Matthews (a patient) v Metal Improvements Co Inc

On a claimant’s late acceptance of a defendant’s Part 36 payment, the usual order is that the claimant pays the defendant’s post-expiry costs unless that order would be unjust. Reasonable conduct by the claimant or the claimant’s advisers is relevant but does not alone establish injustice.

Part 36 deliberately allocates the costs risk arising from the ordinary contingencies of litigation, including later evidence or changed circumstances affecting valuation. A claimant whose ability to assess an offer depends on outstanding material evidence should seek an extension of time or a stay, rather than reject the offer while the position remains uncertain.

The claimant brought a personal-injury claim arising from a workplace accident. The defendant made a Part 36 payment after the claim’s value had been assessed on the basis of the claimant’s apparently normal life expectancy.

The claimant did not accept within 21 days. Later medical evidence showed that his unrelated lymphoma had become aggressive and materially shortened his life expectancy. That evidence made the payment adequate, and the court approved its late acceptance. Deputy District Judge Dowding nevertheless ordered the defendant to pay all of the claimant’s costs.

The defendant appealed against the incidence of costs after expiry of the acceptance period. The central issue was whether the late medical evidence and the claimant’s reasons for rejecting the payment made it unjust to apply the usual Part 36 costs order.

1. Appeal allowed. Stanley Burnton J, with whom Lloyd LJ and Chadwick LJ agreed, held that the Deputy District Judge had erred in principle and that the Court of Appeal could therefore substitute its own costs order.

2. At an approval hearing for a patient, the same principles governed post-acceptance-period costs as would have governed if the claim had proceeded to trial and the claimant had failed to obtain more than the Part 36 payment. The claimant’s status as a patient did not reduce the defendant’s ordinary Part 36 costs protection.

3. Under Civil Procedure Rules rule 36.20, the question was whether it would be unjust to make the usual order requiring the claimant to pay the defendant’s costs after the last date for acceptance. The judge had instead treated the issue as whether the claimant’s advisers had acted reasonably. That was an incorrect and insufficient test.

4. A Part 36 payment places both parties at costs risk. A defendant may properly make a conservative payment in the hope that later evidence or events will favour it. A claimant may properly reject it in the hope of a higher award. Ordinary changes in circumstances, including subsequent evidence reducing the claim’s value, do not normally justify depriving a defendant of the costs protection attached to a payment which the claimant ultimately fails to beat.

5. Once the claimant’s advisers knew that the biopsy result would materially affect life expectancy and valuation, they could and should have sought an extension of time to consider the payment and a stay pending the result. Their rejection while that issue remained uncertain provided a further reason for the usual order.

6. The defendant was ordered to pay the claimant’s costs up to 29 August 2005 and the costs of the approval hearing. The claimant was ordered to pay the defendant’s other costs incurred after 29 August 2005, with detailed assessment on the standard basis if not agreed.

• Court of Appeal (Civil Division): Allowed the defendant’s appeal in [2007] EWCA Civ 215 and substituted the usual post-expiry Part 36 costs order.
• Wrexham County Court: Deputy District Judge Dowding approved the settlement and permitted late acceptance of the Part 36 payment, but ordered the defendant to pay all of the claimant’s costs. That costs order was varied on appeal.