Is the effectiveness of Part 36 being eroded?

SG v Hewitt [2012] EWCA Civ 1053

This case involved a child who suffered a severe brain injury in a road accident in 2003, when he was 6 years old.  In April 2009, before the issue of proceedings, the Defendant made a CPR Part 36 offer to settle the claim for £500,000. At that time, the Claimant’s solicitors said a firm prognosis could not be given and the offer could not be properly considered.  The offer was not withdrawn.  In 2011, the Claimant’s advisers obtained more certain condition and prognosis evidence and accepted the offer. 

As the Claimant was still a minor, the settlement needed Court approval and this was obtained in December 2011. However, a dispute arose as to who was liable to pay the costs following the expiry of the Part 36 offer.  The Judge approving the settlement was not satisfied that the case was an exceptional one, or that it would be unjust for the normal order as to costs to be made pursuant to CPR 36.10(5); therefore he ordered that the Claimant should pay the Defendant’s costs incurred since the expiry of 21 days after the original offer was made.  

The Claimant appealed against the award of costs to the Defendant and the Court of Appeal gave judgment on 2 August 2012.   The appeal was successful, and the Claimant was awarded all of his costs.  Whilst the Defendant had made what turned out to be a good offer in 2009, it was found this did not give the Defendant costs protection, as the Claimant should not be penalised for the uncertainty over his condition.  The Court found that it was only in 2011 that a clear view on prognosis could be offered to the Court and settlement recommended. 

Whilst the ruling from the Court of Appeal demonstrates a departure from the expected operation of Part 36, the Court commented on the unusual nature of the case.  It was a disappointing outcome for the Defendant, who had done all possible to bring the case to an earlier conclusion,  limit the incurrence of costs on both sides, and seek costs protection.  Whilst both Claimants and Defendants may seek to use this case to argue against the expected penalties under Part 36 for the late acceptance of offers, the Court made it clear that this case was unusual.  Lady Justice Black concluded by saying that the amalgam of features in this case would be unlikely to be replicated precisely in another case.  It is therefore clear that each case will turn on its own particular circumstances and uncertainty over prognosis alone will not mean a well judged offer does not ultimately provide costs protection. 

A 10% uplift in General Damages?

Simmons v Castle [2012] EWCA Civ 1039

The endorsement of a settlement in a personal injury action between the appellant motorcyclist and the respondent car driver provided the Court of Appeal with an opportunity to declare an increase of 10 % in general damages, which will take effect from April 1 2013, in most tort actions. The Court of Appeal took this opportunity to state that it would follow the recommendation by Sir Rupert Jackson that general damages should increase by 10% to balance out certain changes to the recoverability of Claimant’s costs.  The Court said that any date would be somewhat arbitrary but it was better to provide the certainty of a fixed date.  

Although guidelines as to the quantum of conventional damages were neither rules of law, nor practice rules, they were addressed to first instance judges, and it was highly desirable that parties to litigation and their advisers had confidence that trial judges would apply them.  A 10% increase in general damages was recommended by the Jackson Report. This proposal was made to facilitate the deflation of the 'compensation culture' in conjunction with the proposal to abolish the recovery of "no win no fee" CFA uplifts from Defendants. The increase in a Claimant's award for general damages will be used by the Claimant to pay for the 'success fee' that will no longer be recoverable from the losing party as of 1 April 2013 following the implementation of the Legal Aid, Sentencing and Punishment of Offenders Act 2012. Parties will still be able to enter into CFAs in personal injury claims but the success fee payable will be capped at 25% of certain parts of damages.

Giving judgment, the Lord Chief Justice, Lord Judge said he was giving early notice of the change to allow parties already engaged in, or considering litigation, to prepare ahead of the implementation of the Jackson reforms next year.  The Court of Appeal also made it clear that this uplift will apply to cases involving:

  • pain, suffering and loss of amenity in respect of personal injury;
  • nuisance;
  • defamation;
  • all other torts which cause suffering, inconvenience or distress to individuals.

The original guidance in this case was given in July 2012, with the Court confirming that the uplift would apply to all cases, irrespective of funding, and for CFA cases, even where the CFA was entered before 1 April 2013 and a success fee would also be recoverable. In light of this apparent windfall for some Claimants, unsurprisingly the decision was challenged by the Association of British Insurers.  It has just been confirmed that the damages uplift will only apply to CFA funded cases entered into after 1 April 2013, where the success fee would not be recoverable from the Defendant, so as to avoid any windfall.

Disclosing a privileged expert report?

Odedra & Another v Ball & Another [2012] EWHC 1790

Whilst not a claim for personal injury, and a first instance decision only, this case gives further insight into the judiciary’s thinking regarding the disclosure of expert evidence against a party’s wishes.  The claim involved a claim for loss of value of land due to oil contamination.  Each party obtained expert evidence from a valuer.  The Claimants' expert valuer prepared two reports simultaneously.  One was disclosed, and the Claimants sought to rely on it. The Defendants sought an order that the undisclosed report be disclosed. The Claimants stated that they did not intend to rely on the undisclosed report, which had become irrelevant. The Defendants asserted that the undisclosed report had been properly prepared, but the disclosed one contained no expert evidence and had been put in to permit the Claimants to pursue a particular case irrespective of their expert's view of that case. In their application, the Defendants relied on the following decisions:
  • Vasiliou v Hajigeorgiou (2005) which related to disclosure of the evidence of a first expert if a party wanted permission to rely on substitute expert
  • Edwards-Tubb v JD Wetherspoon (2011)which highlighted disclosure of pre-action report as a condition of being allowed to rely on a subsequent report.

The Court stated that there was no authority on the status of an undisclosed expert's report prepared simultaneously with a report by the same expert, which had been disclosed and that sometimes the requirement for openness would "trump" privilege. Equally, in some cases that approach might be unjust. Here disclosure of the undisclosed report was refused because, in the event, both parties' experts had become "slightly confused" and it would be wrong and potentially unjust to require the disclosure of reports based on misunderstood issues.

This appears to be a sensible decision.  Where a Court has reached a view that an undisclosed report is at best worthless, and at worst, confusing, it is hard to see how disclosure would assist either the parties or the Court in disposing of the issues in the case.  It also shows that despite recent cases showing an increased willingness on the part of the Court to order disclosure against a party’s wishes, there are scenarios where it will be accepted this is not appropriate.

Striking out Fraudulent Claims

Fairclough Homes Limited v Summers [2012] UKSC 26

The Claimant was injured in an accident at work, sustaining a fracture to his right hand and a serious fracture to his left heel bone. After succeeding on liability, he pursued a claim for damages exceeding £800,000, although this had reduced to £250,000 by the time of the quantum trial.  Surveillance evidence was obtained by the Defendant and the Department for Work and Pensions, which showed the Claimant to be far more mobile and capable than he alleged and, most importantly, working.

At the quantum trial, the Defendant applied to have the whole of the Claimant’s case struck out as an abuse of process.  The trial Judge declined to do so but the Claimant was only awarded £89,000 damages and it was found that he had committed fraud, satisfying not only the civil but also the criminal test.  It was also found that he had undergone an unnecessary surgical procedure, as a result of his exaggerated claims of pain, in a futile attempt to prove the extent of his injury.

The Defendant appealed against the failure to strike out the whole of the Claimant’s claim but this was refused by the Court of Appeal.  Ward LJ in the Court of Appeal found the Claimant was "…an out and out liar who quite fraudulently exaggerated his claim to a vast extent…" but nevertheless dismissed the appeal, feeling bound to follow the previous Court of Appeal decisions of Shah –v- Ul Haq & Others 2009 and Widlake v BAA Ltd 2009.  In the former case, the Court of Appeal had said that there was no precedent for a case to be struck out in its entirety where it was a found a party had dishonestly exaggerated its case.  The Defendant obtained permission to take the matter to the Supreme Court.

The Supreme Court accepted that the behaviour of the Claimant was a serious case of abuse of process and overturned the Court of Appeal decision in Shah –v- Ul Haq.  The Supreme Court has now made it clear that the Court does have the jurisdiction and, under the Civil Procedure Rules, the power to strike out a claim for abuse of process at any stage, even after trial. Despite those findings, the Supreme Court declined to strike out this particular case and the Claimant’s award of damages was maintained.  The Court did refer to the Claimant as having possession of a right to damages, once he succeeded on liability and to deprive him of this human right would be only be justifiable in very exceptional circumstances, and it had to be in the public interest and proportionate.

The Supreme Court offered no specific guidance as to those circumstances where it would be 'just and proportionate' to strike out a fraudulent claim as an abuse of process at a hearing or even after trial.  Discouraging fraudulent claims is important but the court does have various options; the preference of Defendant’s expert evidence (which can lead to much lower awards than the damages claimed); costs sanctions, and the enforcement of penalties relating to well judged Part 36 and Calderbank offers by Defendants.  However, it is useful to know that the Court does have the ultimate sanction in its power, when dealing with a grossly exaggerated claim.

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