Horncastle v Marshall and CIS case comment

William Horncastle (by his mother and litigation friend Janet Horncastle) v (1) Charles Marshall (2) CIS General Insurance Ltd (19 January 2016, Kingston-Upon-Hull County Court)

A recent County Court decision underlining the “formidable” burden on a claimant seeking to show that ordinary Part 36 consequences following late acceptance of a defendant’s offer would be unjust.

Introduction

The Claimant was a protected party who had sustained serious injuries, including a brain injury, when he was thrown through the window of a car from the rear passenger seat after a collision on 23 August 2010.

On 26 July 2011 the Defendants conceded primary liability and made a Part 36 offer to split liability 75%-25% in the Claimant’s favour, stating that this was because the Claimant had not been wearing a seatbelt.

After issuing proceedings in early 2014 the Claimant rejected the Part 36 offer and counter-offered an 85%-15% split, but after further directions the Claimant accepted the Defendants’ original offer on 14 January 2015.

There was a delay in obtaining the court’s approval: the Claimant’s litigation friend changed solicitors, and a telephone hearing had to be abandoned due to “technical difficulties”. Approval of the settlement on liability shares was finally given on 22 October 2015.

Submissions

When the parties settled quantum and got approval, the Defendants sought to recover all of its costs from 16 August 2011, i.e. 21 days after the Part 36 offer was made.

The Claimant didn’t dispute that the Part 36 offer was compliant but submitted that the effect of granting the Defendant’s application would be unjust, and so asked the court to exercise its power under the old CPR r36.14(2) and (4) (now r36.17(3) and (5)) to disapply the usual Part 36 consequences.

Alternatively, the Claimant submitted that the offer – being made at such an early stage in proceedings, when the facts going to contributory negligence had not yet been fully investigated – was not a genuine offer to settle proceedings, but rather a cynical, tactical manoeuvre.

The Defendants also sought certain costs which had been reserved from ineffective interlocutory hearings earlier in proceedings.

The law

This rule is one of those which was reformed in the update to the Civil Procedure Rules which came into effect in April 2015. As originally enacted the usual Part 36 consequences can be disapplied when the court considers them “unjust”: all of the circumstances are relevant, but the court is directed to consider the terms of the offer, the stage at which it was made, the information available to the parties, and the parties’ conduct in giving or refusing to give that information.

The new r36.17 incorporates an additional circumstance, the “genuineness of the offer”: this was added to reflect the dicta in Huck v Robson [2002] EWCA Civ 398, which was applicable to this case in any event.

Earlier decisions on whether a Part 36 offer was “unjust” highlight that, although the test is fact-sensitive, “the burden on a claimant …is a formidable obstacle” (Briggs J, Smith v Trafford Housing Trust [2012] EWHC 3320 (Ch)).

In Matthews v Metal Improvements Co Inc [2007] EWCA Civ 215, in granting a Defendant’s appeal against a finding that costs consequences were unjust, the Court of Appeal found that although unjustness was not to be automatically equated with how reasonable it was for the Claimant to initially reject the offer (although this remained relevant).

Changes in circumstances are normally to be regarded as “contingencies inherent in litigation” (Stanley Burnton J, Matthews (supra), [35]): it follows that it is not normally unjust to apply Part 36 consequences when a Claimant changes their mind in reaction to a developing set of facts.

This was, however, distinguished in SG v Hewitt [2012] EWCA Civ 1053: in that case the infant claimant’s prognosis couldn’t be estimated accurately until maturity, which meant that the effect of a premature Defendant offer was unjust in the circumstances.

Judgment

District Judge Besford, a senior costs judge, focussed his attention on the factual issue at the heart of the Part 36 offer: whether the Claimant had been wearing his seatbelt. It had been conceded by the Claimant that, in the event that he had not been wearing a seatbelt, a finding of 25% contributory negligence was inevitable (in accordance with Froom v Butcher [1976] 1 QB 286).

In this case the Claimant had been a rear seat passenger and had been catapulted from the vehicle, while the belted front-seat occupants had sustained much less serious injuries. Thus “In this case the issue of the claimant wearing a seatbelt was relevant from day one” ([42]).

Consequently, the District Judge did not accept the Claimant’s submission that the issue of seatbelts was unexpectedly raised too late for a proper investigation to take place within the 21 day period.

It was relevant that the timing of the letter of claim (to which the Defendant was replying) was within the Claimant’s control: this meant either that the Claimant had the option to address the seatbelt issue before the letter was issued, or that they already had, and had rejected the offer based on their confidence that they would succeed on that issue at trial. Either way, their rejection of the offer was tactical and part of the “cut and thrust” of the litigation.

The court was similarly unmoved by the submission that the offer had not been genuine: the offer reflected a real factual dispute, and the exact amount of the court’s inevitable finding in the event that the Defendants prevailed on that issue. It could not be unjust to make an expected reduction on a factual issue that was within both parties’ knowledge.

The Defendants were thus awarded their costs from 21 days after their Part 36 offer.

Regarding the reserved costs from the earlier procedural stages of the case, the judge saw no reason why – the Defendants having been successful overall – they should be deprived of these costs. There was no conduct on the Defendants’ part that had led to these costs being unreasonably incurred. The Claimant was to bear these costs as well.

AUTHOR: DAVID GREEN, 12 KING’S BENCH WALK