereafter. That application was opposed by Mr Wilby. Because one aspect of the facts required clarification I reserved my decision and allowed the parties to put in further written submissions. This is my judgment on the costs issue.
2. The essential facts can be summarised as follows:

(1) On 10 October 2008 Blake Lapthorn ('BL') for the Claimant made what purported to be a Part 36 offer (subject only to the fact that any settlement would require the approval of the Court). The offer was to accept a lump sum of £1,000,000 net of interim payments and a PPO in the sum of £1,000 p.a.

(2) On 13 October Irwin Mitchell ('IM') for the Defendant made an offer, purportedly pursuant to Part 36, of a lump sum of £3,600,000.

(3) On 15 October BL offered to accept a somewhat reduced offer.

(4) On 16 October IM made a counter-offer in the following terms:

"We acknowledge receipt of your letter dated 15^th October, received via e-mail at 18.41 yesterday.

The offer set out in that letter is rejected.

In a final effort to settle your client's claim, our client is prepared to offer your client a lump sum of £850,000 net of interim payments and CRU together with a periodical payment of £60,000 per annum indexed to ASHE 6115. If the offer is accepted, our clients will pay your costs of the action to be the subject of a detailed assessment in default of agreement.

This offer is made pursuant to the provisions of Part 36 CPR and will remain open for 21 days from the date upon which you are deemed to have received this letter. Thereafter, the offer cannot be accepted without the Court's permission or the agreement of the parties on costs.

Please note that if this offer is not accepted (notwithstanding the offer in relation to the indexation of the PPO) we reserve the right to seek an Order that any PPO be indexed to RPI rather than ASHE 6115, on the grounds that all the evidence on the point supports the view that your client will not engage with professional carers and is highly likely to continue to employ "support workers" from his friends and family."

The capitalised value of that offer is £2,926,000.

(5) On 17 October BL replied as follows:

"We refer to your Part 36 Offer dated the 16^th October 2008.

We would be grateful if you could please clarify the level of annual periodic payments that the Defendant is now proposing.

The Defence have now offered £60,000 per annum. This appears to be considerably less than previous offers and indeed overall, approximately £675,000 less in total. Please confirm that it is the Defendant's intention to offer periodic payments at £60,000 per annum."

The query raised by that letter appears to reflect a surprise that, in capital terms, the value of IM's offer was less than that of the offer made on 13 October. But it is in fact unsurprising that a defendant who has to take the risks of indexation of long-term payments is not prepared to make as generous an offer on a basis which includes a PPO.

(6) That offer was not accepted. On 10 November, i.e. on the first day of the hearing, BL made clear that they would recommend acceptance of IM's first offer if it were to include a substantial PPO element; but the Defendant was not interested.

(7) The capital value of my award has not, as I have said, been definitively calculated; but it was accepted before me that it was less than £2,926,000 (though not by very much).

3. At first sight the Defendant's offer of 16 October falls squarely within the terms of CPR 36.14(2). (I disregard the offer of 13 October because it did not include an offer of a PPO.) Mr Wilby did not seek to suggest that this was a case where, if CPR 36.14(2) did apply, I should regard if as unjust to make an order that the Claimant pay the Defendant's costs. But he submitted that the letter failed to comply with the requirements of CPR 36.5(4). Specifically, he submitted, the offer:

(1) failed to state the duration of the PPO offered, as required by para. 4(c)(i);

(2) failed to give sufficient details of the index by reference to which the PPO was to vary, as (at any rate implicitly) required by para. 4 (c)(iii), because it referred only to ASHE 6115, without identifying a centile;

(3) failed to include the requisite statement under para. 4 (d) that continuity of payment would be assured.

4. Mr Walker submitted that those points were the purest technicalities. Either they were not such as to render the offer non-compliant at all; or, if they were, I should exercise my discretion under CPR 44.3(4)(c) to produce the same result as if the offer had formally complied with CPR 36. He pointed out that the Claimant's offer shared the same alleged defects as the Defendant's: in particular, BL too in their letters of 10 and 15 October did not state the duration of the PPO or definitively state the centile under ASHE 6115. He submitted that BL could or should have had no real difficulty in understanding the offer; but he submitted that in any event confirmation of any formal points could have been obtained by use of the clarification procedure under CPR 36.8(2). Specifically:

• As for (1), it was too obvious to need stating that the PPO offered was for the rest of the Claimant's life: that was why BL themselves had not specified it in their letters.

• As for (2), BL had in their first letter identified the centile as "probably 75^th", though they had said that advice would be needed from a specialist financial adviser: the 75^th centile has of course been the norm in these cases since the decision of Swift J in Thompstone v Tameside and Glossop Acute Services NHS Trust [2006] EWHC 2904 (QB) (now confirmed by the Court of Appeal – [2008] 1 WLR 2207). The Defendant's offer could only reasonably have been understood as being on the same basis; but if there were any uncertainty about that it could have been resolved by a request for clarification.

- As for (3), Mr Walker was bound to accept that the offer did not contain the necessary statement. But he pointed out that BL knew the identity of the insurers instructing IM, namely Esure Services Ltd: they had had to correspond directly with them in the course of 2006 under s. 151 of the Road Traffic Act 1988 (and they were named as "our client" on IM's letter of 13 October). Esure's own writing paper, which BL had seen, confirmed that they were "authorised and regulated by the Financial Services Authority", from which it followed that they were participants in the scheme established under s. 213 of the Financial Services and Markets Act 2000. Accordingly, it was or should have been clear that any future payments would be secured as required by s. 4(3) and (4) of the Damages Act 1996. Again, in any event confirmation could have been obtained by the simplest of requests for clarification.

5. I am inclined to think that Mr Walker is right about points (1) and (2): I see no reason why purported Part 36 offers should not be construed in the context of any chain of correspondence of which they form part. But the omission of the statement required by para. (4)(d) is in my view a formal defect; so, whatever the position about the other two points, it seems to me that the offer of 16 October did not formally comply with the requirements of CPR 36.5(4).
6. That leaves Mr Walker's alternative submission. In my judgment, the defects relied on by Mr Wilby are indeed purely technical and can, for the reasons given by Mr Walker, have caused no real uncertainty or other prejudice to the Claimant or his advisers. That is indeed illustrated not only by the presence of equivalent defects in the Claimant's offers but by the fact that in their letter of 17 October responding to IM's offer (which they referred to as "your Part 36 offer") BL's only question was about the quantum of the offer: there is no suggestion whatever that they failed to understand its terms or were concerned about security of payment. On the particular facts of this case, I believe that it is right to exercise my discretion under CPR 44.3(4)(c) to provide for the same costs consequences as would have applied if IM's offer had been "Part 36–compliant."
7. Mr Wilby submitted that it was wrong in principle to put a party who had failed to comply with the rules in the same position as if he had done what he should: what, he asked rhetorically, was the point of having the rules? But that does not trouble me. A defendant who makes a non-compliant offer is in a worse position because he is at the mercy of the Court instead of being able to rely on the strong presumption that the costs consequences specified by CPR 36.14 will apply. It would not be in every case that the Court would be prepared to overlook any defects, even if they could be characterised as technical. But in a proper case – and I think, for the reasons advanced by Mr Walker, that this is such a case – I see no reason why a party should be penalised for what are in truth purely technical failures. I was referred to Mitchell v James [2004] 1 WLR 158 and Hertsmere Primary Care Trust v Estate of Rabindra–Anandh [2005] EWHC 320 (Ch), in which the Court gave effect to a non-compliant Part 36 offer in broadly analogous circumstances. Those cases are not directly applicable because they relied on the terms of CPR 36.1(2), which has since been amended; but they reinforce my view that there is nothing wrong in principle in the approach which I propose to take.
8. I will accordingly make the order sought, subject to one refinement. Applying the ordinary period of 21 days from 16 October would mean that the Defendant's liability for the Claimant's costs ceased, and the Claimant's liability for the Defendant's costs commenced, on 6 November. But I think it right to postpone that date to 7 November, to reflect the fact that, notwithstanding my conclusions above, the Claimant would have been entitled for good order's sake to require formal confirmation of the omitted points, or in any event "point (3)", which might have taken 24 hours to provide.