More advantageous - Part 36 rules? Lisa Carver v BAA Plc [2008] EWCA Civ 412

The Claimant, Miss Carver, was an air hostess who suffered a ligament injury to her ankle after entering a defective lift on BAA Plc (“BAA”) premises on 31 March 2003. BAA admitted liability on 24 July 2003 and made various offers to settle, which were not accepted prior to trial. At trial Miss Carver was awarded a greater sum than BAA’s Part 36 payment in to court. Despite Miss Carver’s apparent victory His Honour Judge Knight QC ordered Miss Carver to pay BAA’s costs from the date of expiry of the time to accept BAA’s payment into court to trial. She was also deprived of some of her own costs. Miss Carver appealed this decision.

This case hinges on the interpretation of CPR Part 36 and recent amendments to the wording with effect from 6 April 2007. The main effect of the amendments to Part 36 is that there is now no distinction between Part 36 payments into court and Part 36 offers to settle (a concession already won for NHS Trusts by a series of NHSLA cases). CPR Part 36.14(1) (a) states that when a claimant fails to obtain a judgment more advantageous than a defendant’s Part 36 offer, the defendant is entitled to his costs with interest from the expiration of the offer, unless the court considers it unjust to do so. Under the previous rules, a payment into court was “beaten” if exceeded by as little as £1 and the cost consequences usually followed unless it was “unjust” or there was some derogation from the usual rule arising from conduct.

Miss Carver’s solicitors served a schedule of loss with proceedings claiming £2,170. BAA made a Part 36 offer of £4,006 (including an interim payment) on 17 November 2005 before the commencement of proceedings. Miss Carver obtained further expert evidence which led her to increase her claim for damages to in excess of £5,000 but less than £15,000. In response, BAA made a Part 36 payment into court on 6 June 2006 totalling £4,520 (including the interim payment). This offer was rejected by Miss Carver, and a further schedule of loss was served claiming over £19,000. The parties’ experts agreed that Miss Carver had suffered no more than a mild ankle sprain before an updated schedule of loss was served, reducing Miss Carver’s claim to approximately £2,700. She made a Part 36 offer of £12,500 to settle the claim, which was not accepted by BAA, and later made an offer to accept £20,000 prior to trial.

At trial, HHJ Knight QC awarded Miss Carver £4,686.26 inclusive of interest, beating BAA’s Part 36 payment into court by only £51 (after adjustments for interest). He agreed with BAA that it should not be made to pay Miss Carver’s costs from November 2005 to June 2006 and Miss Carver should pay BAAs costs from the expiry of its Part 36 payment on 27 June 2006 to the trial date on the grounds of (amended) CPR Part 36. He also relied on conduct under Part 44 and highlighted Miss Carver’s lack of response to the Part 36 offer saying that her conduct of her case had been “highly regrettable”.

Miss Carver appealed on the basis that if CPR 36.14(1)(a) was given its ordinary meaning, a claimant does not fail to obtain a more advantageous judgment if it beats the defendant’s Part 36 offer by a penny, albeit that the advantage was a slim one. By contrast BAA argued that the amendments to Part 36 signal a change in the Court’s approach to costs and extend a Judge’s discretion on costs beyond a strict financial comparison. Miss Carver’s appeal was dismissed. Lord Justice Ward held that the words “more advantageous” now permit “a more wide ranging review of all the facts and circumstances of the case” as in non-money claims. While Miss Carver had beaten BAA’s payment into court, this was not deemed to be more advantageous on the facts taking into account the modern approach to litigation and whether the fruit of the litigation was worth the fight. The policy of promoting settlement (“compromise is better than contest”) runs through this judgment and it was held that no reasonable litigant would have carried on litigating for only an extra £51.

Comment

On the face of it this case is good news for Defendants. Sensible Part 36 offers made by Defendants will need careful consideration to avoid painful costs sanctions and the risk to Claimants will be greater still when the offer is made early. As a matter of interest, the Claimant’s costs claim would have been £80,000 (the Judge said that to incur such high costs in a claim that is worth less than £5,000 “fills one with despair”). However, the judgment might equally be seized upon by a Claimant only narrowly failing to beat a Part 36 offer and the there are a lot of “sympathetic” first instance judges who might be more willing than HHJ Knight to exercise this wide discretion in favour of the Claimant.