The claimant successfully sued the defendant for an accident at work to his thumb, and obtained judgment in the sum of £40,854. This sum included damages and interest up to the date of judgment, which was 16 February 2004. The defendant had made a payment into court of £40,000 in accordance with Part 36 of the Civil Procedure Rules on 12 November 2001. The trial judge held that the claimant had beaten the Part 36 offer and ordered the defendant to pay the claimant’s costs in the usual way, although he allowed only 70% of those costs after the final date for the acceptance of the Part 36 offer. The defendant appealed to the Court of Appeal and the claimant cross-appealed the reduction in the costs awarded to him.
The main issue was whether the judge was wrong to conclude that an implied contract arose.
Reference
The Court of Appeal agreed with the defendant and broke down the judgment award into its damages and interest components. This revealed that the award of damages totalled £39,644 and the remainder was interest. The Part 36 offer contained a higher element of damages than the judgment, and so the defendant’s offer had not been bettered. The defendant was therefore entitled to its costs of the action from the last date on which the Part 36 offer could have been accepted.
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Postscript
A “Part 36” offer is a special form of without prejudice offer in court proceedings. Provided that it contains the features prescribed by Part 36 of the Civil Procedure Rules, then it puts the party who refuses it at a greater risk of having to pay both its own and its opponent’s costs of the action. This is how it works when the party refusing the offer is the claimant, as was the case here:
(1) This rule applies where at trial a claimant:
(a) Fails to better a Part 36 payment; or
(b) Fails to obtain a judgment which is more advantageous than a defendant’s Part 36 offer.
(2) Unless it considers it unjust to do so, the court will order the claimant to pay any costs incurred by the defendant after the latest date on which the payment or offer could have been accepted without needing the permission of the court.
The judgment obtained by the claimant did not “better” the offer because it included over two years’ worth of interest which would have been slightly greater had the claimant taken the £40,000 offered in 2001 and put it on deposit, instead of pursuing the matter to trial and judgment.
The court took the view that the claimant had gambled on getting a higher award at trial, and had lost his gamble. It did not therefore consider that it was unjust to order him to pay the defendant’s costs. The court indicated that if the claimant had applied to accept the payment in court once it became aware that its case was not as strong as it first thought, then the cost consequences of failing to beat it at trial might have been less severe. The court emphasised that the policy of the Civil Procedure Rules was to encourage early settlement, and that therefore a defendant who makes a good offer to settle at an early stage should have the benefit of that offer on the question of costs if the matter continued to trial.
