Costs News

27 May 2020
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Party can accept Calderbank offer on costs after hearing has begun, rules High Court

A Calderbank offer to settle detailed assessment proceedings can be accepted once the hearing has begun as it does not lapse at the start, the High Court has ruled.

Mr Justice Morris, sitting with Master Haworth as assessor, said detailed assessment hearings were different from others because parties could see exactly how they were doing as the case went along.

In MEF v St George's Healthcare NHS Trust [2020] EWHC 1300 (QB), following a series of offers and counter-offers over the previous 16 months of the clinical negligence claim, on 19 August 2019 the defendant offered to settle for costs of £440,000 – as it had in September 2018, but with the further condition that the claimant paid certain of the defendant's costs of the assessment.

The detailed assessment, scheduled for three days, began on 17 September 2019 before Master Brown but, just before the end of the second day, the claimant's solicitors sent an email purporting to accept the offer. 

By that stage of the hearing, it was clear that the claimant would recover less than £440,000 if the assessment continued to a conclusion; the claimant said his solicitors did not know the result of the afternoon's proceedings when they sent the letter.

The question of whether the letter constituted a valid settlement was heard the following day before a different cost judge, Master Rowley, who said he was sceptical of the claimant's claim that this was simply a commercial settlement without an indication of how the detailed assessment had been going generally.

However, that did not matter for the purposes of his decision, which was that part 44 offers simply required common law offer and acceptance. Master Rowley said the defendant could have made a part 36 offer, which the claimant would have needed the court's permission to accept, or a time-limited offer that was only acceptable prior to the hearing. But the claimant chose not to.

Master Rowley said: “It was said to me that those offers were never made. That is not my experience. I have seen offers made in exactly those terms where they are acceptable only prior to the hearing, and then regularly parties make ‘time bomb’ offers for limited periods."

He decided that the assessment proceedings were therefore concluded and granted permission to appeal on the basis that an important point of principle was at stake – with the advent of electronic bills, this situation may occur more easily in the future since it will be obvious to everybody exactly where the figures are as the hearing progresses.

Morris J ruled that Master Rowley correctly approached the issue by reference to common law principles of offer and acceptance, but did not expressly apply the contractual principle of lapse after a reasonable time. To that extent, he could be said to have erred in law, meaning the court had to decide whether the ‘reasonable time’ for acceptance of the offer expired at the point of the commencement of the hearing.

The judge said the fact that parties at detailed assessments re-calculated as the hearing went along made them “distinct” from other types of proceedings, “where a party might well perceive that the hearing is not going well, but is less likely to know whether or not the ultimate outcome will be better or worse than an offer which has been made”.

Further, the fact that the defendant chose not to avail itself of the protection under part 36, or withdraw the offer, and made the offer subject to a time condition with costs consequences, all supported the conclusion that the offer did not lapse at the door of the court.

Morris J rejected the argument that this provided no costs protection for the defendant and moreover put the claimant at no risk at all: “If the claimant accepts the offer, during the assessment, he is bound to pay the defendant's costs incurred since as far back as September 2018, and including its costs of the detailed assessment hearing. On the other hand, if the claimant does not accept the offer, then the defendant will be able to refer the costs judge to the offer on the issue of the costs of the assessment under CPR 44.2(4).

“As regards risk and incentive for the claimant, the claimant remains at risk of an ever-increasing penalty in costs, if he does not accept the offer either before or during the assessment.”

Morris J added that it was always open to the defendant to put a time limit on the offer, or withdraw it at any time, even once the hearing had started – it was equally able to recalculate the position during the hearing.

Alexander Hutton QC (instructed by Acumension) for the appellant/defendant, Roger Mallalieu QC (instructed by Stewarts Law) for the respondent/claimant.

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