Fox v Foundation Piling Ltd

A withdrawn Part 36 offer no longer attracts the automatic costs consequences of rule 36.14. It may nevertheless be considered as an admissible offer under rule 44.3(4)(c) of the Civil Procedure Rules.

Where a claimant recovers more than the defendant previously offered, the claimant will normally be the successful party, even if the recovery is less than the claimant’s own offer. The starting point is then an order for the claimant’s costs. A departure requires a proper basis, such as a discrete unsuccessful issue or unreasonable conduct that caused unnecessary costs. Exaggeration alone does not ordinarily justify a costs penalty where the claimant adjusts the claim and the defendant, despite relevant evidence, fails to make a sufficient timely Part 36 offer.

Mr Trevor Michael Fox brought a personal-injury claim against his employer after a workplace accident. Liability was compromised subject to 12.5% contributory negligence. The parties later settled the damages claim, including payments to the Compensation Recovery Unit, but reserved costs.

His Honour Judge Bullimore in Sheffield County Court held that the defendant had been the successful party after an earlier Part 36 offer and ordered the claimant to pay the defendant’s costs after 20 October 2008. He also held, alternatively, that the claimant’s conduct justified that order.

On appeal, the defendant conceded that the claimant had recovered a higher net sum than its earlier offer. The central issue was whether the claimant’s conduct, including the initially inflated claim and an unsuccessful interlocutory appeal, nevertheless justified depriving him of costs.

1. Appeal allowed unanimously. Jackson LJ, with whom Moore-Bick and Ward LJJ agreed, held that the claimant was the successful party. The comparison required by Part 36 was between the net sum payable to the claimant, rather than the gross amount including Compensation Recovery Unit payments. The claimant recovered £31,702.53 net, exceeding the £23,550.79 net sum offered in September 2008.

2. Part 36 is a structured code with prescribed consequences where an unwithdrawn offer is not bettered. Following the 2007 amendments, an offer which has been withdrawn does not attract rule 36.14 consequences. It may, however, be considered as an admissible offer under rule 44.3(4)(c) of the Civil Procedure Rules, when the court exercises its wider costs discretion.

3. Where both parties have been over-optimistic, a claimant who recovers more than the defendant offered will normally be the successful party under rule 44.3(2). The starting point is therefore that the defendant pays the claimant’s costs. The court may adjust that result for a discrete unsuccessful issue or for unreasonable conduct which caused the other party to incur costs.

4. The claimant’s conduct did not justify such an adjustment. His unsuccessful appeal concerning expert evidence had already attracted a separate costs order and caused only limited delay. Both sides had contributed to delay. The defendant had early surveillance evidence but did not make a realistic offer reflecting the true value of the claim until November 2009. The claimant then accepted it promptly. Although the ultimate recovery was far below the original claim, the trial judge had declined to find dishonesty or misrepresentation, and the Court of Appeal could not make that finding instead.

5. The judge had exercised discretion on the erroneous premise that the defendant was the successful party. The court re-exercised the discretion and ordered the defendant to pay the claimant’s costs on the standard basis, subject to specific costs orders made during the litigation.

• Court of Appeal (Civil Division): In [2011] EWCA Civ 790, the court allowed the claimant’s appeal and replaced the adverse costs order with an order that the defendant pay the claimant’s costs on the standard basis, subject to earlier specific costs orders.

• Sheffield County Court: His Honour Judge Bullimore, on 28 January 2010, ordered the claimant to pay the defendant’s costs after 20 October 2008, holding that the defendant was then the successful party and, alternatively, that the claimant’s conduct warranted that result.