part 36 settlement offer litigation advice

Costs: The perils of making a Calderbank offer without a time limit

Once proceedings have started, it is not correct to assume that all bets are off and it is too late to accept an offer (in all circumstances). In fact, offers that are not time-limited, not withdrawn, and not a Part 36 offer are open for acceptance during a hearing (and therefore capable of acceptance when a party is in the best possible position to know what a judge will order).

In MEF v St George’s Healthcare NHS Trust [2020] EWHC 1300 (QB), the High Court reaffirmed the first instance decision of Master Rowley and accepted that a Calderbank offer could be accepted part way through the detailed assessment hearing itself. Unlike Part 36 offers (which require the court’s permission to be accepted during trial under CPR 36.11(3)(d)) common law principles govern Calderbank offers and all that is required is offer and acceptance.

The decision reaffirms that offers open for acceptance should always be monitored as cases progress. The lesson for practitioners is that when making a Calderbank offer, consideration should always be given to time limit such offers, or withdraw any outstanding offers to prevent savvy litigants from tactically benefiting should trial be going badly for their client.

The Background

The Claimant brought a clinical negligence claim in relation to a severe hypoxic brain injury at around his birth. The claim in relation to liability settled in March 2017 and was approved by the court on 25 April 2017 with an order that the Claimant’s liability costs be assessed forthwith. The total liability costs claimed in the Claimant’s bill of costs was £621,455.57. Detailed assessment proceedings were commenced on 6 April 2018.

The Facts

In the lead up to the detailed assessment hearing, a number of Calderbank and Part 36 offers and counteroffers were made, varied or rejected.

The September 2018 offer

In particular, on 27 September 2018, the Defendant responded by letter “without prejudice save as to costs”, rejecting the Claimant’s Part 36 offer and going on to offer to pay £440,000 in full and final settlement (“the 27 September 2018 Offer”). That offer “excludes any entitlement to interest and costs of assessment”. However, unlike the previous offers, this offer did not set any time for acceptance nor include any express condition that the Claimant would be responsible for the Defendant’s costs of the detailed assessment after a date for acceptance of the offer.

In response, by letter dated 11 October 2018, the Claimant stated that it “will not be accepting the Defendant’s offer”. That letter went on to make a further Part 36 Offer in the sum of £490,000 on the same basis as the first Part 36 offer.

The August 2019 offer

By email dated 19 August 2019, and 29 days before the detailed assessment hearing was due to start, the Defendant wrote to the Claimant, enclosing the annex to their Points of Dispute alongside an analysis of the documents schedule, which the Defendant had filed with the court that day. The email continued, making an offer in the following terms (“the August 2019 Offer”):


“We shall now proceed to the Detailed Assessment in September.
The Defendant’s offer dated 27/09/18 is only capable of acceptance subject to the agreement of the Defendant’s costs of Detailed Assessment incurred since that date.”

The August 2019 offer


Whilst the Defendant assumed that the 27 September 2018 Offer was still in place, it was common ground between the parties that the email amounted to a re-instatement of the earlier offer, but subject to a variation that the Claimant was to pay the Defendant’s costs of the detailed assessment from 27 September 2018 (and not from any later date) (“that date” refers to 27 September 2018).

The detailed assessment hearing

The detailed assessment hearing commenced on 17 September 2019 before Master Brown. By the end of the second day, 18 September 2019, according to the Defendant’s representatives, the Claimant’s bill had been reduced to below £440,000. This arose from reductions made in the course of the hearing by the Master and in the light of concessions already made in the Claimant’s Replies. There was a dispute between the parties (after the hearing) about the precise figures, but it is not disputed that by that stage (and indeed by lunchtime on the second day), the Claimant would recover less than £440,000.

In any event, it was likely clear by lunchtime that the Claimant had known that things were not going well for him.

The acceptance (during the hearing)

During the detailed assessment hearing, by letter dated 18 September 2019 and sent by email at 1611 (before the second day of hearing finished), the Claimant wrote to the Defendant in the following terms:


“We write further to the offer in your letter of 27 September 2018 and to Danny Stott’s email to Alexandra Bennett of 18 August 2019, reaffirming the offer, to confirm that the Claimant will accept that offer and will pay the Defendant’s reasonable costs of Detailed Assessment.”

The Claimant claimed, but the Defendant did not accept, that the Claimant’s letter constituted a valid settlement of the proceedings. That dispute was then listed to be heard before a different Cost Judge, Master Rowley, on the morning of 19 September 2019.

The First Instance Decision

Master Rowley commented (paragraph 7) that he was sceptical of the Claimant’s claim that this was simply a commercial settlement without an indication of how the detailed assessment had been going generally. However that did not matter for the purposes of his decision.

At paragraph 10 he commented that, even in the case of Part 36 offers, there is still a discretion to allow an offer to be accepted after the trial has started, despite the provisions of CPR 36.11(3). He took the view that Part 36 did not apply to the present case, because this was not a Part 36 offer case. The Defendant had decided to make Part 44 offers as it was entitled to do. Having done so, the offers were common law offers rather than based on Part 36. He continued:


“Based on that, all that is required is common law offer and acceptance, unlike the situation in Part 36 where offers may still continue even if they have been rejected.”

Master Rowley

Master Rowley noted that the Defendant could have made Part 36 offers and would then have had the protection of the claimant having to require the court’s permission to accept an offer. He continued at paragraph 13:

“It seems to me that the defendant could have protected its position if it had wanted to do so. The fact that it has not done so is no reason for me to say that the offer has not been validly accepted in accordance with ordinary common law principles.”

Master Rowley

The High Court Decision

Firstly, it is correct to state that the court’s permission is required to accept a Part 36 offer during a trial. It is also correct to state that the court will unlikely give permission to accept a Part 36 offer where the offeree is doing badly mid-trial. CPR 36.11(2) provides that, subject to sub-paragraphs (3) and (4), a Part 36 offer may be accepted at any time, unless it has already been withdrawn. However CPR 36.11(3) provides that: “The court’s permission is required to accept a Part 36 offer where – …(d) a trial is in progress”. Where the offeree is doing badly mid-trial, permission under CPR 36.11(3)(d) will rarely be granted.

Secondly, the August 2019 offer did not lapse “at the door of the Court”. The issue was whether the “reasonable time” for acceptance of the August 2019 Offer expired at the point of the commencement of hearing on 17 September 2019 or rather continued during that hearing. Mr Justice Morris held that:

  • “By express provision, a Part 36 offer can only be accepted once a hearing has commenced with the court’s permission. However Part 36 does not provide that the offer lapses at the door of the court nor impose an absolute bar on acceptance post-commencement. It is not possible to rely on this position under Part 36 to support the (stricter) contention that a Calderbank offer lapses at the door of the court.” [paragraph 35]
  • “the Defendant was aware throughout that it could withdraw the offer made, but consciously decided not to do so.” [paragraph 36]
  • “It was always open to the Defendant to put a time limit on the offer. Equally it was open to it to withdraw the offer at any time. This is so even once the hearing had started. In this regard, the Judge’s reasons are essentially sound. His experience of time limited offers has been confirmed to me by Master Haworth’s own experience. As regards the feature of ongoing re-calculation in a detailed assessment, the offeror (here the Defendant) is equally in a position to do that calculation, and is free at any time to withdraw the offer, if it is doing much better than the offer. Here, the Defendant could have withdrawn the offer at lunchtime on the second day of the hearing.” [paragraph 43]

Analysis

Both Master Rowley and Mr Justice Morris’s decisions are welcome and provide clear guidance for litigants in the future on the perils of leaving Calderbank offers open for acceptance during a detailed assessment hearing. It is clear that as to CPR Part 36 itself, the regime for offers under CPR Part 36 is a self-contained code; general contract principles of offer and acceptance do not apply.

It is interesting that both courts did not accept the Defendant’s (tenuous) submissions that there can be no direct read across from Part 36 procedure to the contractual position of a Calderbank offer. Calderbanks and Part 36 offers are jurisprudentially separate regimes and the sanctity of contract cannot be subverted by importing the rationale behind the Part 36 legislation into the legal analysis of Calderbank offers.

The Defendant also deliberately chose to renew the offer (which had previously been rejected) setting an express condition which, on a continuing basis, protected against the effect of late acceptance in costs, even if such acceptance occurred after the start of the hearing. In this way there was no need for the Court to imply a term that the offer was only open for a limited period. This is an interesting point for a court to consider in the future, whether a time limit can be implicitly read into such an offer, it is likely that the answer will be no.

Lessons for litigants in detailed assessment proceedings

In this case, the Claimant was savvy and took advantage of an offer that had been left open for acceptance. Further, at a detailed assessment hearing (unlike a trial in any other issue), the parties will have an understanding of what the Master will order the longer the hearing progresses.

In essence, parties will be able to re-calculate a bill during the hearing as the Master makes mini-decisions on individual issues when he conducts his line-by-line analysis. Moreover, given the use of electronic bills, it is ever easier for parties to re-calculate the bill as the hearing progresses. Therefore, the very feature of a detailed assessment hearing makes it distinct from other hearings where a party may get the inkling from the judge that the hearing is not going well but will not be able to know financially how much the claim will be decided for.

Therefore, in particular for detailed assessment hearings, it is imperative that Calderbank offers are time limited (or withdrawn) before the hearing itself, otherwise a savvy litigant can sit back, do their calculations and make a commercial decision at the very last moment to save their client a few thousand pounds (perhaps at least £100,000 in this case).

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We analyse your case prospects. We deliver strategic legal advice at your first meeting. We get optimal legal results. Want a first or second opinion on your case? Click below or call our lawyers in London on ☎ 02071830529