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French v Groupama Insurance Company Ltd, Court of Appeal, 11 October 2011

20 October 2011
The issues

Costs – Part 36 offers – Calderbank offers – Stokes Pension Fund Trustees v Western Power Distribution (South West) Plc.

The facts

The claimant brought a claim for breach of a contract with Groupama Insurance Company Limited allegedly made in December 2002 for the reinstatement of her home following subsidence. The claim was defended and Groupama counterclaimed.

For much of the period prior to issue of proceedings the claimant acted as a litigant in person, but instructed solicitors for the purposes of the litigation itself. At trial the judge gave judgment in her favour in the sum of £126,963.53. In addition, he calculated interest of £5,283.88 before considering costs. Groupama relied on an offer of £115,000 to cover the entirety of the claim, inclusive of interest and costs, made several years before she had commenced her proceedings. The judge regarded that offer as having been worth more than Mrs French had recovered at the end of the day. This was based on an allowance made for the additional damages that she had continued to suffer in the time that had elapsed between Groupama’s offer and the trial. Groupama calculated that she would have been some £30,000 better off if she had accepted the offer and proceeded to reinstate her home for herself.

There was a dispute as to the status of the offer. There had been two letters that were relevant. The judge found that both were open letters. He found that the first did not come within the rule in Stokes, but that the second did. He therefore accorded it the same effect as a payment into court and ordered that the claimant should recover no costs, but pay the whole of Groupama’s costs. The two letters were dated 22 December 2006 and 15 February 2007. The first letter followed a mediation between the parties which had been held without prejudice. The letter confirmed the offer of £115,000 which had been made at that mediation. The second letter, dated 15 February 2007, again confirmed a final offer of a payment of £115,000 made “without prejudice to the company’s legal position or its rights” and offered in full and final settlement. It was stated as being available for acceptance for a period of 21 days only, expiring at 4pm on the 8 March 2007.

The decision

What was the status of the offers?
The judge had been entitled to see the letters. He had been wrong to described the letters as “open”. Whether they were or whether they were not, the parties had subsequently agreed between the solicitors that they had been privileged and the judge had not been entitled to go behind that agreement.

The status of the letters was that:

  • they were agreed to be privileged when written
  • they were not privileged save as to costs when written and were therefore not of Calderbank status
  • they became admissible in relation to costs only after judgment in October 2010
  • the offer repeated in the letter of February 2007 was time limited
  • at the period during which the offer was available to the claimant, she was relying on other claims of personal injury and of loss of employment which she was time barred from presenting and in any event she did not present when she commenced the litigation so that it was difficult to compare the offer made at the time when it was made and available for acceptance and the offer at the time when it was agreed that the privilege could be waived and the letters could be referred to
  • the letters were written and received by the claimant when she was acting as a litigant in person. In addition, costs had been included in the officer, and it could not be a Part 36 offer for that reason alone.

Did Stokes apply?
On of the issues in Stokes was whether it had made any difference that the offer had been subsequently withdrawn. The court in Stokes held that it did not. Stokes had been decided under the old Part 36. The question was not merely whether the withdrawn offer be taken into account, but whether the Part 36 consequences should ordinarily flow where a Part 36 offer had been withdrawn. That question became all the more insistent where the offer was only a quasi Part 36 offer. It seemed to the court that, particularly under the new regime, it had become hard to ignore the rules which states that the Part 36 consequences ‘do not apply’ to even a Part 36 offer that has been withdrawn. If a mechanistic rule that an offer which beat the judgment should result in all costs being switched to the offeree was to make sense, there needed to be sufficient formality about the making and maintenance of the offer. That formality was provided by the rules and it was not obvious to see why the mechanistic rule should prima facie survive when the formalities were not observed. In the new rules there was a new determination to specify carefully what did or did not count as a Part 36 offer with Part 36 consequences. All other admissible offers were relevant to the Part 44 discretion, but they did not carry with them the costs consequences of Part 36. It was harder to formulate a principled approach to the Part 44 discretion that some offers that were not Part 36 offers should nevertheless in certain circumstances be treated as thought they were Part 36 offers for the purposes of applying Part 36 consequences under Part 44. The court noted that Stokes had currently dropped out of the notes in the White Book under Part 36. It might be that Stokes should be regarded now as dealing primarily with the specific problem of the absence of a Part 36 payment in a context where that was a formal requirement which in certain circumstances added nothing to the value of the offer.

It therefore fell to the court to apply its discretion anew, pursuant to its general discretion under Part 44 and untrammelled by Stokes or the judge’s views.

The relevant matters were:
The offer came from an insurance company after a mediation and in the light of the advice of a QC and was clearly intended to be treated seriously and could be regarded as genuine. It could be relied on and Groupama could be relied on to pay it if it had been accepted.

Secondly, it had been worth more than the claimant had received from the judgment of the court. Therefore, on the basis that the claimant’s other claims which had not been advanced in the proceedings added nothing to her claim, the claimant could have avoided all the costs of the litigation if she had accepted the offer when it was made and in that sense the litigation had proved to be unnecessary.

Thirdly, the claimant’s reasons for advancing the offer were not good ones. She had been unrealistic about the extent of Groupama’s liability.

Fourthly, although the offers appear to have been made as privileged, although in light of the parties subsequent agreement the court had not had to decide that issue, the claimant had approached the litigation on the initial basis that they had been open.

On the other hand, the claimant had been a litigant in person. Although that might not always assist a litigant to a great degree, there were other aspects of the offer which made her lay status particularly relevant. The offer had been time limited. That contrasted with the current view of the amended Part 36 that a Part 36 offer must not be time limited.

Thirdly, the offer had not been expressed to be a Part 36 offer or to have been expressly stated to be privileged “save as to costs”.

Fourthly, the offer had expired long before the agreement between the solicitors had made it admissible, but only after judgment in October 2010.

Fifthly, because it was made to cover claims which had not been advanced by the claimant when she began proceedings and because it covered her costs, the value of the offer was hard to evaluate as the proceedings developed.

Sixthly, Groupama could have served a formal Part 36 offer at any time after the claimant had begun proceedings, which would have removed most of these difficulties.

Seventhly, the particulars of claim were straightforward, Groupama’s defence and counterclaim (21 pages plus 50 pages of appendices) had complicated the litigation and had led to a 6 day trial.

Eighthly, the claimant had won these arguments at trial.

In all these circumstances, the judge was wrong to say that the claimant should pay all of Groupama’s costs. The fair result was that there should be no order as to costs other than that the claimant should have her costs down to 21 days after the making of the February offer.

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The content on this page is provided for the purposes of general interest and information. It contains only brief summaries of aspects of the subject matter and does not provide comprehensive statements of the law. It does not constitute legal advice and does not provide a substitute for it.

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