Claimants who beat part 36 offers should receive all of the costs due to them unless such an order is unjust, the Court of Appeal has ruled.
In doing so, it distinguished the previous authority of Kastor Navigation Co Ltd v Axa Global Risks (UK) Ltd [2004] EWCA Civ 277 – which said that full costs could not be guaranteed – on the grounds that it was based on versions of part 36 and part 44 which were “materially different” from the present provisions.
Giving the ruling of the court, Sir Stanley Burnton, who will be the keynote speaker at next month’s ACL National Conference, said: “These differences, in my judgment, require this court to consider the meaning and effect of part 36.14 untrammeled by the decision in Kastor. My view as to the meaning of part 36.14 is supported by the substantial line of authority to the effect that part 36 is now a self-contained code.”
This meant that in deciding which costs order to make under part 36.14, the court does not first exercise its discretion under part 44, as was the case in Kastor.
The case, Webb v Liverpool Women’s NHS Foundation Trust [2016] EWCA Civ 365, was a clinical negligence claim arising from a birth in which the claimant beat her rejected part 36 offer at trial. There were two main allegations, only one of which succeeded. Having established that her injury was caused by the defendant’s negligence, His Honour Judge Saffman, sitting as a High Court judge in Leeds, ruled that the claimant was entitled to full recovery of damages for her injury and loss.
However, he decided that in the circumstances it was just to make an issues-based proportionate costs order, under which the claimant would not recover her costs of the second allegation.
On appeal, both parties accepted that the claimant’s entitlement to costs before the part 36 offer had been rejected (called the ‘effective date’ in the ruling) was to be determined in accordance with part 44.
Sir Stanley said HHJ Saffman had made the wrong decision. “Although the two allegations related to separate parts of the claimant’s mother’s labour, they were part of one event, namely the claimant’s birth,” he stated. “Her injuries were such as would not in general be caused without negligence in the care of her birth.”
There was no suggestion that it had been unreasonable to pursue the second allegation, leading Sir Stanley to add: “I see nothing in this case to take it out of the ordinary or to justify the claimant being deprived of part of her costs”.
In relation to the costs after the effective date, Sir Stanley agreed that an issue-based or proportionate costs order could be made under part 36. He continued: “However, a successful claimant is to be deprived of all or part of her costs only if the court considers that would be unjust for her to be awarded all or that part of her costs. That decision falls to be made having regard to ‘all the circumstances of the case’.
“In exercising its discretion, the court must take into account that the unsuccessful defendant could have avoided the costs of the trial if it had accepted the claimant’s part 36 offer, as it could and should have done. I am clear that, for the reasons I have given in relation to the claimant’s costs before the effective date, it cannot be said that it would be unjust for her to be awarded all her costs.
“Furthermore, in making his determination the judge did not take into account, as he should have, the fact that the defendant could have avoided all the costs of the trial by accepting the claimant’s favourable part 36 offer. The considerations to which I referred apply even more strongly in relation to her costs after the effective date, when the question is not whether it is just for her to be awarded all her costs, but whether it would be unjust for that award to be made.”
Lord Justice Simon and Lady Justice Gloster agreed that the appeal against HHJ Saffman’s order should be upheld.