Late Acceptance of Part 36 Offer & QOCS protection – what is the current position?

In December 2022, the Court of Appeal handed down judgment in University Hospitals of Derby & Burton NHS Foundation Trust v Harrison [2022] EWCA Civ 1660.  As there is a chance the judgment may have got lost amongst the flurry of December emails, we thought now would be an appropriate time to highlight the importance of this case.

In this case the Claimant brought an action for damages for clinical negligence.  In 2019, the Defendant made a Part 36 offer in the sum of £421,362.88.  The Defendant stipulated that the amount offered included any deductible amounts between the date offer and the date of its acceptance.  The offer stipulated that “if this offer is not accepted by 27 December 2019 (the date of the expiry of the relevant period for the purposes of 36.3(g)) and further deductible benefits have been paid, the Claimant will require the Court’s permission, pursuant to 36.11 (3)(b) to accept this offer.”

The case progressed and liability was admitted on 14 January 2020.  A CCMC was listed on 27 January 2020 where judgment was entered for the Claimant with damages to be assessed.  Expert evidence was obtained and the Schedule of Loss was updated whereby the Claimant sought damages to a maximum amount of £5.7m.

The Defendant applied to adduce at trial evidence, which was inconsistent with the Claimant’s account of the effect of the negligence upon her health and way of life.  Permission to adduce the evidence was granted, following which an unsuccessful mediation took place on 3 November 2021.  On 8 November 2021, the Claimant provided instructions to accept the Part 36 offer made in December 2019.  As further recoupable benefits had been paid after the date of the expiry of the offer, the Claimant required permission of the Court.

The Judge gave the Claimant permission to accept the offer, subject to having the additional CRU benefits deducted from the total.

The Judge ordered that the Claimant should receive her costs up to the end of the relevant period (ie, 27 December 2019).  The Judge also ordered that the Claimant pay the Defendant’s costs that had been incurred since 27 December 2019, but crucially these could not be enforced or set off against the costs the Claimant could recover pursuant to CPR 44.14.  As such, the Judge preserved the Claimant’s QOCS protection.

The Defendant sought to challenge the judgment, arguing that as the Court made an Order under Part 36, it meant an Order of the Court was made and therefore the Claimant did not have QOCS protection.

The Court of Appeal considered the case and the Defendant’s appeal was unsuccessful as per the judgment set out by Lord Justice Coulson.

One of the key considerations was whether the court directed the amount of the offer payable to the offeree.  Lord Justice Coulson held that the Judge granting permission for the offer to be accepted and directing the amount of the deduction payable to CRU “was not carrying out any evaluation or assessment of what was due or to be paid”.  As such, he was not making an order for damages in favour of the Claimant.  The Court was merely recording the parties’ agreement.

Ordinarily, in most Part 36 cases, parties do not require the Court’s permission when deciding whether to accept a Part 36 offer, whether within the relevant period or thereafter.  In some situations, where the Court’s permission is required, the Court is simply endorsing the settlement between the parties.

Further, questions were raised that the judge was directing the amount of a deduction rather than making an order in accordance with CPR 44.14(1).  This was demonstrated by reference to the question of enforcement.  Had the monies not been paid, how would this have been enforced? No doubt, enforcement would be pursuant to CPR 36.14(7) which further supports the fact that the obligation to pay the amount arises from the CPR and not the Court Order.

For the above reasons, it was concluded that a Court making an Order under CPR 36.22(9) is not making an order for damages and interest in favour of the Claimant which meant the Claimant did not lose her QOCS protection.

Further considerations in the judgment reached the same outcome.  Namely, the elevation of form over substance.  Lord Justice Coulson stated an order dealing with additional matters relating to a Part 36 acceptance was not “an order for damages and interest made in favour of the Claimant” and as such the Defendant was not able to set-off the costs order in its favour.

Policy considerations and the authorities of Cartwright and Adelekun v Ho were also considered.  Ultimately, Lord Justice Coulson concluded that “the authorities – and in particular Adelekun v Ho – lead to the conclusion that a settlement achieved by an offer and acceptance under the Part 36 regime, whether it is recorded in a Tomlin Order or howsoever, is not “an order for damages and interest in favour of the Claimant” within the meaning of CPR 44.14(1).  That is therefore a fourth reason why I conclude that the present appeal should be dismissed.”

In the closing arguments, Lord Justice Coulson reiterated that had the CPRC intended for CPR 44.14(1) to cover all the ways in which a Claimant may recover something after issuing proceedings, including settlements, they would have said so but until very recently, they did not.

However, change is coming.  Following judgment in Adelekun v Ho, the Ministry of Justice consulted on proposed amendments which would allow set-off in respect of costs orders.

The proposed changes came before Parliament in early February 2023 and a revision has been made to CPR 44.14.  The changes are identified in bold below:

44.14

  1. Subject to rules 44.15 and 44.16, orders for costs made against a Claimant may be enforced without the permission of the court but only to the extent that the aggregate amount in money terms of such orders does not exceed the aggregate amount in money terms of any orders for, or agreements to pay or settle a claim for, damages, costs and interest made in favour of the Claimant.
  2. For the purposes of this Section, orders for costs includes orders for costs deemed to have been made (either against the Claimant or in favour of the Claimant) as set out in rule 44.9.
  3. Orders for costs made against a Claimant may only be enforced after the proceedings have been concluded and the costs have been assessed or agreed.
  4. Where enforcement is permitted against any order for costs made in favour of the Claimant, rule 44.2 applies.
  5. An order for costs which is enforced only to the extent permitted by paragraph (1) shall not be treated as an unsatisfied or outstanding judgment for the purposes of any court record.

The changes make sure that all areas of settlement now come within the new rules, including deemed orders, agreements to pay damages or costs, offers made under Part 36, and settlement concluded by way of a Tomlin Order.  This should now remove any previous ambiguity as all areas of settlement are now considered to be QOCS compliant.

The changes also allow Defendant’s to set off their costs against both the Claimant’s damages and costs, giving a larger sum of money to pay.  The Defendant’s costs payable by the Claimant are capped at the aggregate amount of damages, interest and costs recovered by the Claimant.

It has been made clear that the change will not be retrospective and will only apply to cases where proceedings are issued on or after 6 April 2023.  With the current rules being more advantageous to the Claimant, one wonders if we can expect to see a sudden influx of cases being issued prior to 6 April 2023, however, do please bear in mind that the Defendant will no doubt raise issue with any cases where proceedings have been issued prematurely in order to avoid the rule change.

If you have any questions regarding this summary, please do not hesitate to contact Emma Robson here

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