The test to be adopted under CPR r.36.10(5) for exercising discretion to depart from the usual costs consequences where a claimant accepted a defendant's Part 36 offer out of time was whether the usual costs order, that the claimant pay the defendant's costs incurred after expiry of the time for acceptance up to the date of acceptance, would be unjust in the circumstances. The considerations set out in CPR r.36.14(4) regarding costs after judgment were likely also to be relevant.
The court was required to determine costs following the late acceptance by the claimant (L) of a CPR Pt 36 offer by the defendant (H) to settle personal injury proceedings. L had suffered a traumatic brain injury when knocked from his bicycle by H. Liability was admitted and judgment entered. Due to L's mental incapacity his wife had been appointed by the Court of Protection to act as his deputy. Following settlement negotiations H made a Part 36 offer, which L rejected. Shortly before trial L made a counter-offer, which H rejected. L then accepted H's offer out of time. L argued that it would be unjust to make the usual costs order under r.36.10(5), namely that he pay H's costs incurred after expiry of the time for acceptance up to the date of acceptance, because (i) at the time of the offer he was undergoing neurological rehabilitation and it was reasonable to wait and see if that would be successful; (ii) any settlement needed approval from the Court of Protection, which was unlikely on the medical evidence available and because counsel had advised against acceptance, and was complicated by a change in his deputy due to the breakdown of his marriage; (iii) it was reasonable to await further medical reports; (iv) the advice to accept the offer had been prompted by an improvement in his condition, his capacity to conduct proceedings for himself and the possible change to his care needs from his meeting a new partner.
HELD: The court had a discretion under r.36.10(5) not to make the usual costs order in cases of late acceptance, but neither the rule nor CPR PD 36 provided any guidance on how to exercise that discretion. The court had a discretion not to make the usual costs order in an exceptional case, Kunaka v Barclays Bank Plc (2010) EWCA Civ 1035, (2011) 2 Costs LR 179 applied. Prior to the introduction of r.36.10(5), which created a presumption in favour of the defendant's costs, the test under the then r.36.20 was held to be whether it was unjust to make the usual costs order, Matthews v Metal Improvements Co Inc (2007) EWCA Civ 215, (2007) CP Rep 27 applied. The test to be adopted under r.36.10(5) was similar to that in r.36.14(2) on the costs consequences after judgment. The test was whether the usual costs order under r.36.10(5) should be departed from because it was unjust for the claimant to pay the defendant's costs after the time for acceptance of an offer in the particular circumstances; departure would be the exception not the rule. The circumstances set out in r.36.14(4) regarding costs after judgment were likely also to be relevant under r.36(10). The incidence of costs was not affected by a claimant being a patient, but there might be circumstances when the claimant being a patient had implications that made it unjust for a costs order to be made against him. L's arguments were insufficient grounds for departing from the usual costs order. By the time of the settlement meeting L's advisers had sufficient expert evidence, knew that L's marriage was coming to an end, were able to provide quantum summaries with specific figures and to have meaningful discussions with H's advisers. L was clearly capable of valuing his claim by the time of the Part 36 offer. Any difficulties about Court of Protection approval were hypothetical. L had not sought any extension of time from H to consider the offer, or informed H of any difficulties. Considering the r.36.14(4) factors, the offer had been clear, made at an appropriate stage, and made at a time when there was sufficient evidence to value the claim and there had been no criticism of H's conduct.
This digest was prepared from notes taken of an extempore judgment and is subject to editorial corrections.
Counsel for the defendant: Charles Woodhouse
 EWHC 2808 : LTL 11/10/2011
CIVIL,PROCEDURE,COSTS,CPR,PERSONAL,INJURY,ACCEPTANCE,BETWEEN THE PARTIES