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Mar 1st, 2018

Mind your Language. The perils of getting your offer wrong

The judgment in Ballard v Sussex Partnership NHS Foundation Trust (2018) raises two very important issues for insurers. First, it acts as a stark reminder to consider carefully the terms of a Part 36 offer in order to get costs protection from it.  Second, it highlights that early offers (even where withdrawn) should not be overlooked in seeking costs protection.


Circumstances

The claimant sought damages for personal injury sustained in June 2012 when she was seriously assaulted by a patient in the course of her employment at a hospital managed by the defendant.

The defendant having admitted liability, the issue at trial on 2 and 3 March 2017 was quantum. The Judge awarded total damages in the sum of £23,315.13 and the matter of costs fell to be considered.

A number of offers had been made in the run up to trial.  In January 2016, the defendant had made a Part 36 Offer in the sum of £50,000.  The relevant period for accepting that offer without costs penalties expired on 15 February 2016. The offer was not accepted.

Having received further evidence which altered the defendant’s view as to quantum, the original offer was withdrawn on 8 February 2017 and replaced with a reduced Part 36 offer of £30,000. The costs implications were spelled out as follows:

• If the claimant accepts the defendant’s offer by 1 March 2017, the defendant will pay the claimant’s reasonable costs up until 1 March 2017 or the date of acceptance of the offer; and

• For the avoidance of doubt, if the claimant fails to obtain a judgment more advantageous than this offer, the defendant will seek an order that the claimant should pay both parties’ costs from 1 March 2017.


Point of Issue

As such, the claimant was clearly required to pay the defendant’s costs after 1 March 2017.

However, the issue for the Court was which party was responsible for costs between the expiry of the first offer on 15 February 2016 and the expiry of the second offer on 1 March 2017.

CPR 44.2(4)(c) states that the court is entitled to have regard to “all the circumstances”, including “any admissible offers to settle”, when deciding what costs order to make.

Having regard to this, the trial Judge ordered the claimant to pay both parties’ costs from the date of the expiry of the first offer.

He took the view that the first offer fell within the ambit of CPR 44.2(4)(c) and was heavily influenced by the fact that claimant could have potentially saved both parties’ costs from 16 February 2016 by accepting the defendant’s first offer in the sum of £50,000, which was more than double the amount she was ultimately awarded.

The claimant appealed.


Appeal

When considering the issue on appeal, Foskett J acknowledged the “tension” between two propositions.  The first proposition was that the defendant should not be entitled to reap the costs benefits of an offer they had chosen to withdraw and the second proposition was that in accordance with CPR 44.2(4)(c) the court can have regard to “any admissible offers to settle” when assessing costs.  Thus, an earlier withdrawn offer should not be ignored.

However, in an attempt to marry up the contrasting propositions, Foskett J concluded that the defendant’s reiteration of the consequences of CPR Part 36.17 should the claimant fail to beat the offer at trial (that the claimant would be responsible for the defendant’s costs after the date of expiry of the offer), had tripped it up.

Thus, as the defendant had stated in no uncertain terms that if the claimant failed to obtain a more advantageous award, they would seek their costs from only 1 March 2017 (with no reference made to the interim period starting from the expiry of the first offer) it was stuck with paying costs up to that date.

Foskett J held that it would simply not be fair for the defendant’s representatives to send a detailed and unambiguous letter setting out the intended costs consequences of an offer and then claim that they had meant something entirely different.


Lessons to be learned

• Think carefully before withdrawing any offer.  Could the potential costs benefits outweigh the risk of overpaying the claimant in damages?

• If an offer is withdrawn, don’t forget it later.  The court can still take these into account –See Owners and/or Bareboat Charterers and/or Sub Bareboat Charterers Of The Ship Samco Europe v Owners Of The Ship Msc Prestige (2011).

• The precise wording of a covering letter to accompany an offer is crucial in circumstances where the defendant seeks the costs benefits deriving from a previous offer, which has subsequently been withdrawn.  Reference should be made to the offer and CPR 44.2(4)(c).
 

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