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IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
||Royal Courts of Justice
Strand, London, WC2A 2LL
B e f o r e :
THE HONOURABLE MR JUSTICE FOSKETT
Dominic Nolan QC and Eva Ferguson (instructed by Ashtons Legal) for the Claimant
David Westcott QC (instructed by Kennedys LLP) for the Defendant
Hearing dates: 31 October, 1-3 and 6 November 2017
Subsequent written submissions on costs
HTML VERSION OF JUDGMENT
Crown Copyright ©
RULING ON COSTS
Mr Justice Foskett:
- The substantive judgment in this case can be found at  EWHC 3082 (QB). I found in favour of the Claimant on the issue of liability for the reasons given. Damages fall to be agreed or assessed in due course.
- The trial commenced on Tuesday, 31 October 2017.
- On 6 October 2017 the Claimant's advisers put forward a Part 36 offer on his behalf to accept 90% of the damages to be agreed or assessed in due course. The "relevant period" within CPR rule 36.3(g) and rule 36.5(1)(c) came to an end on Friday, 27 October, and thus effectively one working day before the trial began.
- The offer was not accepted and the Claimant now seeks to invoke the provisions of CPR rule 36.17 on the basis that he has achieved an outcome at least as advantageous as his Part 36 offer: see rule 36.17(1)(b).
- Subject to the considerations referred to in paragraph 6 below, the consequences of having secured that more advantageous outcome are -
i) the Claimant should be entitled to his costs after the expiration of the relevant period on the indemnity basis (rule 36.17(4)(b));
ii) interest should be payable on those costs at a rate not exceeding 10% above base rate (rule 36.17(4)(c));
iii) the recovery by the Claimant of an additional amount to be determined after the damages have been assessed pursuant to rule 36.17(4)(d).
- Rule 36.17(4) provides that the foregoing consequences must be ordered "unless [the court] considers it unjust to do so".
- Rule 36.17(5) provides as follows:
"In considering whether it would be unjust to make the orders referred to in paragraphs (3) and (4), the court must 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;
(d) the conduct of the parties with regard to the giving of or refusal to give information for the purposes of enabling the offer to be made or evaluated; and
(e) whether the offer was a genuine attempt to settle the proceedings."
- Sub-paragraph (e) was introduced into this rule with effect from 6 April 2015. The authors of the White Book say that the provision was introduced –
"… to deal with the problem of claimants making very high settlement offers (often as much as 95 per cent of the value of the claim) not in a genuine attempt to settle the claim but to place the defendant at risk of indemnity costs pursuant to r.36.17(4)."
- The notes in the White Book trace the history of the approach of the courts to what became known as "tactical offers", namely, offers designed only to secure the additional benefits of the earlier iterations of rule 36.17 and were not true offers of settlement:
"While 100 per cent offers do not work, in Huck v Robson  EWCA Civ 398;  1 WLR 1340;  3 All ER 263, CA, the majority of the Court of Appeal allowed the claimant's appeal and made orders under what is now r.36.17(4) in a personal injury claim where the claimant had made a 95 per cent offer. While allowing the appeal, the Court of Appeal recognised the potential for abuse, holding that, if the offer was "merely a tactical step designed to secure the benefits of [Pt 36]", the court would not give effect to it (Tuckey LJ at para.71; see also Schiemann LJ at para.81). As Norris J observed in Wharton v Bancroft  EWHC 91 (Ch), 30 January 2012, unrep., all Part 36 offers are tactical. The Huck test was not therefore easy to apply. It was these considerations, and a concern that Huck was insufficient to check the potential for abuse, now exacerbated by the "additional amount" awarded to claimants pursuant to r.36.17(4)(d), that led the Rule Committee to introduce the new para. (5)(e). The focus of the additional enquiry is as to whether the offer was a genuine offer to settle, and not on whether it was or was not "tactical". In approaching para. (5)(e), it is important to remember that the default rules in rr.36.17(3) to (4) are only to be departed from where such orders would be unjust and that (as explained above) the offeree faces a "formidable obstacle" in obtaining a different order. It is suggested that para. (5)(e) will be a useful consideration in cases where claimants have made very high Part 36 offers but that judges are likely to resist attempts to call evidence or obtain disclosure on the point, preferring instead to take a broad brush view largely informed by their own assessment of the strength of the case that they have just tried and therefore the extent to which the offer appeared to be a genuine attempt to settle. Of course, there is nothing inherently wrong with very high claimant offers in extremely strong cases, but it may be prudent in such cases for claimants to explain in their offer letters why such a small discount is being offered for settlement."
- The Defendant argues in this case that the offer was not a genuine attempt to settle the case because it did not reflect any realistic assessment of the risks of the litigation. Mr Wescott QC draws attention to the fact that the letter making the offer "did not explain why only a 10% discount was being offered for settlement", something he says that the above Note suggests would be prudent.
- In his written submissions, Mr Westcott has sought to demonstrate how the Claimant's team should have viewed the strengths (or, more accurately, the weaknesses) of his case. If I understand the approach correctly, it seeks to demonstrate that an assessment of the risks as being only 10% was a significant under-evaluation of the litigation risk and, accordingly, such an offer could not have been a genuine attempt to settle.
- Whilst it is unwise ever to say "never", I do consider this kind of argument to be one which could hardly ever succeed. How one side perceives the risks in a piece of litigation (whether in the clinical negligence sphere or any other sphere) will almost invariably be different from the way the other side perceives them. Quite often in my experience as a practitioner and, more particularly, as a mediator, a settlement of a case was achieved when there were widely differing views of the risks on both sides. Settlement did not require a meeting of minds on the nature of the litigation risks of each side. Quite how a judge can successfully embark on the kind of exercise I am being invited to embark upon is very difficult to see. Mr Nolan is right to say that it is almost akin to embarking on a mini-trial in the post-trial situation in order to determine how the case should have looked to the offeror before the offer was made. To my mind, this is an exercise which ordinarily should not be carried out and I am sure that most judges would not regard it is a welcome process, preferring the broad brush approach referred to in the note in the White Book.
- I see absolutely no reason to embark on this process in this case. Mr Westcott submits that clinical negligence cases are "notoriously hazardous" and they "can seldom be regarded as 'open and shut'." He says that "litigation risk" in clinical negligence cases "is often regarded as being in excess of the sometimes 'conventional' 10%." I am not sure, with respect, that I can fully accept that formulation both from my own experience as a former practitioner in the field and in other capacities. There are 'open and shut' cases and I have observed in another case (Surrey v Barnet and Chase Farm Hospitals NHS Trust  EWHC 1598 (QB), ) that the NHSR (formerly the NHSLA) admits liability commendably early in cases where it is obviously right to do so and where there is plainly no defence. All cases do carry some risk, quite frequently associated with the way a witness, whether expert or otherwise, is likely to "perform". That may often be difficult to assess, but experienced practitioners can usually reach an informed view on such an issue.
- When an offer to accept 90% is made in a case such as this, I would regard it as a case where the Claimant's team regard the claim as very strong, but is prepared to offer a modest discount to secure absolute certainty of obtaining substantial compensation. That is what Mr Nolan says prompted the offer in this case and I have no reason to doubt that that was so. Whilst, of course, it is open to the offeror to explain this kind of thinking in the letter making the offer if it is thought helpful, I do wonder whether in most cases it would assist. I can see the letter prompting a reply (sometimes expressed in language that does not help the settlement process) and it may be thought better simply to leave it to the recipient of the offer to assess the offer as it stands.
- If I was to accede to Mr Westcott's submissions, it could have the effect that a 90% settlement in the clinical negligence sphere is hardly ever agreed. In my capacity as Judge in charge of the Queen's Bench Division Civil List, I see a great many settlements in this area of litigation (and in serious personal injury claims not arising from clinical negligence) when I am asked to approve the settlement. I have not, of course, kept any kind of record, but my perception is that a wide variety of "percentage settlements" on liability/causation are agreed and approved by the court, including "90% settlements" from time to time. I can certainly recall several in my own practice in my last few years at the Bar. As I have said, if I were to accede to Mr Wescott's submissions, I can see that no one will ever offer to accept 90% and the NHSR will never agree to it.
- Mr Nolan is correct that 10% is not a token discount, particularly at a time when the level of damages in serious cases is very significant. I do not know what the likely value of the Claimant's claim is in this case, but it is likely to run into several million pounds on a traditional lump-sum basis. 10% of such a sum will itself be a not insignificant sum that would have been saved for the public purse had the offer been accepted. Equally, of course, most of the costs of a 5-day trial would have been saved.
- In my view, this was properly to be regarded as a genuine offer of settlement and I do not consider that it militates against ordering the normal consequences for the Claimant having achieved more than his Part 36 offer as referred to in paragraph 5 above. As I shall indicate below, there was nothing wrong about the Defendant electing to contest the case: there were experts willing to support the Defendant's case. As it happened, I did not accept that case, which also depended on certain findings of fact being made in a particular way, but that is simply a reflection of the way litigation runs its course. An order of the kind sought by the Claimant does not necessarily carry any condemnation by the court of the Defendant's position. Part 36 was drafted in a way that provides an incentive to a defendant to view seriously and, where appropriate, to accept a claimant's Part 36 offer. The decision not to do so may be perfectly understandable and reasonable even if, in due course, it turns out to have been the wrong one. It is simply a reflection of the litigation risk that each party has to evaluate.
- I should add that in the written submissions from both sides I was told a good deal about the position taken by each side in the negotiations or meetings that took place. I imagine that all these discussions were conducted on a "without prejudice" basis and ordinarily their content would not be referred to the trial judge on the issue of costs. No objections appear to have been taken to this course in this case, but I would take this opportunity to reassert that the content of these discussions, provided they are genuinely aimed at settlement, are ordinarily privileged. I did not find what I was told about what was said and by whom to be of any value at all and, for my part, would think that in most cases it would not assist deciding whether an offer was a genuine offer of settlement. A failure to negotiate at all can undoubtedly affect the exercise by the court of aspects of its discretion (see, for example, OMV Petrom SA v Glencore International AG  1 WLR 3465), but the content of privileged discussions should generally remain privileged: the purpose of the privilege is to enable all cards to be put on the table. A general 'open house' subsequently about what was said and by whom during those discussions could endanger the long-recognised utility of the "without prejudice" negotiating process. That can be in no-one's interests.
Rate of enhanced interest
- The final issue is the rate of interest to be awarded on the indemnity costs. 10% above base rate is the maximum. This was a matter that engaged the Court of Appeal in OMV Petrom SA. That was a very strong case on the facts and the Court of Appeal, whilst recognising that it was not automatic, awarded the full 10% uplift for the enhanced rate of interest on the award in the case and the point was made that the purpose of the rule was not merely compensatory. There was, in the present case, a decision not to make any offers by the Defendant, but, whilst the case went against the Defendant, as I have said, there was nothing unreasonable about the decision to contest it. The point, of course, is that now a judgment has been given, the wisdom of accepting the 90% offer is clear.
- I suspect that whatever rate of interest I award, it is unlikely to make a material difference to the amount payable. In my view, an award of 5% above base rate from 28 October 2017 will do justice to the applicable considerations.
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