Part 36 Offers and Costs

Part 36 Offers and Costs

Anna Tuson v Debbie Murphy, Court of Appeal [2018] EWCA Civ 1461. Judgment date 22nd June 2018.

Anna Tuson fell from a horse at the defendant’s riding school and broke her right arm on 19 August 2010. She subsequently developed obsessive compulsive disorder (OCD) which two psychiatrists attributed to the accident. Liability was admitted subject to an agreed deduction of 15% for contributory negligence. She gave up work as a school teacher in September 2012. Her claim was initially valued at over £1.5 million based on the premise that she would be unable to work again.

In November 2013 Anna Tuson obtained a franchise in a playgroup organisation running messy played workshops for children under the name Creation Station. The claimants witness statement in the claim did not mention the playgroup franchise that she had obtained. Neither did the claimant mention the franchise to the defendant’s psychiatrists who she saw for the purpose of the claim after the franchise had been taken out. The defendant’s expert diagnosed severe OCD caused by the accident. The claimant served a schedule of loss in 2014 including a substantial claim for future loss of earnings. Employment experts for both parties prepared reports in 2014, neither expert had been told about the playgroup.

On 29th April 2015 the defendant’s solicitors became aware of the claimant’s involvement in the playgroup the previous year. They told the claimants solicitors and the claimant subsequently served a witness statement setting out in detail the claimants involvement in the playgroup franchise. The playgroup had failed and the claimant says it did not make her any money. The claimant says she regarded it as gainful employment, it was a form of personal CBT therapy.

A week after the receipt of the further statement the defendant’s solicitors made a Part 36 Offer of £352,060 on 17th September 2015. If the offer was accepted within 21 days (8 October 2015) then the defendant’s would also pay the claimants costs. The offer was not accepted, the defendant then obtained a further report from a new psychiatrist. This disputed the causation of the claimants OCD and subsequently the claimant decided to accept (outside the 21 period) the defendant’s Part 36 Offer.

There was an argument as to who should be responsible for costs. The usual rule is that the claimant would be awarded her costs up to the expiry of the relevant consideration period and that the claimant would be responsilbe for the defendant’s costs thereafter. The Court of Appeal decided that it would be appropriate for this rule to be followed in this case even though there had been misleading material non-disclosure. It was noted that the offer had been made by the defendant’s with knowledge of the claimants material non-disclosure, but this was not a case of gross exaggeration. The defendant’s offer was made as a Part 36 Offer which was unconditional whereas the defendant’s could have put forward a “Calderbank” offer which could have carried specific conditions with regards to costs.

Part 36 offers can be an effective form of negotiation for defendant’s and the rules contain specific provisions as to costs. Ultimately where Part 36 offers are accepted late out of time, the Court has discretion as to the final costs order and will depart from the default position in the Rules in appropriate cases. In this particular case however the arguments were not strong enough for the defendants to obtain a costs order that the Claimant should be responsible for costs over and above those that apply in the default position.

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