This case, bought by a litigation friend against the Liverpool Women’s NHS Foundation Trust, involved a personal injury arising out of the claimant’s birth. The claimant made two allegations of negligence against the defendant: one allegation was upheld at trial but the other was rejected (paragraphs 3 - 4). Before trial, the claimant made a Part 36 offer to settle, which was rejected by the defendant (paragraph 5).
The trial judgment was deemed to be more advantageous to the claimant than their earlier Part 36 offer (paragraph 6). However, in making his costs order the trial judge, HHJ Saffman, decided that Part 36 did not prevent him from making an issue-based or proportionate costs order, even though the claimant had succeeded in one of their two claims and beaten her own offer at trial. Therefore, he made such an order – deciding it was “just” to deny the claimant those costs which related to her second allegation (paragraph 11). These excluded costs related to the fees for an expert witness, whose evidence related exclusively to the second allegation, together with 25 per cent of the solicitors’ profit costs (paragraph 12).
On appeal to the Court of Appeal, both parties to the dispute accepted that the claimant’s entitlement to costs before the “effective date” (before the claimant’s offer was rejected) should be determined in accordance with CPR Part 44. However, the claimant also argued that there was no reason why they should be denied their costs relating to their second claim, because the claim had not been pursued unreasonably or irresponsibly, and was related to a single event: “namely her birth and its management”. In complex personal injury cases, it was asserted, it was common for claimants to succeed in relation to some allegations of negligence but also fail on others (paragraph 13). For their part, the defendant argued that the judge was entitled to exercise his discretion under Part 44 to deprive the claimant of the costs incurred in relation to the unsuccessful second allegation prior to the effective date (paragraph 16).
In relation to the claimant’s costs incurred after the effective date, the claimant asserted that the court did not have the power under Part 36 to deprive a party of its costs simply because that party failed to establish part of its claim – in other words, the wording of Part 36 excluded the normal discretion of the court to make an issue-based or proportionate costs order. Alternatively, the claimant stated that she should only be deprived of her costs if it was shown that it would be “unjust for her to recover all of her costs”. Thirdly, the claimant argued that the trial judge had erred in law in deciding that he could – and should – deprive her of her costs attributable to the second allegation (paragraph 15). Meanwhile, the defendant offered an alternative “true constriction of Part 36”: that the costs referred to in CPR 36.14(3)(b) (now 36.17) are the costs that are determined on the application of the discretion under Part 44.2. It is only was only in relation to those costs that the claimant’s right to an assessment on the indemnity basis applied, it was said. By implication, it followed that only the claimant’s costs in relation to the first allegation were recoverable on an indemnity basis. Moreover, in the circumstances of this case, the defendant argued, the trial judge was entitled to make the issues-based or proportionate costs order that he did (paragraph 16).
Delivering the lead judgment in the Court of Appeal, Sir Stanley Burnton’s decision firstly outlined the claimant’s eligibility for costs before the effective date, before turning to their eligibility for costs after effective date.
In relation to costs incurred before the effective date, Sir Stanley was “persuaded that the judge could not properly have deprived the claimant of her costs relating to the second allegation, essentially for the reasons put forward by the claimant”: they arose out of one single event – the claimants’ birth – and the injuries would not have arisen without negligence in the care of her birth (paragraph 24). “It could not be said,” Sir Stanley continued “that it had been unreasonable for the claimant to make and pursue the second allegation, which was supported by her expert evidence” – a “significant” consideration when making a costs order under CPR 44.2 (paragraph 26). Therefore, given that it was not unusual for a claimant to succeed on some – but not all – allegations when making a claim for personal injury, Sir Stanley could see “nothing in this case to take it out of the ordinary or to justify the claimant being deprived of part of her costs” (paragraphs 28 - 29).
In relation to the claimant’s costs incurred after the effective date, Sir Stanley first decided that “costs” referred to in the pre April 2015 Part 36 meant “all [his] costs”. On that basis, he decided that a successful claimant was entitled to “all of her costs on an indemnity basis”, unless it would be unjust to award the claimant those costs (paragraph 30). In doing so, he distinguished this dispute from the Court of Appeal ruling in Kastor Navigation Co Ltd v Axa Global Risks (UK) Ltd  EWCA Civ 277), which he said was based on “provisions of Part 36 and Part 44 that were materially different from the present provisions” (paragraph 33). Additionally, Sir Stanley also stated that, in this case, the only permitted basis for discretion regarding costs orders were those grounds conferred under Part 36 – which case law had now established was a “self-contained code”. Indeed, exercising discretion on the basis of Part 44, and then again under Part 36 “makes no sense”, he added (paragraph 37).
In itself, Sir Stanley explained, Part 36 did not preclude a judge from making an issue-based or proportionate costs order. However, the constraints of Part 36 meant that a successful claimant is to be deprived of all or part of her costs only if the court considers that would be unjust for her to be awarded all or that part of her costs, having regard to “all the circumstances of the case”. And, citing Smith v Trafford Housing Trust ,  EWHC 3320 (Ch), specifically paragraph 13 where "the principles were aptly summarised by Briggs J"...
"For present purposes, the principles which I derive from the authorities are as follows:
a) The question is not whether it was reasonable for the claimant to refuse the offer. Rather, the question is whether, having regard to all the circumstances and looking at the matter as it affects both parties, an order that the claimant should pay the costs would be unjust: see Matthews v Metal Improvements Co. Inc  EWCA Civ 215, per Stanley Burnton J (sitting as an additional judge of the Court of Appeal) at paragraph 32.
b) Each case will turn on its own circumstances, but the court should be trying to assess "who in reality is the unsuccessful party and who has been responsible for the fact that costs have been incurred which should not have been." : see Factortame v Secretary of State  EWCA Civ 22, per Walker LJ at paragraph 27.
c) The court is not constrained by the list of potentially relevant factors in Part 36.14(4) to have regard only to the circumstances of the making of the offer or the provision or otherwise of relevant information in relation to it. There is no limit to the types of circumstances which may, in a particular case, make it unjust that the ordinary consequences set out in Part 36.14 should follow: see Lilleyman v Lilleyman (judgment on costs)  EWHC 1056 (Ch) at paragraph 16.
d) Nonetheless, the court does not have an unfettered discretion to depart from the ordinary cost consequences set out in Part 36.14. The burden on a claimant who has failed to beat the defendant's Part 36 offer to show injustice is a formidable obstacle to the obtaining of a different costs order. If that were not so, then the salutary purpose of Part 36, in promoting compromise and the avoidance of unnecessary expenditure of costs and court time, would be undermined."
Sir Stanley then noted that “in exercising its discretion, the Court must take into account that the unsuccessful defendant could have avoided the costs of the trial if it had accepted the claimant's Part 36 offer” – as it could and should have done in this case (paragraph 38).
For these reasons, Sir Stanley decided to allow the appeal. He then stated that he would set aside the material parts of HHJ Saffman’s costs order, and order the defendant to pay all of the claimant's costs, paid on the indemnity basis, from the effective date. Lord Justices Simon and Lady Justice Gloster agreed with Sir Stanley’s ruling (paragraphs 40 – 42).
Our occasional e-Newsletters are a concise, useful and convenient source of information relevant to our clients.
"At Hodge Jones and Allen we have a large team of specialist clinical negligence lawyers who require costs draftsmen who understand the complex nature of our work and who are able to negotiate on high value multi-track cases consistently and with ease. Toby Moreton fits this bill entirely and he and his team have given us invaluable assistance on all aspects of costs negotiating for several years now. In particular, Toby's easy manner yet in-depth understanding of costs law makes him a pleasure to work with."Olivia Lawson – for Hodge Jones & Allen LLP