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

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION

		ROYAL COURTS OF JUSTICE
		28th June 2011

Introduction and background

1. The Claimants have brought Part 8 proceedings against the Defendant seeking :

(i) the court's approval, which I have granted, for acceptance of a pre-action offer of £190,000, made by the Defendants under CPR Part 36 in their claim for damages arising out of the death of their mother ; and

(ii) their costs.

Approval was necessary because the Claimants, Miss KT and Miss ST are now aged 10 and 9 years respectively. The remaining issue for decision is whether the Claimants or the Defendant should recover costs for the period after the 21 day period for acceptance of the Part 36 offer expired. There is no dispute that the Claimants are entitled to the costs of and incidental to obtaining the court's approval.

2. The Claimants' mother, Ms Tracy Williams, died from breast cancer on 25^th August 2006, then aged 40. She had been a patient at the medical practice where the Defendant was a general practitioner. In March 2004 she consulted the Defendant with breast lump symptoms. The Defendant recorded that there was no discreet lump but there was some slight nodular tissue, reassured Ms Williams but did not suggest any further examination. In October 2005 Ms Williams returned to the surgery and was referred to a local hospital where imaging confirmed malignancy. It is alleged that the Defendant did not properly manage Ms Williams care, that in March 2004 she should have advised her to return to the surgery for re-examination and should referred her to a breast clinic for a specialist opinion. It is said that proper care would have resulted in earlier diagnosis and earlier treatment leading to a considerably longer period of survival.
3. The Claimants' solicitors obtained a report dated 7^th June 2008 from Dr Ingram, an expert GP, and a report dated 11^th August 2008 from Professor Dodwell, a consultant oncologist with a special interest in breast cancer. Dr Ingram expressed the opinion that the Defendant was negligent in not referring Ms Williams to a breast clinic in March 2004. Professor Dodwell expressed the opinion that had referral taken place in March 2004 the cancer would have been detected 19 months earlier than it was and concluded that with appropriate therapy Ms Williams would have had a 50 % chance of a 20 year survival.

The dealings between the parties' advisors

4. On 9^th March 2009 the Claimant's sent a pre-action protocol letter of claim to the Medical Protection Society ("MPS") who were representing the Defendant's interests. They set out the medical history, their allegations of negligence and causation, alleged that the cancer could have been detected 19 months earlier and asserted that the prognosis for a 10 year survival would then have been greater than 50%. The letter stated a schedule of special damage had not been prepared but set out the anticipated heads of damage, reserving the right to seek additional heads of damage if so advised.
5. MPS responded on 23^rd March stating they had breach of duty evidence supportive of the Defendant, had not yet investigated causation, but hoped to respond by the end of the three month protocol period. They did not do so and on 19^th August 2009 the Claimant's solicitors ("Barcans") wrote stating limitation was due to expire and suggesting an extension of limitation to 25^th November 2009 to enable MPS to deliver a substantive response. There followed a number of letters / e-mails (from 20^th April 2010 onwards correspondence was with the solicitors, Kennedys, instructed by MPS) agreeing to extensions of limitation and dealing with the Defendant's investigation of causation. On 20^th April 2010 Kennedy's wrote stating that independent expert evidence had been obtained but they needed further time to finalise their letter of response and obtain client approval. Time for the letter of response was extended to 24^th May. Following a further short extension, a letter of response dated 28^th May 2010 was served. Instead of a maximum of 3 months prescribed in the pre-action protocol, the letter of response had taken 14 months.
6. The letter denied breach of duty, alleged that on 9^th March 2009 no lump was palpable, even if present, referred to data by Peer et al dealing with the speed of development of tumours, and asserted that the Defendant's standard practice was to advise return should the patient have further symptoms or be concerned. On causation the letter said that should breach of duty be established then it was accepted that, on probabilities, diagnosis in March 2009 would have led to a greater than 50% chance of survival at 10 years ie it accepted the Claimants' assertion on this point. The Defendant reserved her position on quantum until further information was available.
7. On the same date, in a second letter dated 28^th May 2010 the Defendant made a Part 36 offer. The first paragraph of this letter included the words :

"This is a Part 36 Offer. This offer is intended to have the consequences of a Part 36 offer. The Defendant's offer is open for acceptance for 21 days from the date you are served with this letter, which we calculate to be until 4pm on 18^th June 2010. This offer can only be withdrawn or altered to be less advantageous to the Claimant before 18 June 2010 with the permission of the Court."

The letter offered £190,000 and stated that if the Claimants accepted the offer by 18^th June 2010 the Defendant would :

".......

4. Pay the Claimant's reasonable costs up until 18^th June 2010 or the date of acceptance of the Defendant's offer, whichever is the earlier, such costs to be agreed or assessed on a standard basis in accordance with CPR 36.10"

The final paragraph said :

"For the avoidance of doubt if the Claimant fails to obtain a Judgment more advantageous than the offer made in this letter, then the Defendant will seek an Order that the Claimant should pay both Parties' costs from 18^th June 2010."

8. On 11^th June Mr Cheadle of Barcans told Mr Glasgow of Kennedys that he could not advise the Claimant on quantum as evidence was needed.
9. The 21 day period for acceptance expired and on 21^st June the Defendant's solicitors wrote asking whether the offer was accepted or rejected, a question they again asked on 1^st July. In a telephone conversation between Mr Cheadle and Mr Glasgow on 7^th July, Mr Cheadle asked for further time to quantify the claim and to issue proceedings. On 7^th July Mr Glasgow wrote agreeing to an extension of time for limitation and following a further telephone conversation on 27^th July Kennedys wrote enclosing the Peer et al publication.
10. On 18^th August Barcans wrote to Kennedys stating :

"...we are at present quantifying the claimant's case. We need to do this in order to be able to advise the infant claimants properly concerning your offer and to be able to justify our advice to The Court for the purposes of an infant settlement approval. Our quantum investigations are well progressed, but there are some matters which we need to clarify in order to be able to satisfy to the court that any settlement is at the right level to justify it to the judge.

.............................

However, we seek clarification of you client's case on causation which at present simply accepts that diagnosis on 4^th March 2004 would have led to a greater than 50% chance of survival at 10 years. Please let us know precisely what the defendant's case is, ie whether your expert evidence places survival (on the balance of probabilities) at ten years, or if more than ten years, how much more. We believe that the claimant is entitled to know this in order to evaluate the defendant's offer.

Accordingly we propose a further extension of time for issue until Friday 4pm on 22^nd October."

11. Kennedys replied agreeing to the extension sought but stating that in their letter of response that they had accepted the Claimants' position on causation namely that the prognosis of a 10 year survival would have been greater than 50%, that further clarification was not necessary and disagreed that the Claimants were entitled to know more for the purposes of valuation of the offer adding :

"We consider this is a matter for you and your clients. Notwithstanding the above we do not wish to be obstructive. By way of assistance we consider prognosis beyond 10 years to be very uncertain.......we do not believe your clients will establish, on the balance of probabilities, survival beyond 10 years."

12. On both 7^th September and 11^th October Kennedys wrote seeking a general indication of profit costs and disbursements to date. On 13^th October Barcans wrote proposing a meeting of the causation experts and a further extension of time to accommodate this. This was refused, Kennedys expressing an unwillingness, without causation reports having been exchanged, to litigate outside the formal litigation process. On 19^th October Kennedys wrote refusing a further extension of time unless there was a formal response to their Part 36 offer.
13. On 21^st October 2010 Barcans wrote stating :

"We have instructions to accept your Part 36 Offer in the sum of £190,000, subject to your confirmation that you will pay our reasonable costs up to and including the infant settlement hearing at a date to be arranged."

14. In response to a request from Kennedys for a without prejudice estimate of costs from 18^th June 2010, Barcans responded with an estimate of the total of their post 18^th June 2010 costs to include counsel's advices and conferences with experts.
15. On 29^th October 2010 Barcans wrote to Kennedys stating they had been prevented from accepting the offer within 21 days by the need to seek the approval of the court, and to ensure that sufficient investigations had been carried out in respect of liability and quantum, so that the court gave its approval and that the issue of costs was "a matter for the court, if not agreed, pursuant to CPR 36.10.(4)(b), and the court will apply the principles set out in CPR 36.10(5)."
16. In reply on 1^st November Kennedys wrote suggesting that Barcans issue Part 8 proceedings and apply to accept their offer out of time adding :

"Whilst we note the points you raise.....we emphasise the purpose of CPR Part 36 is to encourage the Parties to settle claims and costs consequences follow from failure to accept a Part 36 offer. Clearly your clients took a risk in not accepting our Client's Part 36 offer."

They added that they had served a very detailed letter of response and it was in recognition of the sad nature of the case and that two minors were involved that their client had taken the decision to make an early Part 36 offer in recognition of the litigation risk.

17. On 10^th December 2010 Kennedys served a summary of their costs incurred since the date of expiry of the Part 36.

The Claimant's evidence

18. The Claimants have relied on a witness statement by Mr Cheadle. He points out the delay attending the letter of response, states that during the period of delay Barcans did not issue proceedings nor further investigate the claim in the interests of complying with the protocol and saving costs. He refers to his conversations with Kennedys, states that he sought extension of time to issue proceedings to enable Particulars of Claim to be finalised and because of difficulties in assessing the care aspect of the claim, and that he instructed care experts on 22^nd June 2010. It was then decided that a conference with the experts was necessary. The care report was promised by 31^st July 2010 and the earliest date after that a conference with counsel could be arranged was 6^th August 2010. On 27^th July he received a letter from Dr Ingram commenting on the response,^[1] on 29^th July he received the care report and between 30^th July and 3^rd August he prepared a draft schedule of loss. At the conference on 6^th August counsel advised it was necessary to discuss issues raised further with Dr Ingram and Professor Dodwell in conference. The earliest this could be arranged was 16^th September with Dr Ingram and 17^th September with Professor Dodwell. Attempts to arrange a meeting between the causation experts came to nought and the offer was accepted.
19. Mr Cheadle asserts that the Claimants were unable to evaluate the offer until the above investigations had taken place and that counsel could not adequately assess the strengths and weakness of the case until conferences with the experts had taken place. He asserts that a rough and ready approach was not appropriate especially given that court approval for settlement would be needed. He points out that at no time after the time for acceptance had expired did the Defendant state they would seek to enforce the rules relating to costs incurred 21 days after the date of their offer. He suggests it is unreasonable for the Defendant, having taken a period of almost one year to investigate the claim to suggest it has been unreasonable for the Claimants to take more than 21 days to investigate the Defendant's response.

The issues for decision

20. Against this background, Mr Barnes for the Claimants seeks an order for costs against the Defendant to include the costs incurred after the expiry of the 21 days from the service of the Defendant's Part 36 offer. He maintains that the provisions of Part 36.9(3) and (4) apply, that Part 36.10 does not apply but, if and insofar as it does, that I should exercise the discretion I have under CPR 36.10(5) to award him the costs he seeks.
21. Miss Lambert for the Defendant submits that CPR Part 36.10 does apply, that I should award the Defendant her costs from 18^th June 2010 onwards applying CPR 36.10(5)(b) and that there is no good reason for exercising the discretion I have in the Claimants' favour. She accepts that the Claimants are entitled to their costs of obtaining the court's approval. The principles to be applied
22. The relevant provisions of CPR 36 are :

"36.A1

(1) This Part contains rules about –

(a) offers to settle; and

(b) the consequences where an offer to settle is made in accordance with this Part.

................................

I PART 36 OFFERS TO SETTLE

Scope of this Part

36.1

(1)................................

(2) Nothing in this Section prevents a party making an offer to settle in whatever way he chooses, but if the offer is not made in accordance with rule 36.2, it will not have the consequences specified in rules 36.10, 36.11 and 36.14.

(Rule 44.3 requires the court to consider an offer to settle that does not have the costs consequences set out in this Section in deciding what order to make about costs)

Form and content of a Part 36 offer

36.2

(1) An offer to settle which is made in accordance with this rule is called a Part 36 offer.

(2) A Part 36 offer must –

(a) be in writing;

(b) state on its face that it is intended to have the consequences of Section I of Part 36;

(c) specify a period of not less than 21 days within which the defendant will be liable for the claimant's costs in accordance with rule 36.10 if the offer is accepted;

...............................

Part 36 offers – general provisions

36.3

(1) ...................

(2) A Part 36 offer –

(a) may be made at any time, including before the commencement of proceedings;

.............................

Acceptance of a Part 36 offer

36.9

(1) A Part 36 offer is accepted by serving written notice of the acceptance on the offeror.

(2) Subject to rule 36.9(3), a Part 36 offer may be accepted at any time (whether or not the offeree has subsequently made a different offer) unless the offeror serves notice of withdrawal on the offeree.

(Rule 21.10 deals with compromise etc. by or on behalf of a child or protected party.)

The court's permission is required to accept a Part 36 offer where –

(a) rule 36.12(4) applies;

(b) rule 36.15(3)(b) applies, the relevant period has expired and further deductible amounts have been paid to the claimant since the date of the offer;

(c) an apportionment is required under rule 41.3A; or

(d) the trial has started.

(Rule 36.12 deals with offers by some but not all of multiple defendants)

(Rule 36.15 defines 'deductible amounts'.)

(Rule 41.3A requires an apportionment in proceedings under the Fatal Accidents Act 1976 and Law Reform (Miscellaneous Provisions) Act 1934)

(4) Where the court gives permission under paragraph (3), unless all the parties have agreed costs, the court will make an order dealing with costs, and may order that the costs consequences set out in rule 36.10 will apply.

............................

Costs consequences of acceptance of a Part 36 offer

36.10

(1) Subject to paragraph (2) and paragraph (4)(a), where a Part 36 offer is accepted within the relevant period the claimant will be entitled to the costs of the proceedings up to the date on which notice of acceptance was served on the offeror.

Where –

(a) a defendant's Part 36 offer relates to part only of the claim; and

(b) at the time of serving notice of acceptance within the relevant period the claimant abandons the balance of the claim,

the claimant will be entitled to the costs of the proceedings up to the date of serving notice of acceptance unless the court orders otherwise.

(3) Costs under paragraphs (1) and (2) of this rule will be assessed on the standard basis if the amount of costs is not agreed.

(Rule 44.4(2) explains the standard basis for assessment of costs)

(Rule 44.12 contains provisions about when a costs order is deemed to have been made and applying for an order under section 194(3) of the Legal Services Act 2007.)

(4) Where –

(a) a Part 36 offer that was made less than 21 days before the start of trial is accepted; or

(b) a Part 36 offer is accepted after expiry of the relevant period, if the parties do not agree the liability for costs, the court will make an order as to costs.

(5) Where paragraph (4)(b) applies, unless the court orders otherwise –

(a) the claimant will be entitled to the costs of the proceedings up to the date on which the relevant period expired; and

(b) the offeree will be liable for the offeror's costs for the period from the date of expiry of the relevant period to the date of acceptance.

(6) The claimant's costs include any costs incurred in dealing with the defendant's counterclaim if the Part 36 offer states that it takes into account the counterclaim.

.....................................

Costs consequences following judgment

36.14

(1) This rule applies where upon judgment being entered –

(a) a claimant fails to obtain a judgment more advantageous than a defendant's Part 36 offer; or

(b) judgment against the defendant is at least as advantageous to the claimant as the proposals contained in a claimant's Part 36 offer.

(2) Subject to paragraph (6), where rule 36.14(1)(a) applies, the court will, unless it considers it unjust to do so, order that the defendant is entitled to –

(a) his costs from the date on which the relevant period expired; and

(b) interest on those costs.

(3) Subject to paragraph (6), where rule 36.14(1)(b) applies, the court will, unless it considers it unjust to do so, order that the claimant is entitled to –

(a) interest on the whole or part of any sum of money (excluding interest) awarded at a rate not exceeding 10% above base rate for some or all of the period starting with the date on which the relevant period expired;

(b) his costs on the indemnity basis from the date on which the relevant period expired; and

(c) interest on those costs at a rate not exceeding 10% above base rate.

(4) In considering whether it would be unjust to make the orders referred to in paragraphs (2) and (3) above, the court will 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; and

(d) the conduct of the parties with regard to the giving or refusing to give information for the purposes of enabling the offer to be made or evaluated."

23. On the question of the effect that the need for approval may have on a Part 36 offer Miss Lambert has drawn my attention to the observations of Lord Woolf in Abada v Gray and Motor Insurers Bureau (25^th June 1997) considering the effect on costs of a failure to beat a payment into court where the claimant was under a disability and court approval would have been required to accept the payment into court. The court ruled that the usual consequences should flow from the failure to beat the payment-in, namely the defendant should be entitled to his costs after expiry of the date for acceptance, despite the fact that the claimant was under a disability and the effect of the ruling would mean that the claimant recovered nothing. Lord Woolf said (at page 6 of the transcript) :

" We take the view that what in other jurisdictions is called a costs shifting rule, in all the circumstances is beneficial to the administration of justice, albeit that in some cases it does result in decisions which to those who are untutored as to the manner in which our system works as a whole would appear to be hard. The benefit of our practice as to payment into court is that where an action is brought, a defendant is in a position to protect himself from the consequences of the costs of that litigation by offering a sum which he or she is prepared to make, to dispose of the action."

Of course these observations were made when the Rules of the Supreme Court applied. CPR Part 36 has a more detailed approach and Part 36.9(3) deals specifically with costs where approval is concerned.

The first issue – do the provisions of Part 36.10 apply

The Claimants' case

24. Mr Barnes relies on the following :

(i) The wording of Part 36.10

He submits that the wording of the whole of this Part is intended to apply only where proceedings have been brought. He relies on the references to the claimant being entitled to "the costs of the proceedings" contained in 36.10(1), 36.10(2)(b) and 36.10(5)(a), and the reference to "the start of the trial" in 36.10(4)(a).

(ii) The notes in the 2011 edition of The White Book commenting on CPR Part 36.3(2)(a) which state :

"Part 36.3.2(a) is clearly intended to make the whole Pt 36 structure available to litigants before proceedings are commenced and for offers made then to have the anticipated costs consequences later after the proceedings have been commenced. This is an innovation under the CPR because there was no provision for payments into court prior to proceedings under the RSC. One of the ambiguities left by the wording of the current Part 36 is that it is somewhat unclear as to what the cost consequences might be of a Part 36 offer which is made and then accepted before proceedings are commenced: rr 36.10 and 36.11 are both written in anticipation of there being extant proceedings. It is submitted that parties wanting to make Part 36 offers in advance of proceedings should do so in terms whereby the offer expressly states that it is made on the basis that in the event of acceptance before the commencement of proceedings, the costs provisions of Pt 36 (and Pt 44 if the parties so wish) will apply, thereby binding those terms into any settlement contract.

Any failure to clarify the precise intention of the parties as to costs in making a pre-action offer could lead to the highly undesirable consequences of the need to bring Pt 8 proceedings on the issue of costs, or indeed the whole efficacy of an intended Pt 36 settlement."

This note anticipates the problem I have to deal with. Mr Barnes naturally takes comfort from this commentary by the learned editors of The White Book. He points out that the Defendant failed to take the recommended precaution and submits that failure is fatal to their present case.

(iii) The decision of HH Judge Platts in Sandra Soloman v Cromwell Group Plc (2^nd August 2010), given at Manchester County Court, where a claim for costs arose out of the acceptance of a pre-action offer made pursuant to Part 36 prior to the issue of proceedings in a road traffic case. The issue was whether the costs were to be assessed on the standard basis pursuant to CPR36.10, or pursuant to the fixed costs regime under Section II of CPR45. HHJ Platts concluded that CPR 36.10 did not apply, as the Part 36 offer was made prior to the issue of proceedings. In paragraph 27 of his judgment he stated :

"26. However, in my judgment, whilst it is correct that a cost order within proceedings may entitle the receiving party to recover pre-action costs, that proposition does not necessarily lead to the conclusion that "costs of the proceedings" in Rule 36.10 includes costs incurred in contemplation of proceedings where no proceedings have started. It seems to me that Rule 36.10 (and indeed 36.11) both contemplate there being extant proceedings. Further, it seems to me that section 51 pre-supposes that there will be proceedings before the court can exercise

27. It seems to me that on any ordinary and natural reading of Part 36.10(1) it is intended only to create an entitlement to costs if there are proceedings in existence. By Part 7.2(1) "proceedings are started when the court issues a claim form at the request of the claimant." In this case there was no claim form issued and therefore there were no proceedings. In those circumstances how can there be "costs of the proceedings"? If there are no proceedings there is nothing upon which Part 36.10 can bite. I fully accept that if proceedings had been started and Part 36.10 was subsequently invoked than the cost of the proceedings could include pre-action costs. However, in my judgement, for Part 36.10 to have any application in terms of a party's entitlement to costs following acceptance of a Part 36 offer, proceedings must be extant."

Mr Barnes adopts this reasoning.

25. Mr Barnes also submits that this conclusion is supported by an analysis of the terms of Defendant's offer and in particular the wording

"For the avoidance of doubt if the Claimant fails to obtain a Judgment more advantageous than the offer made in this letter, then the Defendant will seek an Order that the Claimant should pay both Parties' costs from 18 June 2010."

He underlines use of the phrase "For the avoidance of doubt", reference to the obtaining of a judgment and, notably, he says, it is not expressly stated that such would apply to late acceptance of the offer. He points out, as is the case, that it was only after the Claimants accepted the offer on the basis that the Defendant pay the Claimants' costs up to and including the infant settlement hearing that the Defendant sought to assert a claim to costs incurred after the expiry of 21 days from the date of service of the offer and suggests that the Defendant had not considered their entitlement to costs until alerted by the Claimants' claim for costs.

26. He draws my attention, too, to Part 36.9(3) which deals with costs where court approval of acceptance of an offer is required
27. He also draws my attention to the Pre-Action Protocol for the Resolution of Clinical Disputes, conveniently found at Vol 1 of the White Book at page 2512 and, in particular, paragraphs 3.16 which deals with the contents of the Letter of Claim, 3.26 which deals with offers, and 3.27 which deals with where time is needed to value the claim. These provisions are as follows :

3.16

"This letter should contain a clear summary of the facts on which the claim is based, including the alleged adverse outcome, and the main allegations of negligence. It should also describe the patient's injuries, and present condition and prognosis. The financial loss incurred by the plaintiff should be outlined with an indication of the heads of damage to be claimed and the scale of the loss, unless this is impracticable."

3.26

"If the patient has made an offer to settle, the healthcare provider should respond to that offer in the response letter, preferably with reasons. The provider may make its own offer to settle at this stage, either as a counter-offer to the patient's, or of its own accord, but should accompany any offer by any supporting medical evidence, and/or by any other evidence in relation to the value of the claim which is in the healthcare provider's possession."

3.27

"If the parties reach agreement on liability, but time is needed to resolve the value of the claim, they should aim to agree a reasonable period."

He submits that the letter of claim satisfied these requirements. He points out that the last sentence of para 3.16 does not require a detailed valuation of the claim but an outline of the financial loss with an indication of the heads of damage, which he says was met in this case, the need in para 3.26 for supporting medical evidence where a provider makes an offer, and agreeing periods of time in para 3.27.

The Defendant's case

28. Miss Lambert argues that CPR 36.10 applies. She submits that CPR 36 is a self contained code and it contains no suggestion that pre–issue offers are less valid as Part 36 offers, nor less deserving of the specified costs consequences. She says Part 36.3(2) makes plain that such offers are valid Part 36 offers. She draws my attention to that part of the White Book note which states that "Rule 36.3(2)(a) is clearly intended to make the whole Part 36 structure available to litigants before proceedings are commenced and for offers made then to have the anticipated costs consequences later after proceedings are commenced." She points out that where CPR 36.10(4)(b) applies (acceptance of a Part 36 offer after the expiry of the relevant period) by CPR 36.10(5), the offeree is liable for the offeror's costs "for the period from the date of expiry of the relevant period to the date of acceptance" and does not on its face refer to the offeror's costs of proceedings. She suggests that the final paragraph of the Part 36 offer (cited in para 7 above) "in reality" left no ambiguity as to what costs order would be sought after the expiry of the 21 day period.

Conclusion on the first issue

29. It is common ground that this was a valid Part 36 offer which complied with the requirements of Part 36. The sole question is whether Part 36.10 can be invoked where the offer was accepted without the issue of formal proceedings.
30. The Civil Procedure Rules represented a breakthrough in favour of a more practical approach to the bringing of and defending of claims. Protocols were introduced with the aim of achieving a better and earlier exchange of information between the parties and better pre-action investigation by both in the hope that early settlement could be achieved where practicable without resort to litigation. CPR Part 36 set out a new approach to settling claims. In addition to containing rules about offers to settle, it sets out, inter alia, subject to the discretion of the court, costs consequences for the parties where an offer to settle made in accordance with its provisions is accepted outside the period for acceptance,. Consistent with the approach of encouraging pre-action exchange was the provision in CPR Part 36(2)(a) that a Part 36 offer could be made at any time, including before the commencement of formal proceedings.
31. Part 36.2(c), which specifies a minimum period of 21 days for acceptance of a Part 36 offer also states that if an offer is accepted within the time specified, the defendant will be liable for the claimant's costs. But Part 36.9(2) states that a Part 36 offer may be accepted at any time, subject to notice of withdrawal. Thus there is no obligation on an offeree to accept within the period specified.
32. Part 36.9(3) requires the court's permission for acceptance of a Part 36 offer where apportionment between claimants is required (36.9(3)(c)). This part also requires permission where deductible amounts of benefits have been paid to the claimant since the date of the offer (Part 36.9(3)(b). Thus Part 36.9(3) enables a court to protect the interests of claimants where apportionment is concerned and the interests of defendants where deductible benefits have changed since the date of the offer. Part 36.9(4) enables a court in its discretion to avoid a rigid application of Part 36.10. But Part 36.9(4) also envisages that where permission to accept a Part 36 offer is given, the court may order that the costs consequences set out in Part 36.10 will apply.
33. I accept that Part 36 is intended to operate as a code prescribing procedures to be followed and consequences which flow where those procedures are followed. The code does not prevent offers being made and accepted outside Part 36. I accept, too that in principle a pre–issue Part 36 offer should be treated no differently from a post issue Part 36 offer so far as operation of the provisions of Part 36 is concerned. Any untoward consequences on costs that flow from an offer being made and accepted pre-issue, can be dealt with within the discretion accorded to the court.
34. The essential question is whether Rule 36.10 was intended to apply where both offer and acceptance occur pre-issue. The White Book notes have highlighted what the editors describe as an ambiguity. HH Judge Potts in Solomon considered there was no ambiguity in the wording of Rule 36.10.
35. Rule 36.10 is headed "Costs consequences of acceptance of a Part 36 offer". Rule 36.14 is headed "Costs consequences following judgment". There is no intervening rule headed "Costs consequences following the issue of proceedings", which one might reasonably expect to have been drafted if a distinction was to be drawn between between pre-issue and post-issue but pre-judgment costs.
36. Both parties accept that when costs are assessed pre-issue costs are allowed. There would be obvious injustice in not doing so. If one were to interpret "costs of the proceedings" in CPR 36.10 as being restricted to post-issue proceedings, as is suggested for the Claimants, and as Judge Potts held, it follows that pre-issue costs could not be recovered under these provisions. I cannot think that was the intention of Parliament. One of the purposes of enabling Part 36 offers to be made "before the commencement of proceedings" would be frustrated.
37. With diffidence I disagree with Judge Potts on this issue and conclude that in Part 36.10 on a purposive construction "proceedings" should be given a wider meaning to include steps taken prior to issue which would ordinarily be compensatable in costs on a formal assessment and that Part 36.10 is not confined in application to post-issue proceedings.
38. That means that "proceedings" in Part 36.10 has a different meaning to that which it has in Part 36.3 where clearly it means post-issue proceedings. In statutory provisions as in conversation, context matters.
39. It follows that I consider that the court may consider the provisions of Part 36.10 when considering what order for costs should be made.

The second issue – should discretion be exercised in the Claimants' favour

40. Rule 36.9(3) requires the court's permission to accept a Part 36 offer where an apportionment is required under Part 41.3A, which is the case here. Part 36.9(4) provides that where the court gives permission under paragraph (3) "the court will make an order dealing with costs, and may order that the costs consequences set out in Rule 36.10 shall apply".
41. The costs consequences set out in Rule 36.10(4) are :

"(4) Where –

(a)..................

(b) a Part 36 offer is accepted after expiry of the relevant period, if the parties do not agree the liability for costs, the court will make an order as to costs.

(5) Where paragraph (4)(b) applies, unless the court orders otherwise –

(a) the claimant will be entitled to the costs of the proceedings up to the date on which the relevant period expired; and

(b) the offeree will be liable for the offeror's costs for the period from the date of expiry of the relevant period to the date of acceptance."

42. Thus where court approval is required there is no obligation to award costs in accordance with CPR 36.10(5) but the court is given the discretion to do so – "the court ...may". Further, within CPR 36.10(5) the court has a discretion – "unless the court orders otherwise" - on whether to award a claimant or defendant his costs. The wording of the discretion given in CPR 36.10(5) is to be contrasted with that given to the court in CPR 36.14 : where a claimant fails to obtain a judgment more advantageous than a defendant's offer CPR 36.14(2) states that the court will order that a defendant is entitled to his costs ; and where judgment against a defendant is at least as advantageous to the claimant as the proposals contained in the claimant's offer then CPR 36.14(3) provides that the court will order that the claimant is entitled to his costs, both provisions being qualified by the words "unless it considers it unjust to do so".

The Claimant's submissions

43. Mr Barnes submits that Rule 36.9(3) gives me an unfettered discretion as to costs. It seems to me rather that whereas the exercise of Rule 36.10(5) discretion falls to be exercised on the circumstances of the case including the offer and its acceptance out of time, Rule 36.9(3) enables the court to take into account as well any impact the need for approval may have had on the issue of costs.
44. He submits that as this was a case where approval had to be obtained, further enquiries were necessary in any event and those further enquiries meant that the offer could not properly have been accepted within 21 days. He says that the court must give effect to the overriding objective to deal with cases justly and that in the following four factors compel an order that the Defendant pays the costs incurred by the Claimant after the 21 day period expired :

(i) the Claimants required further information before the offer could be evaluated and recommended to the court ;

(ii) the Claimants' need for further information and evidence has to be assessed against the conduct of the Defendant prior to serving the letter of response on dated 20 August 2010;

(iii) it would have been clear to the Defendant that further investigations would have been required before the Claimants could accept the offer, and yet they asserted no right to costs ;

(iv) the Claimants would have incurred costs in relation to the approval that would have been even if the Part 36 offer had been accepted within the 21 days.

I shall deal with these in turn.

(i) The need for further information

45. Mr Barnes referred me to Ford v GKR Construction Ltd [2000] 1 All ER 802, where an award of damages to the claimant was approved despite her failure to beat the defendant's Part 36 offer, largely because of late steps taken by the defendant. Mr Barnes drew my attention to the following observations by Judge LJ and Lord Woolf MR when dealing with the proper approach to Part 36.

(i) per Judge LJ at 807f :

"Civil litigation is now developing into a system designed to enable the parties involved to know where they stand in reality at the earliest possible stage, and at the lowest practicable cost, so that they make may make informed decisions about their prospects and the sensible conduct of their cases."

(ii) and at 808j :

"...the importance, rightly and increasingly, to be attached to civil litigation being conducted openly between the parties with the real issues between them efficiently and quickly identified and investigated..."

(iii) per Lord Woolf MR at 810F, making express reference to pre-issue offers :

"If the process of making Part 36 offers before the commencement of litigation is to work in the way which the CPR intends, the parties must be provided with the information which they require in order to assess whether to make an offer or whether to accept that offer."

46. He also drew my attention to observations made by HHJ Toulmin QC in R (Factortame and Ors) v The Secretary of State for Transport (27^th July 2000), of which he kindly provided me with a transcript, where the judge concluded that claimants who accepted a Part 36 offer made during preparations for trial, but did so outside the prescribed period, should not be suffer any cost consequences during the course of a reasonable period for considering material previously unavailable to them. At pp 65 to 66 of the transcript he said :

"In my view it was right that the claimants should have had a fair opportunity to consider a number of expert's reports and information not previously available before deciding whether or not to accept the part 36 payments. This is consistent with the overriding objective in Part 1.1(2)(a) that the court must ensure that the parties are on an equal footing as far as is practicable."

47. He points out that the Claimants were faced without warning with a Part 36 offer at the same time as the letter of response and that what was said in the letter of response had to be evaluated. He says this raised issues of breach of duty and causation requiring further investigation, in due course in conference with Dr Ingram on 16^th September 2010 and with Professor Dodwell on 17^th September 2010. He also says it was necessary to obtain evidence to value the care component of the claim. He emphasises that the above investigations were to satisfy the court that the offer should be accepted and that the investigations undertaken could, he submits, not have been criticised if they had been achieved within 21 days.

(ii) The conduct of the Defendant prior to the Part 36 offer

48. Mr Barnes says that the Defendant's delay in serving its letter of response demonstrates the time the Defendant regarded as reasonable and necessary to investigate the claim and makes it unreasonable for them to have expected the Part 36 offer properly to have been evaluated within 21 days. He suggests that the Defendant's advisors used part of this extended period to value the claim, and is critical of the fact that they did so without requesting extra time for this. He says this approach was unfair and should not result in the Defendant gaining an unfair advantage by being able as a result to make an early Part 36 offer. He says that the delay resulted in matters going stale, increasing the need for up to date consultation with the experts.

(iii) The Defendant's knowledge of the need for further information

49. By making the offer at the same time as their letter of response, Mr Barnes says the Defendant would have known that the Claimant would have to investigate further to decide whether to accept the offer. He reminds me of the contact between the parties when Mr Cheadle requested further time and that it was not until after the offer was accepted on 21 October 2010 that the Defendant asserted a right to costs.

(iv) Costs would have been incurred in any event

50. Finally, Mr Barnes says that a significant part of the costs incurred would have been incurred for the approval even if the Part 36 offer had been accepted within the 21 days and that fairness dictates that those costs should not be borne by the Defendant.

The Defendant's response

51. Miss Lambert submits that this is not a complex case on quantum but a typical fatal claim with conventional heads of damage easily valued and that by the time the Claimants sent their letter of claim they should have known what their case was. She deftly ran through the heads of damage stating the value of each, indeed she stated that valuing the claim would take a very short time. She said that was what the Defendant's advisors had done. The Defendant's advisors maintained she would not be held liable but acknowledged there was a 50:50 risk of a finding of liability and as a result made an offer of 50% of their valuation of the claim. She said the claim for care had been valued by taking the cost of employing a full time nanny at a cost of £24,000 pa. Thus she said, it was possible to reach a valuation for offer and acceptance purposes and acceptance and approval of the offer was consistent with its reasonableness.
52. She maintained that the 21 days gave the Claimants sufficient time to assess the offer and that there was, or should have been no need for further investigation. She pointed out that the Claimants already had Dr Ingram's supporting opinion and that the Defendant had admitted the Claimants' assertion of a greater than 50% chance of survival at 10 years. She said the only real area of dispute between the parties was on the issue of breach of duty and there the Defendant considered a 50:50 assessment appropriate.
53. She submits there was no question of the Defendant taking advantage of the delay to value the claim. Valuation had been done quickly as she described, not as a result of prolonged research into quantum.
54. She maintained that there was no ambiguity in the last paragraph of the offer letter, which she submitted, made it quite clear that the Defendant would be seeking her costs from 18^th June 2010 if the offer was not bettered. The offer had been designed to put pressure on the Claimants. That was quite permissible, indeed was what Part 36 offers were about. If the time restraint caused the Claimants difficulty then it was open to them to apply to the court for an extension of time under CPR 3. They had not done so, nor had they asked the Defendant for an extension of time for acceptance of the offer.
55. She accepted that it was fair that the Claimants should recover those costs which were necessarily and reasonably incurred in connection with the approval but pointed out that the hearing before me was because of the Part 36 issues, and that otherwise approval would have been dealt with in a half hour hearing before a Master.

Conclusions

56. Part 36.9(3) applies. Given that approval was necessary, that the claim had not been fully valued and that the Defendant's arguments about breach of duty and, possibly, causation needed to be considered with the experts, I consider it would have been difficult, if not impossible, for the Claimants to decide whether to accept the offer within the 21 days and that the Defendant would have realised this.. Under CPR 36.9(3) I have a discretion on costs which includes a discretion on whether to apply the provisions of CPR 36.10(5).
57. Miss Lambert's submissions included the assertion that the Claimants should have valued their claim fully before serving the letter of claim but that is not what the pre-action protocol requires. Para 3.16 of the protocol requires the letter to contain an outline of the financial loss incurred with an indication of the heads of damage to be claimed and the scale of the loss, unless this is impracticable. The protocol does not envisage that the claim will have been fully quantified before the letter of claim is issued. In the present case I consider most heads of damage would not have been too difficult to value but I accept that Care, which would be a significant component of the claim, reasonably yet required to be quantified.
58. The Part 36 offer does not value separately each head of claim. Part 36 offers do not usually do so, although the CPR 36.2(2)(d) enables offers to be made in respect of a part or parts of the claim. Miss Lambert has valued the individual heads in her submissions before me. In the present case the heads of damage are largely conventional. So far as I can see, the only head where some expert input may have been necessary is Care. I am not persuaded that this could be valued simply by reference to the cost of a professional nanny in the absence of any evidence that such was engaged, although it may be a convenient approach for the Defendant to have adopted for Part 36 offer purposes. In fact, the care report provided for approval purposes, records that Ms Williams required care in the months preceding her death and that such, and such care as the Claimants have lost by reason of their mother's death, have been provided by their father and members of the family. In the present case I consider it reasonable that the Claimants had not by the time of the issue of the letter of claim obtained a care report. Had they done so, its cost would likely have been met by the Defendant. Indeed given the delay in serving the letter of response, the further expense of an up to date report may have been necessary.
59. I also consider it reasonable that the Claimants sought the views of their experts, Dr Ingram and Professor Dodson on the contents of the letter of response, in particular the further advice of Dr Ingram on the detailed assertions in the letter of response concerning breach of duty and the detectability of the breast lump and whether or not there was abnormal asymmetrical nodularity. So far as causation is concerned, the letter of response had accepted that, if breach of duty was established, diagnosis in March 2004 would have led to a greater than 50% chance of survival at 10 years, which was what had been alleged in the letter of claim, but the letter of response did not state how great the Defendant considered the increased chance was nor what it meant in practical terms for the Claimants to know whether the Defendant's assessment was the same as their own. Had the Defendant observed the provisions of para 3.26 of the pre-action protocol she would have disclosed her medical evidence, which inevitably would have been sent to Dr Ingram and Professor Dodson for their consideration. In fact, in his letter dated 27^th July 2010 Dr Ingram adjusted his view of liability (see footnote to paragraph 18 above), which I conclude must have had some impact on the decision to accept the offer, which may have operated to the Defendant's advantage.
60. I have been shown no post offer correspondence with or report from Professor Dodson, It appears to me that Professor Dodson had earlier made clear his opinion on causation. In his report dated 11^th August 2008 he had stated that had the diagnosis been made 19 months earlier the probability of ten year survival would have been 55% without the use of adjuvant chemical therapy or adjuvant endocrine therapy, improving to 75% if both treatments had been employed ; that it was very difficult to estimate Ms Williams likely life expectancy but that existing data suggested that extrapolating from the expectation of a 75% chance of this 10 year survival it seemed a reasonable estimate that there would be a 50% chance of 20 year survival and thus to state that the average expectation of life would be 20 years.
61. In February 2010 whilst still awaiting the letter of response, Barcans had again been in contact with Professor Dodwell. By letter dated 23^rd February 2010 he dealt further with survival time. He affirmed his opinion that had Ms Williams been referred in March 2004 her survival probability at 10 years would have been 75%. He also set out research which suggested that the range of survival probabilities at 20 years for those patients who survived 10 years averaged 82%, so that a 75% chance of a 10 year survival equated to a 62.5% chance of survival at 20 years. Having plotted the 10 and 20 year survival probabilities on a graph, extrapolation of the survival curve led him to conclude that the median survival for Ms Williams' group of patients was around 29 years, which he thought was the best estimate of individual survival in this case.
62. The letter of claim asserted that Ms Williams' prognosis for a 10 year survival was greater than 50%, which was a observation which had been made by Professor Dodson. I do not know whether the Defendant was ever notified of Professor Dodson's later views that there was a 50% chance of a 20 year survival and that average expectation of life would have been 29 years.
63. On 18^th August 2010, Barcans wrote seeking clarification of whether or not the Defendant's expert evidence placed survival at 10 years or more and if more, how much more, which met with a prompt response that the Defendant had accepted the Claimants' position on causation, that the Claimants were not entitled to more but that Kennedys considered prognosis beyond 10 years to be very uncertain and that the Claimants would not establish survival beyond 10 years.
64. Any further detailed investigation with Professor Dodson would appear unnecessary in the light of the stance taken in the letter of claim, which was accepted in the letter of response. I was not told what matters needed to be discussed with Professor Dodson in conference in September 2010 beyond the contents of the letter of response, nor have I been shown any attendance note recording any advice he may have given after receipt of the letter of response. Having said that, in a case like this, and given that court approval was necessary, I consider it would have been sensible for Barcans to have sent the letter of response to Professor Dodwell for his observations. Counsel evidently took the view it was desirable to see him in conference..
65. I consider that the need for approval did merit further enquiries of Dr Ingram and with regard to valuing care, and that it would have been appropriate to seek Professor Dodson's views on the letter of response but I cannot see from the evidence put before me that and given that the letter of claim asserted merely a greater than 50% chance of survival at 10 years, that significant further input was required on causation. If it was hoped to encourage the Defendant to concede a 20 year or 29 year survival period, then the first step ought to have been to notify Kennedys of Professor Dodson's views to this effect.
66. But the need for further immediate enquiries is only part of the picture. The Defendants advisors took 14 months instead of 3 months to provide their letter of response. The correspondence suggests that dealings between the parties' representatives were extremely friendly. The Defendant's advisors made numerous requests for extensions of time, which were granted. The effect of their delay was that limitation became pressing and, understandably and properly, Barcans became concerned about the limitation period expiring and sought, and were granted, extensions of time with regard to that. The longer the Defendant's delay, the more stale the claim became and the more it would need to be revisited when the letter of response arrived.
67. Further, there was never any suggestion from the Defendant that their letter of response would be accompanied by a Part 36 offer. They had no obligation to do so under the Rules and para 3.26 of the protocol allows for this. But given the friendly relations between the parties' representatives and the Claimants' generosity to the Defendant over the delayed letter of response, many might have thought it reasonable for the Defendant to have indicated to the Claimants solicitors that their letter of response may or would be accompanied by a Part 36 offer. It is not unusual for parties to give advance warning that a Part 36 offer may be made, although usually this is after proceedings have been issued, which is the more usual situation for Part 36 offers to be made. To make the Part 36 offer, Kennedys would have to have the instructions of their client, which itself takes time. Clearly some thought, time and preparation went into the making of the offer. It was something of a fast ball if not a surprise spinner.
68. Of course, the Claimants' formal response should have been to seek an extension of time, as they were doing for limitation, but they omitted to do so. This, I am satisfied, was by oversight and I conclude it likely that Barcans assumed that the friendliness between the parties was continuing. Mr Cheadle by telephone and letter notified Kennedys that evidence was needed to advise the Claimants on quantum. On 7^th July 2010 by telephone he requested a further extension of time to quantify the claim, consider the offer and issue proceedings, to which the Defendant responded by letter the same day extending limitation. The letter was silent on whether time to consider the offer was accepted. Following the conference, on 18^th August Barcans wrote stating they were quantifying their case "to advise the infant claimants properly concerning your offer and to be able to advise the court" and seeking further information on the Defendant's case on causation, receiving a reply agreeing to extend limitation and referring to a window of opportunity "to genuinely resolve this claim", but again silent on the question of quantification. On 7^th September Kennedys wrote seeking on a without prejudice basis a general indication of the Claimants' profit costs and disbursements to date, and on 11^th October 2010 again wrote stating that if no response was received to their Part 36 offer before the expiry of the limitation period, they would not be advising their client to agree to any further extension and again seeking on a without prejudice basis a general indication of the Claimants' profit costs and disbursements to date.
69. Throughout the exchange of correspondence between the date of the Part 36 offer and 21^st October when it was accepted, there is no reference to the costs consequences of failure to accept the offer. Rather, there are requests as to whether the offer has been accepted, expressed understanding that further enquiries are being pursued by Barcans, a willingness to extend the limitation period and indeed a request for the Claimants' profit costs to date. Whilst the request for profit costs cannot be construed in any way as a waiving of any entitlement to costs under Rule 36.10, given that settlement was on the cards, it hardly suggests that the Defendant would be standing firm on 21^st June as the date for acceptance.
70. On a strict reading the final paragraph of the wording of the offer with its references to "avoidance of doubt" and to "judgment" justifies the argument advanced by Mr Barnes that it was judgment, not pre-issue settlement that the Defendant would rely on to justify being entitled to costs from 18^th June 2010. But I have seen no evidence that the Claimants put such a construction on these words or were deceived by its terms into thinking that it was only judgment that put them at risk to having to meet post 18^th June 2010 costs. It was also open to the Defendant to take the added precaution of incorporating the wording suggested in the White Book note.
71. I reject the Defendant's submission that the Claimants' should not be entitled to their costs after 18^th June 2010 but that the Defendant should be entitled to her costs from 18^th June 2010, apart from those costs relating to the approval.
72. I therefore consider in the exercise of my discretion under CPR 39.6(3) that the Claimants are entitled to their reasonable costs down to and including approval of acceptance of the Part 36 offer. I also consider that this is a case where it is appropriate that the court should make an order other than that provided for expressly in CPR 36.10(5) (a) and (b).
73. Finally, I would like to thank counsel for their assistance. I would be grateful if they would kindly agree an appropriate order.

JOHN LEIGHTON WILLIAMS QC

28th June 2011

Note 1   That letter was put before me for the purposes of the approval but was openly referred to in submissions. In it Dr Ingram maintained his earlier opinion but added :

“"Having said all of this I would highlight that there is a risk in pursuit of this case as it may be argued that some GPs having established that there was no abnormality on examination would have taken a reassuring stance.
..........
I do not believe the case is watertight and this must be taken into account.”    [Back]