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Part 36 Offers and the Litigant in Person

To what extent should a Part 36 offer be explained to a litigant in person? This issue was considered by a District Judge in Liverpool in May 2015. His decision highlighted that the actions of the represented party’s solicitor were important if the normal Part 36 costs consequences were to apply.

Guidance has been given by the Court of Appeal on this issue.  In Kunaka v Barclays Bank [2010] EWCA Civ 1035 a claimant acting in person accepted the defendant’s offer 3 months late.  The defendant bank had not pointed out to the claimant the consequences of accepting a Part 36 offer late.  In that case the Court of Appeal considered that the fairness of the situation had to take into account that the claimant was a litigant in person as well as those circumstances.  The Court of Appeal ordered no order as to costs from 21 days after the date when the offer was made and the claimant recovered his costs before that.

Kunaka was considered by the District Judge in Liverpool when determining costs in a personal injury claim.  Although represented pre-action, the claimant was a litigant in person throughout the litigation. She initially claimed about £1,400,000 and unsuccessfully tried to increase the value of her claim to over £4,000,000. The defendant made a Part 36 offer of £50,000 in April 2014. 

The defendant’s letter making the Part 36 offer set out in some detail the costs consequences of accepting or rejecting the offer.  Further, the defendant’s counsel and solicitor attempted to discuss settlement with the claimant outside court on more than one occasion, but without success.  Finally, the defendant’s solicitor sent a 5 page without prejudice letter to the claimant which set out clearly and plainly how the claim would be valued at trial, the defendant’s view of the likely outcome, the consequences of accepting the defendant’s offer late and risks of not beating it. The defendant’s solicitor invited the claimant to contact him and gave her his direct dial telephone number.  

The claimant rejected the defendant’s offer and made a counter offer of £750,000 in February 2015.  In April 2015 the claimant accepted the defendant’s part 36 offer of £50,000 but disputed that she should pay the defendant’s costs from May 2014 (21 days after the offer) to April 2015 (acceptance of the offer).  

At the hearing to decide costs, the judge considered the cases of SG v Hewitt [2012] 5 Costs LR 937 and PGF II SA v OMFS Co I Ltd [2014] 1 WLR 1386.  He reminded himself that, where a Part 36 offer is accepted late, the court had a discretion to depart from the normal costs order if it would unjust to make such an order (the unamended CPR 36 applied to the offer).  

In this case the judge commented that, although the CPR applied equally to litigants in person and represented parties, he was mindful that the Part 36 rules were complex.  However it was clear that the defendant’s solicitor had made every effort to explain the costs consequences to the claimant when the offer was made and subsequently throughout the litigation.  As the defendant’s solicitor had fully informed the claimant of the nature and costs consequences of accepting or rejecting the offer, the judge found that it was not unjust to make the normal order with regards to costs.

Consequently the judge ordered the claimant to pay the defendant’s costs incurred from 21 days after the offer was made up to acceptance, a period of about a year.  The judge also ordered the claimant to pay the defendant’s costs since acceptance which were incurred by dealing with the disputed costs issue.  In addition the judge ordered a payment on account of costs to the defendant of an amount equal to the net damages the defendant was due to pay the claimant together with a set off of those costs against the damages.  

This case is a reminder that when faced with a litigant in person it pays – literally – to make sure that they fully appreciate the risks and consequences of Part 36 offers.

Jasmine Murphy, instructed by Gordon Davidson, Hill Dickinson LLP Manchester.