Solicitor has no duty to warn an opponent of its mistakes; Part 36 offers – must they include interest? Conflicting decisions in Horne v Prescot and Ngassa v The Home Office; Part 36 offers – when it is not a genuine offer to settle, attracting the 'usual' Part 36 costs consequences


Read the full articles by clicking on the drop downs below.

Solicitor has no duty to warn an opponent of its mistakes

Woodward & Anor v Phoenix Healthcare Distribution Ltd 

Background: 

A claim form was issued on 19 June 2017, which was the last day of the six-year limitation period for the claim. Whilst often a defendant will nominate its solicitor to accept service of the claim, in this case, the solicitor had not been instructed to accept service. The claimant then purported to serve the claim form on the defendant's solicitor. Whilst the defendant's solicitor was aware of the error in service, they chose not to respond until the claim became time-barred by statute a couple of days later. The defendant's solicitor then informed the claimant's solicitors of the error. The claimant attempted to invoke other methods of service by couriering, posting and emailing the claim form at the defendant's trading address before attempting to have retrospective service under CPR 6.15 validated by the Court. 

At first instance, Master Bowles granted the application on the basis that the defendant had acted in a tactical manner by maintaining silence on the issue until time had expired. However, this was then appealed. On appeal, HHJ Hodge QC found that the defendant was under no duty to tell the claimant how to do their job.   

Decision: 

The Court of Appeal held that the defendant's solicitor was not under an obligation to inform the claimant's solicitor that the service of the claim form had been invalid. Solicitors are under no obligation to highlight errors in service to other parties.  

Comment: 

This decision reinforces that there is no duty requiring a solicitor to draw attention to an opponent's mistake, confirming the view of the majority in the Supreme Court in Barton v Wright-Hassall in 2018 – see our summary of that decision here. The position may be different where a party has contributed to the mistake of its opponent, but in this case that had not happened.  

Best practice should be to issue and serve a claim form well in advance of the expiry of the limitation period. The Court was critical of the claimant, stating that they had "courted disaster" by leaving service until the latest possible second, leaving themselves no time to correct errors in service. It is key to adhere strictly to the Civil Procedure Rules on service, particularly when end of the limitation period is approaching.  

Mabel O'Connor

Part 36 offers – must they include interest? Conflicting decisions in Horne v Prescot and Ngassa v The Home Office.

An offer to settle intended to be made under CPR 36 must be made in accordance with rule 36.5 in order to have the cost consequences specified in Part 36. Rule 36.5(4) provides that "a Part 36 offer which offers to pay or offers to accept a sum of money will be treated as inclusive of interest" until the end of the period specified in the Rule.

Horne (as executrix of the estate of Edward Horne, deceased) v Prescot (No.1) Ltd [2019] EWHC 1322 (QB) (unrep)

The appellate court decided that the Part 36 offer made by the claimant was a valid Part 36 offer, even though it specifically excluded interest. 

Background

On 5 March 2018, the claimant's solicitors made an offer under Part 36 to settle the whole claim (in this case detailed assessment proceedings). They offered to accept £82,000, exclusive of the costs of the assessment and exclusive of interest. The defendant did not accept the offer. 

On 9 July 2018 the claimant's costs were assessed at around £121,000 (including the costs of the detailed assessment itself which were around £20,000). Given that the costs awarded to the claimant exceeded the settlement sum, it followed that the claimant was entitled to the benefits of achieving a judgment which was more advantageous than her Part 36 offer. 

The defendant appealed the decision on the basis that an offer "exclusive of interest" was not a valid Part 36 offer.

Decision

The appellant court dismissed the appeal on the basis that:

  • Firstly, there were no issues regarding interest that the Master had to decide as interest did not feature in the detailed assessment proceedings. The claimant's offer was made for the whole of the claim in such proceedings and there was no severable part of that claim which concerned interest.
  • The court also confirmed that, in detailed assessment proceedings, an offer which is silent as to interest would be taken to be inclusive of interest as per CPR 47PD.19, so it was prudent for the claimant's solicitors to specifically exclude interest from the offer. CPR 47PD.19 provides that "Where an offer to settle is made, whether pursuant to Part 36 or otherwise, it should specify whether or not it is intended to be inclusive of the cost of preparation of the bill, interest and VAT. Unless the offer states otherwise it will be treated as inclusive of interest".
  • Secondly, even if the Judge's interpretation of the first point was wrong and interest was part of the claim, the Judge concluded that it would still be a valid Part 36 offer as it would be an offer to settle part of the claim representing the principal sum in the detailed assessment proceedings but without interest. He also made it clear that CPR36.5(4) is a not a mandatory provision as it does not use the word "must", as it is the case elsewhere in the Rule (CPR36.5(1) and CPR36.5(3)). 

Ngassa v The Home Office & Anor [2018] EWHC B21(unrep)

The Court decided that an offer which excludes interest is not a valid Part 36 offer as it does not comply with the strict requirements set out in CPR 36.5. Again, the offer made in the context of a detailed costs assessment.

Background

On 6 November 2017, the claimant purported to make a Part 36 offer which provided that he was prepared to accept £45,000 exclusive of VAT and interest to settle the whole costs claim. The costs were assessed at around £52,000 which was more than the settlement sum proposed. 

Decision

The Master dismissed the claimant's arguments that this was a valid Part 36 offer arguing that:

  • Firstly, CPR Part 36 is a self-contained procedural code and that only an offer which complies with such code will have the cost consequences set out in Part 36. On that basis the Master suggested that 47PD.19 (which relates to the procedure for assessment of costs) is not intended to set out the procedure for making a valid Part 36 offer but is merely there to assist the court when exercising its general discretion as to costs.
  • Secondly, the Master's view was that CPR 36.5(4) is a mandatory provision because it provides that an offer "will" be treated as inclusive of interest.  He said: "[t]o describe the rule as not expressly prohibiting an offer being made which is exclusive of interest seems to me to ignore the plain words of the rule.

The Master also pointed that the offer should be capable of bringing the matter to a conclusion. Otherwise, if interest is excluded there would be further argument as to what interest should be awarded.

Conclusion

There is a clear conflict between these two decisions. But we understand that the Court of Appeal is expected to consider this point later in the year in another case, King -v- Corporation of London.

Ionela Cosneanu

Part 36 offers – when it is not a genuine offer to settle, attracting the 'usual' Part 36 costs consequences

Invista Textiles (UK) Ltd and another company v Botes and others [2019] EWHC 1086 (Ch) (12 April 2019) (unrep)

In a recent High Court costs judgment, it was determined that a claimant's Part 36 offer was not a genuine attempt to settle, despite the claimant receiving a better outcome at trial. It would therefore have been 'unjust' to award the claimant the usual costs benefits under CPR 36.17(4).

Background

Employers (Invista Textiles (UK) Limited and Invista Technologies SARL (Invista)) alleged breach of confidence and contractual breaches against former employees (Dr Botes et al. and Dr Botes' company, VideraBio). Two of the defendants left Invista and set up VideraBio; however, in January 2017 files relating to VideraBio were found on the work computer of a third defendant who had also recently left Invista. As a result of Invista bringing proceedings for breach of contract, misuse of confidential information and inducing a third party into breach of contract, disclosure of materials on the defendants' various devices and accounts was ordered. This yielded several thousand deleted files, which the defendants' claimed were not the claimants' property. 

In June 2018, Invista sent the defendants a Part 36 offer asking them for 1,367 documents of over 7,000 documents in issue and to pay the entirety of Invista’s costs on the standard basis if the offer was accepted. The offer was not accepted.

Decision

Birss J held that the defendants were correct to refuse to pay all of the claimants' costs. This approach had been 'vindicated by the judgment'. 

Birss J went on to note that when assessing whether the usual Part 36 offer consequences should be triggered, all circumstances must be considered. In this case, CPR 36.17(1)(b) was technically satisfied as a result of the claimants' offer to abandon everything claimed except for the return of 1,367 documents. This was because in July 2018 the vast majority of the documents contained in the Part 36 offer were admitted by the defendants as belonging to Invista. Accordingly, following the defendants' admissions ‘the claimants had achieved a more advantageous position than what had been offered in the Part 36 offer.’ After the admissions the claimants were able to obtain relief in relation to those documents and some other minor causes of action at trial, thereby achieving a more advantageous outcome than their offer. 

Nonetheless, Birss J noted that had the defendants accepted the claimants' offer they would have been required to pay all of the claimants' costs up to that date, including costs relating to all of the other issues abandoned by the claimants. Indeed, Birss J noted that 'A reasonable litigant and litigation team in [Invista’s] position will have known when it made that offer that that aspect would make it wholly unacceptable.

Birss J concluded that it would be ‘unjust’ to enforce the usual consequences of the Part 36 Offer because the offer was not a genuine attempt to settle. Instead, he held that the offer had been a barrier to settlement of this dispute with the claimants thereafter approaching the case as if they were entirely protected as to costs'. 

Practical significance 

While Part 36 offers remain an important tactical step in litigation, a party proposing to protect itself on costs by using the Part 36 regime should carefully consider whether their offer will be treated as a genuine offer to settle. That may not be the case if accepting it would result in injustice for the recipient.

Ben Jones

Key contact

Kate Menin

Kate Menin

Principal Knowledge Lawyer, Dispute Resolution
London

View profile