High Court finds it would be unjust to award claimant Part 36 costs consequences due to reliance on late evidence

In a recent judgment, the High Court held that it would be unjust to award a claimant the beneficial costs consequences under CPR Part 36, because the claimant had introduced new evidence at a late stage in the proceedings which had made a significant difference to the value of the claim: Head (Executrix of the Estate of Michael Head, deceased) v The Culver Heating Co Limited [2021] EWHC 1235.

In this case, the damages award was higher than the claimant's Part 36 offer, which meant the court had to award the claimant the Part 36 costs consequences (including indemnity costs and enhanced interest on damages and costs) unless it would be unjust to do so. Under CPR 36.17(5) the court must take into account all of the relevant circumstances of the case, including certain factors listed in that rule, when determining whether it would be unjust to make a Part 36 order.

Ultimately, the court determined that it would be unjust to the defendant to make a Part 36 order given the claimant's reliance on evidence which was served late without good reason, and the impact of that evidence on the value of the claim.

The decision demonstrates that the list of matters to be considered under CPR 36.17(5) is not exhaustive and the court may take other circumstances into account when determining whether it is unjust to make a Part 36 order. It also shows that, in some circumstances, defendants may be able to argue that they should not be penalised for a failure to accept a Part 36 offer at a time when important evidence should have been, but was not, available.

Each case will however turn on its own facts, and it should not be assumed that a Part 36 order will be refused whenever late evidence is adduced, even where that evidence has made a significant difference to the value of a case.

Background

The original claimant, Michael Head, commenced proceedings against the defendant claiming that he had contracted mesothelioma as a result of his work for the defendant from 1974 to 1979. After his death in 2019, his wife was substituted as the claimant (as executrix of his estate). At first instance, the court determined that there was no financial loss during the period of time by which mesothelioma had shortened Mr Head's life (the "lost years claim"). The claimant successfully appealed against this finding and the lost years claim was remitted to the High Court for redetermination.

The lost years claim comprised Mr Head's notional earning capacity through his company, Essex Mechanical Services Limited. during the lost years (the claimant's case being that Mr Head would never have retired). During the remitted hearing, the claimant sought to rely on new evidence to support the claim that Mr Head would have continued working had he not contracted mesothelioma. The defendant argued that the evidence did not make any significant difference to the value of the claim, and said that there was no good reason why the evidence should not have been provided earlier, but did not object to the admission of the evidence.

A month before the Court of Appeal hearing, the claimant made a Part 36 offer to accept just under £2.25 million. The claimant was awarded over £2.6 million, and so the outcome of the litigation was more advantageous to the claimant than if the offer had been accepted.

The claimant therefore sought orders under CPR 36.17(4) for:

• interest at the rate of 10% above base rate for the entirety of the period since 21 days after the Part 36 offer was made;
• costs on the indemnity basis since that date;
• interest on costs at the rate of 10% above base rate; and
• an additional amount of £75,000.

Decision

The High Court (Mr Justice Johnson) determined that it would be unjust to award the Part 36 costs consequences.

In making this determination, the court considered the factors listed in CPR 36.17(5):

• the terms of the Part 36 offer;
• the stage in the proceeding when the Part 36 offer was made;
• the information available to the parties at the time the Part 36 offer was made;
• the conduct of the parties with regard to giving or refusal to give information to allow the Part 36 offer to be made or evaluated; and
• whether the offer was a genuine attempt to settle the proceedings.

While the court did not consider that making a Part 36 order would be unjust on the basis of the factors set out above, the list is not exhaustive and the court considered it necessary to take account of the claimant's reliance on the late evidence as to notional earning capacity when determining whether a Part 36 order would be unjust.

The court determined that the late evidence had had a significant impact on the value of the claim, to the benefit of the claimant. The evidence available to the court prior to the introduction of the late evidence would not have resulted in a key finding that had in fact been made with the benefit of the late evidence. When the defendant came to decide whether to accept the Part 36 offer, it would have been natural to assess whether the evidence available at that time supported that offer.

The defendant argued that, without the late evidence, the claimant would not have recovered more than the Part 36 offer and a Part 36 order would not have been available. The court said it was not necessary to make a finding as to the precise monetary difference that the new evidence had made. The claimant had "beaten" the Part 36 offer by a relatively small amount, and so any significant increase in the value of the claim was likely to have made all the difference.

The court noted that if the defendant had objected to the admission of the late evidence, the claimant would have required relief from sanctions (applying the Denton test, summarised here) for the failure to adduce it earlier. This was a serious or significant breach, there was no good reason for the delay in providing the evidence and, considering all the circumstances, the defendant was "prejudiced by the late introduction of the evidence because of the potential Part 36 consequences".

Accordingly, the court concluded, it would be "unjust to the defendant to allow the claimant to benefit from Part 36 orders that are only available because she was permitted to rely on evidence which was served late without good reason".

Note: The Court of Appeal has refused permission to appeal against this decision.