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03 April 2018
The judgment in Ballard v Sussex Partnership NHS Foundation Trust confirms that, if a party wishes to preserve the costs consequences of a first settlement offer when making a second, it is safer to:
At first instance, the claimant was ordered to pay the defendant's costs from the date of an original Part 36 offer, since the claimant had failed to beat it at trial. There had been a second Part 36 offer (which the claimant also failed to beat) and the earlier one had been withdrawn. The second offer clearly indicated that if it was not beaten, costs would flow only from its expiry, not from that of the first offer. The judge at first instance held that the withdrawal was irrelevant, but this was overturned on appeal – not least because holding otherwise would be unfair to the claimant in circumstances where the second offer clearly set out the costs consequences of failing to beat it.
The claimant was a former employee at a hospital who had been assaulted by a patient in June 2012, in the course of her employment. The defendant assumed responsibility; the issue at trial was quantification of damages rather than liability. A series of offers were made in an attempt to settle the proceedings:
"If the Claimant accepts the Defendant's offer by 01.03.17, the Defendant will… [p]ay the Claimant's reasonable costs up until 01.03.17 or the date of acceptance of the Defendant's offer… 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 01.03.17."
At the trial, held in March 2017, the Brighton County Court awarded the claimant just over £23,000 in damages – an amount lower than either the first or second offer. Costs matters were reserved for future determination.
The claimant accepted that she would have to pay the defendant's costs after March 1 2017 – the expiry date of the second offer – since she had failed to beat it at trial. Similarly, the defendant accepted that it would have to pay the claimant's costs up until the expiry of the first offer (February 15 2016) since no Part 36 offer was in existence before that date.
However, the parties disagreed as to the remainder of the costs (ie, those between February 16 2016 and February 28 2017). The claimant's position was that she was owed these costs. She argued that the first offer could not be taken into account since it had been withdrawn and the defendant had clearly stated in the second offer that, should she fail to beat it at trial, costs would be sought only from March 1 2017. The second offer did not deal with the remainder of the costs. The defendant argued that although the first offer had been withdrawn, the court could still take its existence into account since there would have been considerable costs savings from a much earlier date (ie, February 16 2016) if the claimant had accepted it.
In summary, the judge held that the second offer did not have "any relevance". He concluded that:
"although tactically the Claimant may well have been right not to accept the original offer and to hold out for more, that tactic unfortunately, with the benefit of hindsight, has not succeeded and the consequences, in my judgment, must follow."
The fact that the first offer had been withdrawn did not appear to make a difference.
Accordingly, the judge awarded the defendant its costs from February 16 2016 and the claimant her costs before that date. The claimant appealed.
The High Court heard the appeal on February 13 2018. The claimant's position was that the county court judge had erred in ruling that the second offer was irrelevant. The defendant argued that the county court judge had not completely ignored the second offer, but had clearly considered it and found that it carried no weight. Under Civil Procedure Rule (CPR) 44.2, it was legitimate for the judge to have decided that the first offer should have an impact on the costs apportionment.
The claimant further argued that the wording of the second offer had led her to believe that the only costs for which she would become liable should she reject the offer and fail to beat it were those incurred from March 1 2017.
The judge noted that in respect of CPR 44.2, there was a tension in the case law: on the one hand, a party which withdraws a Part 36 offer cannot "reap the benefits" of CPR 36.17; but on the other hand, such an offer would still be relevant to the issue of costs. His findings were as follows:
"… a detailed letter to [the claimant's] solicitors, apparently spelling out the consequences of failing to beat the Part 36 offer and then to argue that something different was intended, particularly where, as here, the consequence of the additional argument would probably diminish the Claimant's net return from the litigation very considerably."
The judgment provides useful practical guidance for practitioners navigating the costs implications of multiple settlement offers.
It is likely that the decision would have been different had the second offer not specifically set out that costs would only be payable after March 1 2017. If it had instead stayed silent on the matter, the first offer's relevance to costs consequences would probably have been preserved (although it would still not have had Part 36 consequences). Accordingly, if earlier offers are intended to be relevant to costs, subsequent offers should not specify that costs consequences will flow only from the expiry of that offer.
It would be safer for offerors to amend Part 36 offers than withdraw them; then at least the automatic Part 36 costs consequences could arguably continue to apply throughout the whole period where the offeree beats neither of the offers.
For further information on this topic please contact Jonathan Cary or Gillian O'Regan by telephone (+44 20 3060 6000) or email (email@example.com or firstname.lastname@example.org). The RPC website can be accessed at www.rpc.co.uk.
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