What is the costs position if a claimant makes a Part 36 liability only offer at 90/10?
Mundy v TUI UK Limited [23.02.23]
On 16 October 2022, 36,700 people saw Leeds United play Arsenal at Elland Road. Leeds missed a penalty, their xG (expected goals) was 2.35, to a paltry 0.86 to the visitors from North London. However, the record book shows that Arsenal scored a goal, Leeds didn’t. Who won that game, and took all three points? The answer may be reasonably clear, but obvious results may always be open to challenge (whether they are successful is an entirely different matter).
What happens when a claimant does less well than a defendant Part 36 offer made in full and final settlement of all of the claim, but the claimant still considers that he won because he had made a liability only offer? Kennedys represented the defendant in the matter of Mundy v TUI UK which considered this point.
Calvin Mundy sought damages for ‘holiday sickness’. His claim was advanced at £35,000, and he made Part 36 Offers to compromise all of his case at £20,000, and liability only at 90/10, neither of which were accepted. About 18 months before trial, the defendant made a Part 36 Offer to compromise all of the case at £4,000. At trial Mr Mundy was awarded damages in the sum of £3,805.60, so he won his case, but ‘lost’ on the defendant’s Part 36 offer.
Not content with that outcome, Mr Mundy appealed, contending that he was the real winner, because he had won on his liability only offer, and adding relevant penalties to the judgment sum, should have increased his award to £4,100, hence beating the defendant’s offer.
High Court’s decision
Mr Mundy’s appeal was heard before The Honourable Mrs Justice Collins Rice, and in judgment handed down on 23 February 2023, she found that he had in fact lost, and dismissed his appeal. The judgment provides a useful summary of competing offers, where the outcome is binary.
By way of introduction, it always has to be remembered that Part 36 is a self-contained procedural code (for example, much as we use terms such as rejection, there is no concept of rejection in Part 36). CPR 36.17, applies where, upon judgment being entered, a claimant fails to obtain a more a judgment more advantageous than the defendant’s offer (CPR 36.17 (1) (a)), or the opposite where the defendant fails to beat a claimant’s Part 36 Offer (CPR36.17(1) (b)). As such, where CPR 36.17 bites, it can only bite one way, not both at the same time.
The appeal focussed on how CPR 36.17 is engaged, if at all, where there are competing offers, one of which being a liability only offer.
Mr Mundy submitted that the judgment was more advantageous to him, because of his 100% success, having offered to take only 90%. His argument was rejected, mainly because he was seeking to prove that loss on a monetary offer, could be rescued by a win on a liability offer.
In the index matter, there was no question of issue based liability, the case was all or nothing; the claimant was going to win or lose, with no liability reduction:
“… I see no encouragement at all in CPR 36.17, or anywhere else in the Part 36 scheme, for the idea of approaching rejected offers, where a defendant has made a money offer to settle the whole claim, by doing anything other than starting with the question at CPR36.17(1)(a) and making a straightforward comparison between what a defendant offered and what a claimant got ‘in money terms’. What a claimant got is to be considered in obtaining a judgment. The judgment entered, obtained and recorded in this case was for a sum less than £4,000… On a plain reading, CPR 36.17(1) (a) and (b) are directed for like for like comparison”.
The appeal court considered that the liability only offer, in the circumstances of the index matter was an attempt to unilaterally impose an insurance policy to reverse the losses otherwise provided for by CPR36.17. The court held: “It is, in other words, an attempt to use CPR 36.17 against itself contrary to both its letter and its spirit”.
What of liability only offers then? In a case like this, it was held that the simplest answer was to consider whether it engaged CPR 36.17 (5), i.e. was it unjust to make the order on costs. A court may be invited to consider injustice arising through such liability offer not being accepted. In the index claim it was not unjust to make the usual costs order as the claimant had not beaten the monetary offer made to him by way of Part 36. Further the liability only offer was at large and unparticularised, as liability comprised both breach and causation, in such circumstances, “…it would be sensible to make clear whether the defendant is being invited only to admit a breach of duty, or, if the admission is intended to go further, what damage the defendant is being invited to accept was caused by the breach of duty”.
In a binary case, a liability only offer will not be compared with an all in Part 36 offer, because that is comparing tomatoes with turnips. The ‘winner’ when Part 36.17 is in play, will depend on comparing financial offers made with the judgment sum. It is possible, albeit unlikely, that a liability only offer will be considered as to whether it is then unjust to make the award.
Turning to the question that introduced this article, of course, and much to my chagrin, Leeds lost the game because they scored fewer goals than Arsenal. Unfortunately, as with Mr Mundy, Leeds could not argue that their far superior xG, bettered the goal that was actually scored. Such is life.