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
		05/11/2012

Mr Justice Cranston:

Introduction

1. This is a claim for fatal asbestos-related injury by the claimant, Margaret Jolly, acting as widow and executrix of the estate of her late husband, Stephen Arthur Jolly. Liability has now been agreed by the defendant, Harsco Infrastructure Services Ltd. The issue before the court is whether the claimant is entitled to have judgment entered for damages to be assessed, in accordance with the agreed apportionment following the defendant's acceptance of the claimant's CPR, Part 36 offer on liability. The claimant contends that judgment on these lines should be entered in what is said to be the ordinary way. That would generally lead to the favourable consequences for costs and interest under CPR 36.14, in particular indemnity costs. The defendant contends that the judgment should not be entered but that there should be a consent order in line with CPR 36.10-36.11 covering further directions for disposal of the claim.

Background

2. The claimant's late husband, Stephen Jolly, contracted mesothelioma as a result of being exposed to asbestos when he worked for the defendant between 1975 and 1976. Mr Jolly died on 8 July 2008 aged 54. The claim form was issued on 29 June last year. The defendant denied liability. The defence, in December, made few admissions. The court invoked the show-cause procedure under the Practice Direction to CPR 3. The first show-cause hearing was listed for 21 February this year. Two days before that date, the defendant served a witness statement and resisted judgment on that basis. A hearing was adjourned because of the lack of time. At the resumed hearing on 19 April, the defendant resisted judgment and was given permission to defend the claim. Master McCloud ordered a split trial, with the issue of liability being set down for hearing last week.
3. On 27 April 2012, the claimant made a Part 36 offer to settle the issue of liability 99 percent in her favour. The offer read, in part:

"The claimant offers to settle the issue of liability in accordance with Part 36 of the CPR. This offer is intended to have the consequences of Section 1 of Part 36. If the offer is accepted within 21 days of the date of receipt the Defendant will be liable for the Claimant's costs in accordance with Rule 36.10".

The defendant did not accept the offer within the 21 days of service specified in CPR 36.2(2)(c) and CPR 36.3(1)(c)(i)). In a letter early this month, the defendant made a without prejudice offer to apportion liability on an 80/20 basis in the claimant's favour. The claimant rejected that offer. A week later the defendant accepted the claimant's 99 percent offer. The claimant wrote in reply:

"We will take our client's instructions on an interim payment of damages. CPR 36.14 applies. We will draft an appropriate order for your consideration. If we are able to agree terms as to costs then we will be able to vacate the trial hearing."

4. The following day the claimant sent a draft order which stated:

"Judgment on the issue of liability be entered 99 percent in favour of the claimant."

The draft order continued that, pursuant to CPR Part 36.14(3)(a), the defendant would pay the claimant interest on damages at 10 percent above the base rate from the date on which the relevant period expired, until damages were paid in full, upon the unpaid part of the damages. The draft order also stated:

"Pursuant to CPR Part 36.14(3)(b) the defendant shall within 28 days pay the claimant her costs on the issue of liability such to be assessed:

on the Standard Basis up to the date the relevant period expired;

on the Indemnity Basis thereafter."

There was also a provision pursuant to CPR Part 36.14(3)(c) for the defendants to pay the interest on costs on the issue of liability. The defendant replied by email:

"CPR 36.14 doesn't bite – your client has not received judgment so the provisions you have put in do not apply."

Part 36

5. Part 36 of the CPR is designed to facilitate settlement. It provides that offers to settle in accordance with its provisions produce the consequences set out in the rules: CPR 36.1(1). Parties are not prevented from making an offer to settle in whatever way they choose 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: CPR 36.1(2). The formalities of a Part 36 offer are set out in CPR 36.2. In particular, CPR 36.2(2)(c) states:

"(2) A Part 36 offer must …

(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 …"

Acceptance of a Part 36 offer is dealt with in CPR 36.9. It is effected by serving written notice of the acceptance: CPR 36.9(1). The offer may be accepted at any time:

"(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."

6. CPR 36.10 sets out "The costs consequences of acceptance of a Part 36 offer." Where a Part 36 offer is accepted within the relevant period the claimant is entitled to costs of the proceedings up to the date on which notice of acceptance was served on the offeror: CPR 36.10(1). CPR 36.10(4)(b) deals with costs where a Part 36 offer is accepted after the relevant period.

"(4) Where –

…

(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."

CPR 36.10(5) continues that, where paragraph (4)(b) applies, unless the court orders otherwise, the claimant is entitled to costs of the proceedings up to the date on which the relevant period expire; and 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.

7. CPR 36.11 then address "The effect of acceptance of a Part 36 Offer". Under CPR 36.11(1) the action is stayed. Any stay does not affect the power of the court to deal with any question of costs (including interest on costs) relating to the proceedings: CPR 36.11(5)(b).
8. CPR 36.14 is entitled "Costs consequences following judgment". It applies, inter alia, where judgment against the defendant is at least as advantageous to the claimant as the proposals contained in a claimant's Part 36 offer: CPR 36.14(1)(b). In that event CPR 36.14(3) provides:

"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(GL) 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."

CPR 36.14(6) covers situations where a Part 36 offer has been withdrawn; has been changed so that its terms are less advantageous to the offeree, and the offeree has beaten the less advantageous offer; or is made less than 21 days before trial (unless the court has abridged the relevant period).

The claimant's submissions

9. The claimant contended that I should enter judgment for her damages to be assessed by the court in accordance with the parties' agreement on liability, i.e. that the defendant pay 99 percent of the value of the claim. The claimant accepts, however, that apart from that the court cannot determine matters at present because of the possible effect of global Part 36 offers: see Beasley v Alexander [2012] EWHC 2715 (QB).
10. In advancing this submission, Mr Steinberg for the claimant did not point to any specific power conferred on the court to enter judgment in the present circumstances. He did highlight the counterpart to CPR 36.14 in the 1998 version of Part 36, CPR 36.21, and that it applied to situations, where the claimant did better than proposed in the Part 36 offer "at trial". The present CPR 36.14 applies when "upon judgment" the situation is at least as advantageous to the claimant as the proposals in the Part 36 offer. That suggests, he submitted, that CPR 36.14 has purchase in situations much wider than previously.
11. Moreover, Mr Steinberg submitted that judgment along the lines proposed has been entered in countless cases. He acknowledged that there may be situations where it would not be appropriate to enter judgment following acceptance of a Part 36 offer. For instance, the parties might have compromised a claim with a money offer, without acceptance of liability. Here there did not appear to be any valid reason not to implement the agreed liability apportionment by entering judgment for damages to be assessed. CPR 36.11, as to the staying of an action, did not preclude the court from entering judgment. In this case, submitted Mr Steinberg, the defendant had denied liability for a considerable period, accepted liability at the last moment, and now sought to escape the costs consequences in CPR 36.14.

Discussion

12. In Gibbon v Manchester City Council [2010] EWCA Civ 726; [2010] 1 WLR 2081 the Court of Appeal rejected the contention that implied withdrawal, a concept from contract law, was applicable to Part 36 offers. In giving the court's judgment (with which Sir Anthony May P and Carnwarth LJ agreed), Moore-Bick LJ held that CPR Part 36 is drafted as a self-contained code. Basic concepts of offer and acceptance clearly underpin Part 36, and are part of the landscape in which everyone conducts their daily life, but it did not follow that Part 36 should be understood as incorporating all the rules of law governing the formation of contracts, some of which were quite technical in nature: [5]. Moore-Bick LJ said:

"4. It can be seen from Part 36 as a whole, as well as from the extracts cited above, that it contains a carefully structured and highly prescriptive set of rules … In seeking to settle the proceedings, therefore, parties are not bound to make use of the mechanism provided by Part 36, but if they wish to take advantage of the particular consequences for costs and other matters that flow from making a Part 36 offer, in relation to which the court's discretion is much more confined, they must follow its requirements."

13. If Part 36 is a self-contained code, and the claimant wishes to take advantage of its provisions, it seems to me that she is confined by its terms. The defendant has accepted the claimant's Part 36 offer outside the period of 21 days specified in CPR 36.2(2)(c), but before its withdrawal. The applicable regime is therefore CPR 36.10, "Costs consequences of acceptance of a Part 36 Offer" and CPR 36.11, "The effect of acceptance of a Part 36 offer". As we have seen CPR 36.10(5) provides for certain costs consequences where paragraph (4)(b) applies, unless the court orders otherwise.
14. In principle CPR Part 36.10(5) would appear to apply in this case but the claimant is entitled to argue for a different order and the court may agree. CPR 36.11 provides that a stay operates. As we have seen under CPR 36.11(5)(b) the stay does not affect the power of the court to order costs. Nothing in the self contained code which is Part 36 provides for judgment to be entered in this situation. Mr Steinberg could point to no specific power in the CPR. To my mind the change in terminology from the 1998 version of Part 36 does not fill the gap. What has happened in this case is that the issue of liability has been compromised by the late acceptance of a Part 36 offer. The defendant has not consented to judgment being entered. There is no power for me to enter judgment under Part 36. In my judgment the appropriate order should follow CPR 36.10 and 36.11, and CPR 36.14 is not applicable. The issue of liability should be stayed upon the terms of the claimant's offer and the question of the costs relating to that issue (including the basis of the assessment of those costs) should be postponed to be dealt with under CPR 36.10(4) and (5) or under the general discretion under CPR 44.3.