Dishonesty and Part 36

July 10, 2018 9:06 am Published by

Some of you will be aware that under the Civil Procedure Rules, the Court rules that govern litigation, it is possible to make a Part 36 Offer.  A Part 36 Offer, named after Part 36 of the Civil Procedure Rules, allows either a Claimant or a Defendant to inform the other party that they will accept or pay to settle the dispute.  If a party does not accept the offer made under Part 36 (the Part 36 offer) it is at risk of being liable to pay higher interest and/or costs on a Judgment than if no offer had been made.   The idea is that the additional risk of not accepting the Part 36 offer encourages the parties to make them and when receiving them, to seriously consider whether to accept them or not.  In other words, it makes considering settlement more important and relevant.

In the recent case of Tuson v. Murphy [2008] EWCA Civ 1461 (22 June 2018), the Court of Appeal was asked to consider the dishonest and misleading conduct of a Claimant who accepted a Part 36 Offer.  T brought a personal injury claim for damages which included loss of earnings.   She issued proceedings, and three months later endeavoured to develop a business franchise.  She subsequently abandoned this as it was loss making.  She failed to disclose this in her evidence and did not disclose it to the employment expert who was used to support her loss of earnings claim.  M, after becoming aware that the business franchise had failed, made a Part 36 offer to T.  T accepted this but late accepting two months after the expiry of the relevant period.   M was ordered to pay T’s costs up to the point at which T started to mislead M, and T was ordered to pay M’s costs thereafter.  T appealed to the Court of Appeal.

Allowing the Appeal, the Court of Appeal ordered M to pay T’s costs up to the expiry of the relevant period.   It considered CPR 36.13 (5) and the circumstances in which it may be unjust to make the usual costs order.   The Court paid particular attention to an earlier case Tiuta Plc (in Liquidation) v. Rawlinson and Hunter (A Firm) [2016] EWHC 3480 (QB).  The Court of Appeal endorsed the approach in Tiuta that if nothing emerged after the Claimant’s acceptance of a Part 36 offer to show that the Defendant’s assessment of the risks and benefits in making the offer had significantly been upset, contradicted or misinformed, it was highly unlikely to be unjust to apply the default cost rule.   The Court distinguished the following positions:-

  1. a) The facts known to the Defendants at the time of the Part 36 Offer did not change significantly during the period before the delayed acceptance;

 

  1. b) The Defence adviser’s assessment, when the Part 36 Offer is made, of the true value of the case, based on the facts then known to them, is upset or undermined by subsequent events or subsequently discovered facts.

In the former, it is highly unlikely to be unjust to apply the default costs rule. The default costs rule can be broadly summarised as meaning that the paying party also pays the receiving party’s costs.

For any further information on Litigation or Part 36 offers, please contact our litigation partner Graham Mead on 01473 230033 or email gjm@blockslegal.co.uk.

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This post was written by Graham