Late acceptance of a Part 36 Offer = Indemnity Costs?
Our Victoria Stewart, Costs Lawyer, reports on the case of Holmes v West London Mental Health NHS Trust
In Holmes v West London Mental Health NHS Trust (the Judgement can be found on the Claimant’s website here) the High Court ruled that a Defendant who waited 15 months to accept the Claimant’s Part 36 offer must pay indemnity costs covering the period of delay. The award of indemnity costs was helped by the Defendant’s conduct of the case.
The Claimant brought a Clinical Negligence claim in February 2015 over the prescribing of the drug lithium, which left her in intensive care for 19 days. Between January 2017 and April 2017, the Defendant made various offers to settle the claim which the Claimant rejected. In February 2017, the Claimant offered to settle the claim at 95% of its full value (this offer being made by way of Part 36). The Claimant’s Part 36 offer was rejected by the Defendant in March 2017. The assigned master at the case management conference described the Defendant’s case as ‘worse than hopeless’. The judge noted with ‘utter dismay’ that the trial window was set for between October 2018 and April 2019.
Preparation for Trial ‘dawdled along’, with the Defendant’s witness statements and expert reports exchanged late and agendas for expert discussions never even agreed. The Claimant’s solicitors had to chase the Defendants throughout, with the NHS Trust not responding to repeated invitations to engage in ADR and requests for mediation.
The Defendant finally accepted the Claimant’s Part 36 offer, which had been originally made in February 2017, on 30 May 2018, but on the condition that her legal costs were awarded on the standard basis. This was not accepted by the Claimant in light of the delays and the Defendant’s conduct, which ultimately resulted in significant costs being incurred.
Where one party accepts a Part 36 offer after expiry of the 21-day period, many have argued that the party who had made the offer should be entitled to recover indemnity costs from the expiry of the relevant period. However, the rules relating to costs consequences of acceptance of a Part 36 offer (36.13(4)(b)) state where a Part 36 offer which relates to the whole of the claim is accepted after expiry of the relevant period, the liability for costs must be determined by the court unless the parties have agreed the costs; it is the liability for costs and not the basis of costs.
At the hearing in the Queen’s Bench Division of the High Court, His Honour Judge Gore QC dismissed the Defendant’s arguments that standard basis costs apply and that their letter accepting the 95% offer was an offer in itself because they offered standard basis costs. The Judge:
- Dismissed the Defendant’s opinion about the strength of its Defence; which was inconsistent with the them ‘drip feeding’ settlement offers (from the drop hands deal to 50%, to 65% then 75%, then 85%).
- Noted that the litigation had been very slow and it was difficult to class the Defendant’s conduct as reasonable in light of the delays. The case had been defended badly and “the conduct here was not ‘the norm’”.
- Insisted that the Defendant’s letter accepting the Claimant’s 95% offer could not be construed as a Part 36 offer of its own. As a result, the Claimant was entitled to invite the court to order costs on the indemnity basis from the date by which the Part 36 offer fell to be accepted.
- The court concluded that, ‘The costs to be paid by the end of the relevant period for the acceptance of the Part 36 offer would be on the indemnity basis and judgment for the Claimant was entered in 95% of the value of the claim to be assessed.’
It appears that the indemnity costs order in this case was made on the basis of conduct, and not late acceptance of a Part 36 offer; the late acceptance being the reason the Claimant asked the court to consider making an indemnity costs order. The expiry of the date for accepting the Claimant’s Part 36 offer was a convenient date from which to order indemnity costs from.
This case will ultimately send a message to the NHS; they must conduct their cases without delay and with a consistent and strong defence, because the court will impose sanctions for incurring unnecessary costs.
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