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Matthews v Metal Improvements Co Inc, Court of Appeal, 14 March 2007

22 March 2007
The issues

Costs – Part 36 – patient – whether it was unjust to make the usual Order against a Claimant, who was a patient, where the Claimant wished to take monies out of Court after the time for acceptance.

The facts

The Claimant was 62 at the time of the Appeal. In 2000 he had suffered an accident at work causing a minor head injury but which had developed into a Hysterical Conversion Order, now categorised as a Dissociative Disorder under ICD 10. As a consequence he was a patient within the meaning of CPR Part 21. He brought an action for damages against the Defendant’s employer. Primary liability was admitted subject to causation. The Claim Form was issued on the 6th March 2003 and Particulars served on 30th May 2003. The Claimant was diagnosed as suffering from a lymphoma unconnected with his accident or his psychiatric condition. The prognosis, initially, was that he had a 70% chance of a 10 year survival. The Schedule of Special Damages, including a future loss claim based on a normal life expectancy was served. A Part 36 payment was made by the Defendant which was not accepted within 21 days. Subsequently the medical evidence with regard to the lymphoma changed, such that the life expectancy was thought to be 7 years. As a consequence the Claimant’s solicitors reconsidered the Part 36 payment and advised the Claimant’s litigation friend to accept. The Defendant was willing to allow the payment to be accepted subject to costs. Approval of the settlement was received from the Court of Protection and an Application was made to the Deputy District Judge for approval of the settlement and permission to accept the monies in Court. The District Judge considered that the reasons for not accepting the payment initially were “proper and valid” although, subsequently, it had become appropriate to seek to accept the payment in. The Deputy District Judge concluded that it would not prejudice the Defendants if her discretion was exercised in favour of the Claimant in these circumstances and accordingly she ordered that the Claimant should have his costs.

The Defendant appealed.

The Court could only interfere with a Costs Order if an error of principle had been made. Secondly, the right of the Defendant or the Claimant to costs was not affected by the fact that the Claimant was a patient. In principle a Defendant in proceedings brought on behalf of a patient was entitled to the same costs protection from a Part 36 offer or payment as a Defendant against whom a claim is brought by a competent Claimant. The Deputy District Judge did not have an unfettered discretion. It was only if she could properly conclude that it was unjust to order the Claimant to pay costs that she could depart from the usual Order.
The Deputy District Judge seemed to answer the question as to whether it was unjust by considering whether it had been reasonable for the Claimant to have rejected the Part 36 payment when it was made and later to accept it. That consideration was not the same as whether it was unjust to make the usual Costs Order, although it was relevant to the question of whether the usual Costs Order should be made. She could not however have decided the question of unjustness sensibly by reference to the Claimant’s advisor’s assessment of the offer. She should also have had to consider the reasonableness of the Defendant’s assessment of the value of the claim but there was no such information before her. The advice prepared by the Claimant’s advisors for submission to the Court as to the adequacy of the Part 36 payment, for the purposes of the approval Hearing is not disclosed to the Defendant and the Defendant cannot be expected to comment on it or to criticise it. Equally the Defendant cannot be required to justify its own assessment of the value of the claim as at the date of the approval Hearing and should not be required to justify the assessment they made when they made the Part 36 payment.

The Deputy District Judge’s approach was based on a misunderstanding of the function of the Part 36 payment or offer. A Defendant might make a low payment in the hope that events or evidence would favour him. He might make a generous payment because he was reluctant to incur the risks and costs of going to Trial. There is nothing unreasonable in a competent Claimant rejecting a Part 36 payment in a hope that at Trial the Judge would take a generous view of his damages. The risks that the parties run are costs risks. The function of a Part 36 payment is to place the Claimant on that costs risk if, as a result of the contingencies of litigation, he fails to beat the payment.

The Deputy District Judge did not identify any fact that rendered it unjust to make the usual Order. There was nothing to justify depriving the Defendant of the protection against costs conferred by their Part 36 payment. Moreover she wrongly identified the question of whether it was unjust to make the usual Order with a question of whether the Claimant’s advisors had acted reasonably. She had made her Costs Order on an incorrect basis and the Court was therefore free to substitute its own decision.

Neither party had submitted that the other had acted unreasonably. The events had justified the Defendant’s assessment of the total value of the claim and had falsified the Claimant’s assessment. Changes in circumstance between the date of a Part 36 payment and Trial are contingencies inherent in litigation and cannot of themselves normally justify a conclusion that the Defendant should be deprived for the benefit of his payment. There was therefore no reason to depart from the normal Rule.

Appeal allowed and an Order made that the Defendant pay the Claimant’s costs of the claim until the date of the Part 36 payment and the costs of the approval Hearing, but that the Claimant pay the Defendant’s costs incurred after the last date for acceptance other than the costs of the approval Hearing.

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