When are Part 36 consequences unjust?

January 11, 2023

Jack Scott recalls an experience before a District Judge in Sheffield. A Claimant’s successful late application to include an additional special damage resulted in the Claimant beating their own Part 36 offer. Was it unjust that the usual Part 36 consequences followed?

Facts

A case arose from a road traffic accident in which liability was admitted. It consisted of general damages and physiotherapy. Causation and quantum were in dispute. As a preliminary matter, Counsel for the Defendant noted the that excess was not pleaded and sought clarification that this was no longer being pursued.

As Counsel for the Claimant, I made submissions inter alia that:

• The Claimant’s witness statement included the phrase “I also paid £400 excess and wish this to be added to my claim against the Defendant”. It was properly served well in advance of the trial and contained the specific allegation, alerting the Defendant that the excess remained in contention;
• The trial bundle contained a receipt as appropriate evidence that the excess expense had been incurred, further alerting the Defendant;
• Liability was admitted and the Defendant, an insurance company, could not be said to be ambushed by an entirely expected and typical head of loss;
• Taking a step back and considering the Overriding Objective, it would be unjust to penalise the Claimant for what seemed to be an oversight which was not of her own making.

Counsel for the Defendant alleged they were being “ambushed” by the late claim for excess. They also noted that excess did not feature in the Claim Notification Form, nor the Claimant’s Schedule of Loss, nor (naturally), the Defendant’s counter-schedule.

The Judge effectively treated the issue as the Claimant making an application for relief from sanctions. Applying the Denton test, they found the breach was serious and there was no good reason for the failure to properly plead excess. However, on balance, it was decided that the interests of justice tilted in favour of allowing the excess to be considered, subject to causation being established.

The trial proceeded. The Judge found for the Claimant and awarded both general and special damages, including the now-included excess payment.

Issue

So far, so normal – until it came for costs to be assessed. The Claimant had beaten their own Part 36 offer by around £150. This would not have been the case, but for the allowed £400 figure for excess.

Counsel for the Defendant submitted that award of Part 36 consequences against the Defendant would be unjust and the court should exercise its discretion under CPR 36.17 (4) and not apply the usual Part 36 consequences.

It is fair to say that this submission evidently carried some weight with the Judge. In allowing the excess to be claimed, the Judge had sought to ensure the Claimant was not penalised; it was not the Judge’s intention to inadvertently penalise the Defendant or their solicitors.

Quite properly, the Judge was not aware of the contents of the Part 36 offer itself before giving their judgment. The Offer itself was dated around a year ago and – very helpfully – had been broken down and included £400 excess as one of the items that made up the offer.

It was submitted that excess was therefore evidently in dispute in the Claimant’s mind at a comparatively early stage and the Part 36 Offer was a genuine attempt to settle the claim. Further, it was suggested that excess was “part of the embryonic bargain” between the parties.

The Judge dismissed the Defendant’s application to disallow usual Part 36 consequences and ruled they must be paid as usual. The Judge held that the excess was “clearly a live issue” at the time the Part 36 Offer was made.

It was also noted that the Defendant had neither sought any clarification under CPR 36.8, nor responded with a counter-offer that did not include the excess payment.

As an aside, the Judge also noted that the contents of the Part 36 Offer further reinforced their initial decision that allowing the excess to be included at the start of the trial had been correct.

Commentary

Perhaps four lessons emerge:

1. Evidently, this matter would not have occurred had the excess pleading been originally included. Oversights inevitably occur from time to time and can often be resolved by the parties working constructively together. Failing that, a formal application may be made to amend the Particulars of Claim or seek relief from sanctions. Whilst this may carry additional costs for the Applicant, a proper application, supported by evidence is usually more likely to be successful than an application in the face of the court.
2. The Claimant was greatly assisted in this case by their witness statement, which explicitly referenced the omitted head of loss and stated that they wished to add it to their claim. Taken with the evidence in the bundle, this extinguished the argument that the Defendant was ambushed, which may otherwise have prevailed. Ensuring each aspect of the claim is properly explained in the witness statement and clearly evidenced is good practice and sometimes with hidden benefits!
3. Part 36 Offers are important correspondence. Providing a breakdown of each item can often assist parties to secure agreement, or open new avenues for negotiation. Such an approach is very often preferable to a single, unexplained figure. Of course, a Judge is entitled to see the contents of a Part 36 Offer after they have given judgment and is likely to be grateful for as much detail as possible should any issues arise. However, this could work both ways – in your favour and against you. It needs thought and careful consideration. But in a proper case, a properly formulated breakdown can prove very helpful, perhaps even in ways that one does not initially anticipate.
4. CPR 36.8 clarification exists for a very good reason. It is envisaged that some Part 36 Offers are clearer than others, so clarification questions can be important. Parties who seek to dispute the contents, validity or certainty of a Part 36 Offer after trial are unlikely to find much sympathy from a judge if they have not availed themselves of these provisions beforehand.

This particular contested trial serves as a timely reminder that a carefully crafted and well-constructed Part 36 offer can be the cherry on the cake.