Pump Court Chambers

Gohil v Advantage Insurance Company – What is a genuine offer of settlement?

News, Blog 7th August 2023

Anyone who has any familiarity with fixed-cost personal injury litigation on the fast track will be well familiar with the provisions of CPR Part 36. That part provides that a party can make an offer which will have punitive consequences if it is not beaten by the other side at trial. Part 36 contains numerous details as to the form, and procedure surrounding such offers.

In practice, QOCS means that these offers are made far more often by claimants than defendants in personal injury matters on the fast track, though in cases where there are counterclaims, or where there is a possibility of a finding of split liability, they ought to be strongly considered by defendants as well.

That rule provides a means by which Claimant solicitors can secure recovery of their indemnity costs (often far in excess of the fixed costs otherwise awardable under CPR 45, which under the pressures of inflation, begin to look increasingly measly, especially for lower value claims), from the expiry of the relevant period (usually 21 days after the making of the offer, pursuant to rule 36.5(1)(c)).

There are a further raft of benefits which CPR 36.17 provides, including interest on costs and damages at a rate of not more than 10% above base rate, and an extra 10% chunk of the damages, added to the total.

These provisions are modified to accommodate the fixed costs regime by CPR 36.18.

Crucially, if an offer is beaten, pursuant to rules 36.17(3) and (4) the court “must” make orders in line with the consequences delineated in CPR 36.17 “unless it considers it unjust to do so”.

CPR 36.17(5) gives some guidance on this:

(5) In considering whether it would be unjust to make the orders referred to in paragraphs (3) and (4), the court must take into account all the circumstances of the case including—

  1. the terms of any Part 36 offer;
  2. the stage in the proceedings when any Part 36 offer was made, including in particular how long before the trial started the offer was made;
  3. the information available to the parties at the time when the Part 36 offer was made;
  4. the conduct of the parties with regard to the giving of or refusal to give information for the purposes of enabling the offer to be made or evaluated; and
  5. whether the offer was a genuine attempt to settle the proceedings.

Despite the apparent mercilessness of rules 36.17(3) and (4), then, the cry often goes up following judgment that any Part 36 offer should be dis-applied, because it would be ‘unjust’ to apply it. This is generally a high bar to surmount.

However, a body of jurisprudence is emerging which addresses the circumstances in which it might not be ‘just’ to give effect to the consequences of a Part 36 offer even where it has been beaten. Usually, the most common argument is that a Part 36 was not a ‘genuine’ offer to settle, within the meaning of CPR 36.17(5)(e).

In AB v CD [2011] EWHC 602 (Ch), Henderson J got to the crux of what constituted a ‘genuine’ offer:

  1. The claimant’s Part 36 offer, or purported Part 36 offer, is contained in the letter of 5 July 2010. Subject to one point, I consider that it complies with the requirements of form and content in rule 36.2. However, there is an issue whether it is a genuine offer at all, or merely a lightly disguised request for total capitulation. If it is a proper Part 36 offer, the question arises whether the judgment which the claimant has now obtained against the defendants is “at least as advantageous” to the claimant as the proposals contained in the letter, within the meaning of rule 36.14(1)(b).
  1. The concept of an “offer to settle” is nowhere defined in Part 36. I think it clear, however, that a request to a defendant to submit to judgment for the entirety of the relief sought by the claimant cannot be an “offer to settle” within the meaning of Part 36. If it were otherwise, any claimant could obtain the favourable consequences of a successful Part 36 offer, including an order for indemnity costs, by the simple expedient of making an “offer” which required total capitulation by the defendant. In my judgment the offer must contain some genuine element of concession on the part of the claimant, to which a significant value can be attached in the context of the litigation. The basic policy of Part 36 is to encourage the sensible settlement of claims before trial, or even before the issue of proceedings . . . The concept of a settlement must, by its very nature, involve an element of give and take. A so-called “settlement” which was all take and no give would in my view be a contradiction in terms.”

So it seems a Part 36 offer which merely repeats the contents of the ‘prayer’, or in other words requests capitulation on a 100% basis will almost never be considered to be a genuine offer to settle. This view was further endorsed by the High Court in Jockey Club Racecourse Ltd v Willmott Dixon Construction Ltd [2016] EWHC 167 (TCC).

Huck v Robson [2003] 1 WLR 1340 asked the question as to whether a Part 36 offer has to represent a possible, or likely outcome of proceedings. Indeed, sometimes counsel are instructed to argue that an offer should be dis-applied because the offer contained no information which allowed the receiving party to understand how it had been calculated. Perhaps this is intended to be pursuant to CPR 36.17(5)(d).

The leading judgment by Tuckey LJ concluded that such an offer does not need to reflect an outcome of proceedings:

  1. … I do not think that the court is required to measure the offer against the likely outcome in a case such as this. In this type of litigation a claimant with a strong case will often be prepared to accept a discount from the full value of the claim to reflect the uncertainties of litigation. Such offers are not usually based on the likely apportionment of liability but merely reflect the reality that most claimants prefer certainty to the ordeal of a trial and uncertainty about its outcome. If such a discount is offered and rejected there is nothing unjust in allowing the claimant to receive the incentives to which he or she is entitled under the Rules. On the contrary, I would say that this is a just result.

That is obviously correct. Of course, there is no requirement anywhere in the rules for the offer to be broken down. In many cases no apportionment of liability would be possible, and there may not be complicated disputes as to quantum. Indeed, apportionment of liability is almost exclusively the domain of negligence claims, and so in many areas the only way a party will be able to take advantage of Part 36 is by making a reduction on their claimed total (or in their proposed costs) to reflect litigation risk.

I would suggest that where an offer is made post the disclosure phase, (and where no issues have been taken as to the extent of the disclosed materials) the parties ought usually to have enough material to properly assess each other’s case and any Pt 36 offers made.

If an offer is made pre-disclosure (and parties will generally wish to do this, to secure the maximum benefit), then issues around whether it could be properly evaluated under CPR 36.17(5)(d) may arise.

One example which springs to mind is where a Claimant claiming substantial credit hire charges pleads to be impecunious without providing sufficient particulars and/or without providing any disclosure to the Defendant. Impecuniosity is routinely pleaded as a boilerplate pleading, and then dropped at a later stage of litigation. I would expect that many judges would be sympathetic to the suggestion that a Defendant who had no information as to the genuine state of a Claimant’s finances would be unable to assess a Part 36 offer for say 90% of the hire charges where, were the Claimant fail to prove their impecuniosity, those charges would be reduced by far more than a mere 10%.

Jockey Club Racecourse Ltd v Willmott Dixon Construction Ltd [2016] EWHC 167 (TCC) considered whether a claimant offer of 95% of the claim value constituted a genuine offer. Following AB v CD [2011] EWHC 602 (Ch), the High Court found that the offer was not derisory, but did offer a benefit which was substantial .

The High Court has come to another similar conclusion, this time in a 90% offer, in JMX v Norfolk and Norwich Hospitals [2018] EWHC 185 (QB). Foskett J noted in his judgment that both parties’ assessment of litigation risk are likely to be (sometimes very) different, but that the trial judge has to take a broad brush assessment as to whether the offer was genuine, and is unlikely to place too much weight on without prejudice discussions. After all – the trial judge will have heard the case unfold and will be in the best position to consider any offer, after hearing the case.

The judgment in Jockey Club Racecourse Ltd v Willmott Dixon Construction Ltd did however go on to consider whether it would be just to apply the consequences in CPR 36.17 for the whole period following expiry of the offer. In this case, when the Claimant served its draft amended particulars of claim (to serve as its statement of case), the figure claimed remained to be exactly quantified, and pleaded. The High Court considered that once the Defendant company realised the scale of the claim it should have promptly taken steps to investigate, or to equip itself via expert evidence, to assess properly its position on liability and the Part 36 offer made.

Pursuant to CPR 36.17.5(c), Foskett J concluded that it would be unjust to order indemnity costs from 21 days after the offer, but rather from the earliest date after which the Defendant company should have been equipped to assess the claim on liability (assessed to be four months after the offer).

In cases where there has been a level of evidential shift, and movement in the parties’ positions, it may well be worth arguing that CPR 36.17.5(c) and (d) mean that indemnity costs, and punitive interest on damages and on costs, should not apply for the full period.

Turning to the recent case of Gohil v Advantage Insurance Company (County Court at Birmingham, 11th May 2023), one can clearly see that it is a common sense application of the principles outlined above.

The claim concerned an unremarkable low value road traffic accident, which had been settled by way of acceptance of a Part 36 offer. There was then a dispute as to whether the Claimant was entitled to fixed costs that she had claimed at £4,937.07 or MOJ Portal costs (which would be rather less).

The Claimant prepared a schedule of fixed costs which amounted to £4,307.07 and then made an offer under Part 36 to settle the matter for £4,307.00, only 7 pence less (or put another way 99.999% of the full value of the ‘claim’). The Claimant then applied under CPR 36.17 for these costs consequences to be ordered against the Defendant.

Given the previous case law it is hardly surpassing that a reduction of 7 pence was not considered by District Judge Griffith to be a ‘genuine’ offer to resolve the dispute, and so the consequences of CPR 36.17 were not applied.

Gohil v Advantage needs to be taken as a clear indicator that Part 36 offers should contain within them a level of concession (appropriate to the facts of the case) in order to be considered genuine attempts to resolve the dispute. What that will comprise will always depend on the nature of the case. We have all seen cases where, perhaps due to being a litigant in person, receiving poor advice, or simply being pig-headed, the other side proceed with a hopeless claim or a hopeless defence.

Clearly in these cases it may be difficult for the party on the ‘correct’ side to understand why they should have to make any concession at all in order to resolve the proceedings when what they are claiming is perfectly reasonable in the first instance. But it does appear some small concession  will have to be made in order for the Part 36 to take full effect. Provided it is clear to the trial judge just how hopeless the other side’s case is at trial, one can hope that even a high offer will be considered to be genuine once the judge is informed of it at the conclusion of the trial, if beaten.

It is, however, interesting and important to note the observation of Stephen Houseman KC in Yieldpoint Stable Value Fund LP v Kimura Commodity Trade Finance Fund Ltd [2023] EWHC 1512 (Comm) that “all Part 36 offers are made for tactical purpose”; the mere fact of a Part 36 offer being tactical should not count against it. On the contrary, that is the whole point of a good Part 36 offer in the first instance!

As a final note, the author has recently been involved in a case where he secured Part 36 consequences following the making of a very ‘tactical’ offer in a personal injury case:

More and more, we are seeing Defendant insurers plead or pursue fundamental dishonesty in personal injury cases. This is due to the provisions of CPR 44.16, which provides for the dis-applying of QOCS where the claim is found on the balance of probabilities to be fundamentally dishonest. in these circumstances, the defendant will be able to enforce its costs against the claimant.

This, in my opinion, is now verging on being an overused provision. Whether or not there is a problem of exaggerated or falsified injury in this jurisdiction, it is now routinely pleaded and argued in many RTA fast track matters.

The usual situation is that the Defendant will admit breach of duty in their defence by the coming together of the vehicles, but deny liability by virtue of a denial of causation and damage. That focuses the court’s attention on the credibility of the claimant.

In summary, if the claimant is pursuing the claim through an accident management company and the defendant raises fundamental dishonesty then (unless the Defendant is willing to settle by way of payment to the Claimant further down the line), the claim is very likely to proceed to trial.

This is because the claimant personally won’t want to discontinue, as he will then usually become liable for his solicitor’s costs under his CFA with them. A discontinuance will deprive the claimant’s solicitors of the chance of recovering their costs against the other side, so they will want those costs from the claimant personally (despite the CFA often being described as “no win, no fee”). Also, and obviously, the claimant usually wants to recover their own damages anyway!

On the other side, the defendant won’t want to settle if they are convinced the claimant is a fraudster, who has faked a whiplash injury to garner a few thousand pounds. There may be evidential holes in the Claimant’s case which point to such a conclusion.

In the case I was involved with, the Defendant had alleged fundamental dishonesty based on a fairly flimsy allegation of induced or staged accident. The Defendant was convinced that the Claimant was working in tandem with another vehicle on the motorway. In reality, this amounted to mere suspicion, as there was no supporting evidence to suggest the vehicles were linked.

Following the receipt of the defence, the Claimant’s solicitors made a liability only offer in the figure of 90% in the Claimant’s favour. There is nothing to stop a liability only offer in CPR 36. CPR 36.5(d) states that the offer must:

(d) state whether it relates to the whole of the claim or to part of it or to an issue that arises in it and if so to which part or issue; and

Now obviously a liability split is almost always an impossible outcome where the defence admits breach of duty on a 100% basis. But that is not necessarily a problem per Huck v Robson.

And, as ‘liability’ in the strict sense has been denied in all cases where fundamental dishonesty is alleged it must be said, in my opinion, that an offer as to liability would be an offer in relation to “an issue that arises in (the claim)”. Liability arises out of the combination of duty, breach, causation and damage, after all.

Now, in this case, the judge did not accept the allegation of a staged accident, noting that the allegation was made based on nothing more than the Defendant’s suspicions, which on their own could never make out such a grave finding.

Resultantly, she found in favour of the Claimant on a 100% liability basis (unsurprisingly). This meant that the 90% liability offer was beaten and the consequences of CPR 36.17 applied.

The elegant thing about this offer was that in any case where the judge found for the Claimant, the offer would be beaten and Part 36 consequences would apply. In cases where fundamental dishonesty is alleged, this is a useful tactic, as usually there is no chance of a liability split because breach of duty will have been admitted on a 100% basis, by virtue of the coming together of the vehicles. The issues which will have been in dispute are causation and existence of damage.

The Defendant may try to argue that the offer is not a genuine attempt to settle proceedings as there would still be argument on quantum. However, most judges (I imagine) would accept the argument that liability (or the issue of fundamental dishonesty) would engage nearly all the court’s time at trial anyway, and that such issue would be the main issue in proceedings. And realistically, quantum would probably be settled, following an admission of liability, in most low value PI claims.

In summary then, Claimant solicitors in personal injury cases should strongly consider making liability only offers (alongside more usual quantum and liability offers) in cases which look like they are going to run to trial. They provide an elegant way of ensuring the application of Part 36 consequences where a split liability decision is impossible, especially in cases where fundamental dishonesty is alleged.

Henry Hawkesworth

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