Case No: B3/2008/2495

Neutral Citation Number: [2009] EWCA Civ 775
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE CENTRAL LONDON COUNTY COURT
(HIS HONOUR JUDGE BAILEY)

Royal Courts of Justice
Strand, London, WC2A 2LL

Date: Wednesday, 10th June 2009

Before:

LORD JUSTICE CARNWATH 
LORD JUSTICE TOULSON
and
LORD JUSTICE GOLDRING
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Between:

	ONAY	Appellant
	
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BROWN	
Respondent	

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(DAR Transcript of 
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Mr O’Sullivan (instructed by Bearsells) appeared on behalf of the Appellant.
Mr A Davis (instructed by Berrymans) appeared on behalf of the Respondent.
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Judgment
Lord Justice Goldring:

Introduction  
1.	This appeal relates to the decision of HHJ Bailey sitting at Central London County Court on 29 September 2008.  The claim was for damages as a result of injury sustained by the claimant, who is the appellant in this appeal, in a road traffic accident which occurred on 7 March 2006.  On 3 September 2007 the defendants admitted liability.  On 4 February 2008, by consent, judgment was entered for the claimant “with damages and the issue of contributory negligence, if any, to be assessed”.

2.	The sole remaining issue on liability concerned contributory negligence therefore.  Shortly before the hearing the parties agreed a figure of 25 per cent in respect of that negligence.  There was an argument about costs.  The judge ordered that the claimant pay the defendant’s costs on that issue.  It is that order which the claimant appeals.

The background  
3.	The claimant was riding his motorcycle.  The defendant was driving his motor car in the opposite direction.  He turned right across the claimant’s path.  The vehicles collided.  The claimant was seriously injured.  The claimant issued proceedings on 25 June 2007.  By the defence it was admitted that the defendant was in breach of his duty of care by driving across the claimant’s path.  Contributory negligence was alleged.  It was said that the claimant was travelling significantly faster than the speed limit.  Had he been travelling at the speed limit of 30 miles per hour and keeping a proper lookout, he would have been able to stop before colliding with the defendant’s motorcar.  It was more likely than not, it was suggested, that he could have avoided a collision had he been travelling at 40 miles per hour. He failed, it was said, to heed the defendant’s indication.

4.	On 8 October 2007 the claimant’s solicitors applied for an order that the issue of liability be tried before that of quantum.  On 4 February 2008 Deputy District Judge Hood ordered that judgment be entered for the claimant in the terms to which I have already referred.  It was subsequently ordered that the trial on the issue of contributory negligence be listed during a trial window from 8 September 2008 to 31 October; it was ultimately fixed for 29 September 2008.  Witness statements were exchanged.  Each party relied upon the evidence of an expert: Mr Darbyshire on behalf of the claimant; Mr Manderson on behalf of the defendant. They produced on 17 September 2008 a joint statement.

5.	On 4 September 2007 the defendant made an offer to settle the issues of liability.  In a letter of that date headed “Part 36 offer” it is said:

“Our client offers to settle the issues of liability on the basis of a two thirds one third apportionment in your client’s favour.  If accepted, your client will receive two thirds of damages to be assessed by the court.  

“This offer is open for acceptance for a period of 21 days from the date of receipt of this letter namely to 27.09.07.”

On 5 September 2008 the claimant made a part 36 offer.  By it:

“The Claimant offers to apportion liability 90% - 10 % in his favour i.e. a finding of 10% contributory negligence.”

On the same date the defendant made a second offer. The letter was headed Part 36 offer and was in the following terms:

“Our client offers to settle the issue of contributory negligence on the basis of a 25% deduction.  In other words, if the offer is accepted, your client will receive 75% of his assessed damages. 

“This offer is made pursuant to part 36 of the Civil Procedure Rules and is intended to have the consequences of that rule. 

“The relevant acceptance period is 21 days from the date of receipt of this letter, namely to the 26th September 2008. 

“In the event that your client elects to proceed to trial and our client establishes liability at or in excess of 25% our client shall seek indemnity costs and interest.”

On 9 September 2008 the claimant made a second part 36 offer in the following terms:

“Pursuant to CPR Part 36 the Claimant offers an apportionment of liability 85% - 15% in his favour (i.e. a finding of 15% contributory negligence). This offer is intended to have the consequences set out in CPR Part 36.”

The preparations for trial continued.

6.	On 12 September 2008 the claimant’s solicitors wrote a letter in the following terms to the defendant:
“We refer to our discussion with Mr Cato on the 11th September and confirm that the claimant offers to apportion liability 80/20 in his favour (i.e. a finding of contributory negligence of 20%). 

“We look forward to hearing from you when you have taken instructions from your insurer client.”

7.	On 12 September 2008 the defendant’s solicitors wrote to the claimants pointing out what they suggested was a fallacy in the expert report of Mr Derbyshire, the claimant’s expert.  They suggested that the claimant must have been riding at a speed greater than 41 miles per hour, that no realistic challenge could be made to the opinion of the defendant’s expert, Mr Manderson, to the effect that the likely speed was between 52 and 55 miles per hour.  The letter finished with the following observation:

“We would invite your client to reconsider his position before the costs of trial and its preparation are incurred.”

8.	On 22 September 2008 the claimant’s solicitors acknowledged receipt of the defendant’s offer letter.  They go on to say:

“The Claimant accepts your offer to apportion liability 75/25 in his favour. We enclose a draft consent order which will vacate the trial date and allow the parties some time to gather quantum evidence. If these terms are agreed would you please sign and return the order and we shall file it at court. 

“We look forward to hearing from you.”

The proposed consent order was in the following terms:

“1.  Judgment be entered for the Claimant for 75% of damages to be assessed and costs. 

“2.  The hearing listed for Monday 29th September 2008 be vacated 

“3.  There shall be a case management conference to be held on the first available date after 2nd February 2009.”

9.	On 22 September the defendant’s solicitors responded in the following terms:

“We thank you for your letter dated 22.9.08 accepting our client’s Part 36 offer dated 5.9.08 as to contributory negligence on the part of your client to the extent of 25%. Accordingly, Judgment should be entered for your client for 75% of an amount to be assessed by the Court. 

“There remains to be determined the issue of costs of the issue of contributory negligence pursuant to CPR 36.11(3)(b) unless the parties are able to agree terms in relation thereto. 

“In the absence of agreement, submissions as to costs will need to be made at the hearing on 29.9.08. 

“Our client seeks his costs of the issue of contributory negligence upon which he has succeeded pursuant to Devon County Council v Clark, bearing in mind that primary liability was admitted with Judgment entered on that basis and that your client denied negligence.”

10.	Also on 22 September 2008 in a without prejudice letter, save as to costs, the defendants offered:
“… To settle the whole of your client’s claim by way of a gross compensation payment of £85,000 together with payment of your client’s reasonable costs of all issues of his claim to be assessed having regard to the factors of CPR 44.5 [I omit immaterial words] … This offer is open for acceptance until 2pm on Friday 26 September 2008.”

The judge’s decision  
11.	The judge had to decide which party should pay the costs.  He observed that, although made complicated by counsel, it was in his view a straightforward matter.  I need not deal with some of the aspects with which he had to deal, in particular disclosure and other issues which were raised; they are no longer relevant.

12.	The judge set out the history of the different offers and counter-offers.  In paragraph 9 of his judgment he said this:
“9.  It is a fact -- disappointing in the circumstances and certainly something that has led to today’s argument -- that the offer made by the defendant to settle at 25% said nothing about costs.  The claimant’s acceptance also said nothing about costs.  It is the claimant’s contention that they are entitled to assume that the defendant’s offer carried costs, ie the defendant paying the claimant’s costs.  Well, the difficulty is that the defendant, although the defendant in the action, was in fact the claimant in this single issue.  It would certainly have been better had the defendant spelt out that the 25% offer was to carry costs, ie the claimant paying the defendant’s costs.  I am bound to say that there is a temptation to impose some penalty on the defendant for not having spelt out the costs aspect of his offer.  Having said that, it would be wrong to do so given that the claimant’s solicitors did not tackle the issue of costs head on in their letter of 22nd September 2008 accepting the offer.  From the perspective of a claimant in an issue, one would not expect to be paying the costs of the defendant to that issue if making an offer to settle your claim which up until that stage has been entirely rejected.  In these circumstances I cannot accept that there is an implied offer to pay the claimant’s costs of the issue of contributory negligence in the defendant’s offer.

10.  I should say at this point that I was referred to the case of Summit Property Ltd. v Pitmans by Ms Truscott for the claimant.  I should make it clear that I do not see that there is any assistance to be gained from this or similar authorities.  The Summit case was concerned with the vexed issue of a multi-issue trial where the claimant wins on some issues and loses on others.  The court is often faced with very difficult questions when dealing with costs in such circumstances, and there are occasions where the court considers it appropriate to make orders for costs that are issue-based.  Here there was simply one issue, one piece of litigation, as it were, and it is a piece of litigation which the defendant has won.  In the circumstances, I consider that the appropriate order for costs is that the costs of and occasioned by this issue should be paid by the claimant to the defendant.

11.  However, I should make one further specific order for costs.  Although the failure to disclose these documents was inadvertent, that is inadvertent on the part of the defendant’s lawyers, it certainly was the failure of the defendant’s side.  Had they disclosed the documents that they should have disclosed by 8th February 2008, it seems to me pretty clear that Mr Darbyshire would have only produced one report.  I consider the appropriate further order for costs then is that the defendant should pay the claimant’s costs of Mr Darbyshire’s second report.”

The relevant provisions 
13.	CPR 36.1 provides under the broad heading scope of this part as follows:

“36.1 (1) This part contains rules about - a) offers to settle and b) the consequences where an offer to settle is made in accordance with this part. 

“(2) Nothing in this part prevents a party making an offer to settle in whatever way he chooses but if the offer is not made in accordance with rule 36.2 it will not have the consequences specified in rules 36.10, 36.11 and 36.14.”

36.2 provides as follows:

“(1) an offer to settle which is made in accordance with this rule is called a part 36 offer 

(2) a part 36 offer must a) be in writing, b) state on its face that it is intended to have the consequences of part 36, c) specify a period of not less than 21 days within which the defendant will be liable for the claimant’s costs in accordance with rule 36.10 if the offer is accepted, d) state whether it relates to the whole of the claim or to part of it or to an issue that arises in it and if so to which part or issue and e) state whether it takes into account any counter claim.”

Sub-part 3 provides:

“Rule 36.2(2)(c) does not apply if the offer is made less than 21 days before the start of the trial.”

Sub-paragraph 5 provides:

“An offeror may make a part 36 offer solely in relation to liability.”

36.10, under the heading “Costs, consequences of acceptance of a part 36 offer”, provides:
“(1) Subject to paragraph 2 and paragraph 4(a) where a part 36 offer is accepted within the relevant period the claimant will be entitled to the costs of the proceedings up to the date on which notice of acceptance was served on the offeror 

(2) where a) a defendant’s part 36 offer relates to part only of the claim and b) at the term of serving notice of acceptance within the relevant period the claimant abandons the balance of the claim the claimant will be entitled to the costs of the proceedings up to the date of serving notice of acceptance unless the court orders otherwise. 

(3) costs under paragraphs 1 and 2 of this rule will be assessed on the standard basis if the amount of costs is not agreed.”

Sub-paragraph 4 provides:

“Where a) a part 36 offer that was made less than 21 days before the start of trial is accepted or b) a part 36 offer is accepted after expiry of the relevant period if the parties do not agree the liability for costs the court will make an order as to costs.”

Under the heading “the effects of acceptance of a part 36 offer” 36.11 provides:
“(1) If a part 36 offer is accepted the claim will be stayed 

(2) In the case of acceptance of a part 36 offer which relates to the whole claim the stay will be upon the terms of the offer 

(3) if a part 36 offer which relates to part only of the claim is accepted a) the claim will be stayed as to that part upon the terms of the offer and b) subject to rule 36.10(2) unless the parties have agreed costs the liability for costs shall be decided by the court.”

Finally CPR 44.3, under the heading “court’s discretion and circumstances to be taken into account when exercising its discretion as to costs”, provides in sub-paragraph 1:

“The court has discretion as to a) where the costs are payable by one party to another, b) the amount of those costs and when they are to be paid 

(2) if the court decides to make an order about costs a) the general rule is that the unsuccessful party will be ordered to pay the costs of the successful party but b) the court may make a different order.”

The argument 

14.	Mr O’Sullivan, on behalf of the appellant, firstly submits that in the letter of 5 September 2008 the defendant made a valid part 36 offer to which the consequences at 36.10(1) applied.  The judge made no findings regarding the part 36 argument.  As will become apparent and for reasons which I shall come to, I agree with Mr O’Sullivan’s broad submission on part 36.

15.	Secondly, Mr O’Sullivan submits that if the letter of 5 September did not amount to a part 36 offer to which 36.10(1) applied because it did not:
“specify a period of not less than 21 days within which the defendant would be liable for the claimant’s costs in accordance with 36.10 if the offer is not accepted.”

The judge was wrong in the exercise of the discretion he would then undoubtedly have regarding any order for costs.  Mr O’Sullivan submits that the judge erred in the very wide discretion then given to him.  He submits that it was exercised perversely, it was wrong in principle for the judge to consider contributory negligence as a wholly separate issue from primary liability; they were part and parcel of the same issue arising from the same set of facts.

16.	The fact, he submits, that a defendant admits a breach of a duty that alleges contributory negligence does not mean that a trial of the issue of contributory negligence is materially different to a trial where the court is considering the liability of both drivers.  The issues of blameworthiness and causation are the same, the admitted breach of duty by the defendant merely removes one factor from ultimate determination; it does not remove issues relating to the defendant’s negligence and the causative relevance of it.  Contributory negligence will inevitably be intertwined with the defendant’s liability for the accident.  The court would have to apportion responsibility for the accident between him and the defendant.

17.	Mr O’Sullivan further submits that the judge failed to take into account that the defendant made no concessions as to an appropriate extent of his responsibility until 5 September 2008.  He submits that the claimant was the “successful party” in terms of CPR 44.3.  Further, submits Mr O’Sullivan on the basis of the decision that the judge took on this issue, had the trial taken place and the apportionment been 75/25 per cent in the claimant’s favour the claimant would not have obtained his costs on the issue of contributory negligence.  That is not, he submits, the usual approach taken by judges in road traffic cases trying split trials where primary liability and contributory negligence are in issue or where only contributory negligence is in issue.

18.	Mr O’Sullivan refers the court to the case of Fleming v Chief Constable of Sussex Police Force [2004] EWCA 643.  It is unnecessary to refer to the very different facts of that case, however, in the course of giving his judgment, with which Mance and Jacob LJJ agreed,  Potter LJ said this at paragraph 25:
“[immaterial words omitted] … the starting point is still an order for costs in favour of the successful party: see CPR 44.3(2).  Put more generally, the successful party is the party who has really won at trial, by establishing the essentials of his case and his rights to a particular remedy or remedies sought, the time spent on the issues being broadly that reasonably necessary for the exploration and determination of the dispute.”

19.	Mr Davis, on behalf of the respondent, submits that it was largely irrelevant that the judge made no explicit finding in respect of part 36.  First, he submits that there was no part 36.2(2) offer. The letter of 5 September said nothing about costs.  Any reasonable and competent solicitor reading it would he submits have realised that no offer in respect of costs was being made by the defendant.  He would realise that his client, the claimant in this context, would have to pay the costs after accepting the offer within 21 days.

20.	Secondly, Mr Davis submits that this offer related to “part only of the claim”.  He points out that, under CPR 36.10(2)(a) and (b), where the defendant’s offer relates to part only of the claim and at the time of serving notice of acceptance, the claimant abandons the balance of the claim and the claimant’s entitlement to costs under 36.10(1) does not apply.  The appropriate provision in this case, he submits, is CPR 36.11(3).

21.	The part 36 offer which was accepted only related to part of the claim, namely liability.  It only related to liability in respect of contributory negligence.  The court, he submits, therefore had unlimited discretion as to the appropriate order in accordance with CPR 36.11(3)(b).  

22.	Thirdly, and in any event, Mr Davis submits the judge’s discretion was very wide.  He had the benefit of full argument, he had all the papers, the judgment was properly reasoned, the decision was well within the ambit of his discretion, it was fair on the facts of the case and that is sufficient to dismiss the appeal.

23.	In the proceedings as they remained the defendant had to prove causative negligence in respect of the alleged contributory negligence.  That was the only burden, submits Mr Davis, upon him where primary liability was admitted and judgment had been entered.  It was abundantly clear, he submits, that that was the only live remaining issue and upon it the respondent succeeded.  In the circumstances he was therefore the successful party.

24.	The claimant’s positive case that he was not guilty of any contributory negligence failed.  He was not therefore the winner on that issue, a reality which the judge recognised.

25.	Mr Davis further submits that the judge considered the conduct of all the parties.  The claimant was seeking to run what was, as he submits, a hopeless case on contributory negligence; he purported to remember that which he originally said he could not; his expert evidence was unconvincing.  In short the costs order was a fair apportionment on the facts of the particular case.

26.	Finally he submits that if the appellant is right it would be impossible for a defendant in a single issue trial such as this to protect himself in costs.

My conclusion  
27.	The defendant’s letter of 5 September 2008.  As was pointed out by my Lord, Toulson LJ in the course of argument, the reference to the relevant (my emphasis) acceptance period of 21 days plainly pointed to CPR 36.2.  Mr Davis accepted as much.  Any reasonable solicitor reading the letter would in my judgment conclude that the writer’s intention was that part 36.2(c) was to apply, in other words that if within 21 days the offer was accepted:

“The defendant will be liable for the claimant’s costs in accordance with rule 36.10.”

28.	I do not accept Mr Davis’s contentions to the contrary.  Neither do I accept that the appropriate provision under part 36 was part 36.11(3) but the offer related to part only of a claim.  Part 36.2(5) specifically contemplates that a part 36 offer may be made solely in relation to liability.  That must be intended to relate to a part 36.2 offer.  It would be inconsistent therefore to regard an offer solely in relation to liability as an offer in respect of part of a claim whether in accordance with 36.10(2) or 36.11(3).  This letter, in my judgment, amounted to an offer solely in relation to liability.  It fell within 36.2(5), but that the context was contributory negligence does not seem to me to affect that.  It therefore seems to me that the letter of 5 September 2008 was, and was objectively intended to be, a part 36.2 offer, and that the entitlement to costs accordingly arose under 36.10(1).

The exercise of the judge’s discretion 
29.	Although that would be sufficient to dispose of the appeal, I shall briefly turn to the judge’s exercise of his discretion.  As it seems to me, on proper analysis, the following is the position: 

1) In accordance with CPR 44.3(2)(a) and (b) the general rule is that the unsuccessful party will pay the costs although the judge may make a different order.  As to which is the successful party, Potter LJ summarised it in paragraph 35 in Fleming, as I have already indicated.  The question is therefore: who really won? 

2) The judge has a very wide discretion concerning costs. It is only if his order was outside that wide area, plainly wrong or perverse, that this court should interfere.  

3) In making his order for costs and deciding which was the successful party it was necessary for the judge to have regard to the underlying realities of the position.  

4) They seem to me to have been these: the defendant admitted in the defence that he was in breach of his duty of care to the claimant that he had been negligent.  Paragraph 5 of the defence put it in this way:
“The matters complained of were caused by or contributed to by the claimant’s own negligence.”

Submitting to judgment he admitted not only a breach of duty but that he caused some of the claimant’s damage.  He did not, however, admit the extent of the damage he caused.  That could have been anywhere between 10 and 90 per cent.  That was to be decided by the trial which it was anticipated would take place.  In that trial the judge would have had to assess the relative blameworthiness of both parties, as Mr O’Sullivan rightly submits.  In other words he would have had substantially to decide how the accident happened.  I do not accept that such an exercise would be the simple one suggested by Mr Davis.  The costs incurred in such an exercise would relate to the resolution of that dispute.  That was the real issue in the trial on contributory negligence which the Deputy District Judge ordered.  

5) The relative blameworthiness of the parties was compromised by the settlement between them at 75 per cent to 25 per cent.  That might or might not have been the outcome of the trial.  In the light of such an apportionment of blameworthiness, whether as a result of settlement or trial, it seems to me wholly artificial to describe the claimant as other than the winner, applying the approach of Potter LJ in Fleming to which I have referred.  

6) Mr Davis is right when he says the claimant did not accept any negligence at all.  However, as it seems to me, the position in reality was this: it was the claimant who was injured and suffered damage, he had to bring proceedings to be compensated, it was reasonable for him to pursue those proceedings until he received a reasonable offer from the defendant.  He did not until 5 September 2008.  He then had 21 days in which to accept it.  If he did not and was found 25 per cent or more to blame he would lose his costs from the date of the offer.  If he was not, then the defendant would obtain his costs.

7) I do not think that detailed consideration of the rights and wrongs of the claimant’s case in that litigation in the circumstances help. 

8) In short it seems to me artificial to consider the proceedings in the narrow way in which the judge did.  If he had had regard to the underlying realities he would in my view have been bound to come to a different conclusion in the exercise of his discretion.

9) As to the respondent’s complaint that such an outcome means a defendant could not protect himself, I do not accept it.  He can by making a sensible and early part 36 offer.

30.	I would therefore allow this appeal both on the basis of the part 36 offer and of a flawed exercise by the judge of his discretion.

Lord Justice Toulson: 

31.	I agree.

Lord Justice Carnwath:

32.	I also agree.  The moral of this story is that someone who writes a letter headed “part 36 offer”, and which is stated as “intended to have the consequence of that rule”, should make sure that he knows what those consequences are.  I agree with my Lord that those consequences in a case such as this are clearly set out in 36.2(2) and 36.10(1).  If the party writing the letter does not want those consequences to apply, he should put his offer in some other way, as is expressly permitted by rule 36.2.

33.	The judge was deflected from that simple approach by the consideration that the offer said nothing about costs, and also he was concerned that by the time of the hearing the roles of defendant and claimant had to some extent been reversed.  He may also have been influenced by a certain ambiguity in the claimant’s arguments (also reflected in the skeleton before this court), as to whether their primary case was that this was not a valid part 36 offer at all, or that it was a valid part 36 offer with the consequences defined by the rules. .However that may be, it seems to me important, in the interests of certainty, that, when the part 36 jurisdiction is expressly invoked, the court should generally take that as face value, and as far as possible give effect to the consequences as envisaged by the rules. I agree that this appeal must be allowed.

Order: Appeal allowed