SG v Hewitt

Where a Part 36 offer is accepted after the relevant period, the normal costs order applies unless it would be unjust. The court must assess all the circumstances without imposing an additional requirement of exceptional circumstances.

A child’s status and the need for court approval do not automatically displace the normal order. Their practical implications are nevertheless material. Departure may be justified where the injury itself prevents a reliable prognosis until the child matures, the delay and expenditure are reasonably required to evaluate the offer, and the defendant knows why acceptance must await further evidence. Reasonable conduct is relevant but does not by itself determine what justice requires.

A six-year-old child suffered a severe frontal-lobe brain injury in a road traffic accident caused by the defendant’s negligence. The long-term consequences could not reliably be assessed until adolescence.

The defendant made a pre-action Part 36 offer of £500,000 in 2009. The claimant left the offer open while obtaining further expert evidence and accepted it in 2011. Popplewell J approved the settlement but ordered the claimant to pay the defendant’s costs incurred after the offer’s relevant period expired.

The claimant appealed. The central issue was whether the judge had erred in finding that the uncertain prognosis was an ordinary contingency of litigation and that the normal costs order under Part 36 was not unjust.

1. Appeal allowed unanimously. Black LJ gave the leading judgment. Arden and Pill LJJ agreed that the judge’s costs order should be set aside. The claimant was entitled to his costs throughout, including those incurred after 23 April 2009.

2. Where a Part 36 offer is accepted after the relevant period, the normal order under rule 36.10(5) shifts the subsequent costs risk to the offeree. The court must order otherwise where that result would be unjust. In applying the analogous criteria in rule 36.14(4), it must consider all the circumstances, including the offer’s terms, its timing, the information then available and the parties’ conduct. The language of “exceptional circumstances” adds no separate threshold. It means only that departure is the exception rather than the rule.

3. A claimant’s status as a child or protected party does not alone remove the defendant’s normal Part 36 protection. The practical consequences of that status cannot, however, be ignored. The court must consider whether the need for approval and the claimant’s incapacity materially prevented earlier acceptance. Reasonable conduct by the claimant’s advisers is relevant but is not identical to the ultimate question of justice.

4. The judge failed to give adequate weight to the particular consequences of the claimant’s childhood and injury. A reliable prognosis could not be formed until adolescence because the frontal lobes were still developing. The post-offer costs were incurred to determine whether the offer could safely be recommended and approved. The offer was made before proceedings, while both parties knew of the uncertainty; the claimant did not reject it; and the defendant left it open despite being able to withdraw it.

5. The uncertainty was inherent in the injury caused by the defendant and was materially different from an unrelated change in circumstances of the kind considered in Matthews v Metal Improvements Co Inc [2007] EWCA Civ 215. Treating it simply as an ordinary litigation contingency was an error of principle.

6. A perceived windfall from accepting the offer was irrelevant to costs. Whether a settlement was generous could remain uncertain or require a disproportionate satellite inquiry.

7. The conclusion was fact-sensitive. The relevant features interacted, and the result did not establish that childhood, uncertain prognosis or reasonable conduct would independently justify departure in every case.

1. Court of Appeal (Civil Division): The appeal was allowed unanimously. The costs order was set aside and replaced by an order that the defendant pay the claimant’s costs throughout. [2012] EWCA Civ 1053

2. Queen’s Bench Division: Popplewell J approved the settlement but ordered the claimant to pay the defendant’s costs incurred after the Part 36 offer’s relevant period expired. No citation for that decision is stated.