In this article we report on the judgement from Mr Justice Foskett in the case of Ballard v Sussex Partnership NHS Foundation Trust  EWHC 270 (QB), in which he ‘considered the impact of a Part 36 offer that had been withdrawn’.[i]
An action was brought by the claimant for damages of personal injury. The defendant admitted liability. A Part 36 offer for £50,000 was made by the defendant on 25 January 2016. The terms of the offer expressed that it would expire after 21 days of service, on 15 February 2016, and failure to obtain judgment more advantageous at trial would see the defendant seek costs after the period for acceptance elapsed.
In February of 2017, the offer was withdrawn.
The defendants made a new offer, on 8 February 2017, to settle the claim for £30,000.
The terms of the second offer expressed that it would expire after 21 days of service, on 1 March 2017, and failure to obtain judgment more advantageous at trial would see the defendant seek costs after the period for acceptance elapsed.
The trial, on quantum, was listed for 2 and 3 March 2017, where the ‘claimant recovered a total of £23,315.13 in damages.’ In short, the claimant had not beaten the defendant’s original withdrawn offer, nor had she beaten the defendant’s lower second offer, which expired a day before trial.
As such, the defendant sought costs from the claimant, per the terms of the Part 36 offers. In the words of Foskett J, on appeal:
‘It was not in issue that the Claimant would have to pay the Defendant’s costs after 1 March – in other words, the costs of the trial – nor was it in issue that the Claimant was entitled to her costs up until the expiry of the first offer. The issue was who should be responsible for the costs between the expiry of the first offer and the commencement of the trial.
The question for Simpkiss HHJ at 1st instance, therefore, was to decide the date from which costs could be sought, pursuant to CPR 36.17(3), as the defendant’s first offer had been withdrawn before the 21 day period for acceptance.
The judge ruled, ex tempore, at his own discretion:
‘I cannot see the second offer has any relevance. The withdrawal of the first offer is relevant only to the extent that the automatic provisions of Part 36 no longer apply but, if an offer had been made without prejudice save as to costs which was not expected to be Part 36 and had been made for example before the proceedings had been issued, then that would be an important factor that the Court could take into account. In my judgment, although tactically the Claimant may well have been right not to accept the original offer and to hold out for more, that tactic unfortunately, with the benefit of hindsight, has not succeeded and the consequences, in my judgment, must follow. In my judgement the correct exercise of my discretion is to award the Defendant the costs from the date that the original Part 36 offer expired, which I think is the 16th February 2016 and the Claimant to have her costs up until that time or whatever the appropriate period is.’
The claimant appealed this decision.
Foskett J, on appeal, summarised the defendant’s submission, at paragraph 13:
The Defendant argued that, although it was withdrawn on 8 February 2017, the court was entitled to take into account the existence of the first offer which, if accepted, would have saved the costs on both sides from 16 February 2016.’
Counsel for the claimant argued that Simpkiss HHJ had ‘misled himself’ by reasoning that the defendant’s second offer was not relevant. Alternatively, counsel for the defendant argued that ‘“it is clear that what he [Simpkiss HHJ] was saying was not that the [second offer] was completely irrelevant, only that it was an irrelevant factor in deciding whether to exercise his discretion to award the [Defendant] its costs from 16 February 2016 to 1 March 2017. Defendant counsel also argued that [the judge] ‘weighed up the [second offer], in the sense that he did not ignore it, but considered that it had carried no weight in the balancing act of deciding what costs order to make’.
Foskett J considered both arguments and concluded, at paragraph 16:
‘The Judge said unequivocally that he did not see that the second offer had any relevance and this reflects a provisional view he had expressed during the argument that he did not “quite see what the [second offer] adds to the equation”’.
Foskett J said he could not see how the second offer was ‘irrelevant’ because it was brought to the attention of Simpkiss HHJ. He went on to say, at paragraph 19, that:
‘It had the effect of the more or less automatic right of the Defendant to its costs of the trial: CPR 36.17(3)(a). Whatever the relevance of the first offer, it could not have that effect: CPR 36.17(7)(a). The potential relevance of the first offer is derived from Part 44.2(4)(c)’
The High Court judge cited Jackson LJ, in Fox v Foundation Piling Ltd  EWCA Civ 790, at paragraph 53:
‘“A Part 36 offer which is subsequently withdrawn ceases to attract the consequences set out in rule 36.14. Such an offer then constitutes an “admissible offer to settle” within rule 44.3 (4)(c).”’
The decision of Hacon HHJ, in the case Uwug Ltd & Anor Bull  EWHC 74 (IPEC) was also brought to the attention of Foskett J. In that case, the judge said, relying on CPR 44.2(4)(c), that:
‘…the usual consequences of a claimant failing to obtain a judgment more advantageous than the defendant’s Part 36 offer do not apply where the offer has been withdrawn … [but] it does not follow that [the defendant’s] first Part 36 offer [should be treated] as if it never happened.”’
Foskett J highlighted, at paragraph 23:
‘There is, therefore, a tension between the proposition that an offeror who withdraws a Part 36 offer cannot “reap the benefits” of what is now r.36.17 (and thus, in the present situation, result in the almost inevitable result that all the costs incurred after the expiry of the offer should be paid by the Claimant) and the proposition that such an offer is still “relevant” on the issue of costs.’
The judge went on to consider the express terms of the defendant’s second offer:
At paragraph 25, Foskett J summarised claimant counsel’s submission as:
‘... the terms of the second offer (which was the only extant Part 36 offer) were such that the Claimant and her advisers were led to believe that if she failed to beat the offer, the only adverse consequence was that she would be liable for the costs after 21 days from the date of the letter – in other words, the costs of the trial.’
At paragraph 27 of his judgment, Foskett J accepted the claimant’s interpretation of the terms of the second offer, reasoning:
‘…whatever might have been in doubt about the impact or otherwise of the first offer after it had been withdrawn, it was resolved by the final paragraph of the letter. Not merely was the consequence that the Claimant would ordinarily be responsible for the costs after 21 days if she failed to better the offer pursuant to r. 36.17, but that was made crystal clear in the letter. The letter did not go on to say “and in that situation we will also be inviting the court to order the Claimant to pay the Defendant’s costs from 16 February 2016” or words to that effect.’
Foskett J allowed the claimant’s appeal, ruling, at paragraph 29:
‘The Judge was obviously very heavily influenced by the fact that the Claimant could have saved a great deal of expense by accepting the first offer. It is undoubtedly true that such expense would have been saved, but I do not consider it was right to regard the second offer as “irrelevant” with the consequence, if the judge so treated it, that the precise terms of the offer were also regarded as irrelevant. In my judgment, the Defendant cannot escape from the precise terms of the final paragraph of the second offer and as a result it is really the first offer that becomes irrelevant.’
He continued, at paragraph 30, to say that:
‘Whilst I differ from an experienced Judge in this field with some hesitation, I am satisfied that he misdirected himself about the relevance of the second offer and that, accordingly, he paid less attention to its precise terms than should have been paid.’
The full text judgement can be found here.
[i] Gordon Exall, ‘WHO SHOULD PAY WHAT WHEN A PART 36 OFFER IS WITHDRAWN? HIGH COURT DECISION: COSTS LIABILITY DOES NOT RUN FROM THE DATE OF AN OFFER THAT IS WITHDRAWN’ (28 February 2018 Civil Litigation Brief) <http://www.civillitigationbrief.com/2018/02/28/who-should-pay-what-when-a-part-36-offer-is-withdrawn-high-court-decision-costs-liability-does-not-run-from-the-date-of-an-offer-that-is-withdrawn/> accessed 5 March 2018.