Offers to settle: HRA damages claims and CPR Part 36 – Part II

Costs consequences of a Pt 36 offer

 

In Part I of this series (https://dbfamilylaw.wordpress.com/2017/03/20/offers-to-settle-hra-damages-claims-and-cpr-part-36-part-i/) the background to making offers to settle claims in civil proceedings, especially in HRA damages claims under HRA 1998 s 8. This article explains the consequences of offers being made, first on costs where an offer is accepted and secondly where a case goes to trial and the court makes an order which is more or less ‘advantageous’ to one or other party relative to the offer made by him or her in Pt 36 correspondence. Finally the importance of attempts to settle and of mediation will be touched upon.

 

Deemed costs awards; acceptance of an offer

 

The emphasis of Pt 36 is very much upon provision for costs being deemed as a result of offers being accepted or offers being beaten by parties – claimant or defendant – so that costs orders can be taken as read. Issues for the courts to resolve as to how costs should be awarded are kept to a minimum. Prescribed or deemed orders rule the scheme.

 

CPR 1998 rr 36.13(1) and 44.9(1)(b) ‘deems’ orders for the claimant’s costs to have been made on acceptance by either party of a Pt 36 offer within the relevant period. Thus:

 

44.9 Cases where costs orders deemed to have been made

(1) … where a right to costs arises under – (b) rule 36.13(1) or (2) (claimant’s entitlement to costs where a Part 36 offer is accepted);… a costs order will be deemed to have been made on the standard basis.

 

An order for costs is treated as having been made if an offer is accepted and acceptance is within the ‘relevant period’ (ie not less than 21 days or up to the termination of the trial if an offer is made less than 21 days before trial (r 36.3(g) or 36.5(1)(c))). After the ‘relevant period’ a respondent to the offer is liable for costs. Costs can include pre-proceedings costs (r 36.13(1)). (Slightly different rules apply where the offer is in respect of only part of a claim (r 36.13(3) and (4)(c); but that is unlikely to affect the main types of claim under consideration here.)

 

The rules encourage early attempts to settle. Different rules apply where an offer to settle is made less than 21 days before trial (r 36.13(4)(a)) or where it is not accepted within the ‘relevant period’ (r 36.13(4)(b)). That represents one of the instances where the court may become involved in determining costs issues if parties cannot reach agreement: r 36.13(4) concludes that ‘liability for costs must be determined by the court unless the parties’ can reach agreement.

 

Deemed costs – unless ‘unjust’

 

If an offer is made less than 21 days before the start of a trial, or is accepted outside the relevant period then – unless the parties can agree – the court will decide the costs order (r 36.13(4)). Subject to this, the deemed orders give the claimant costs up to the end of the relevant period, and the offeree (claimant or defendant) costs from expiry of the relevant period (r 36.13(5)) on the following bases, subject to the overriding check that the court can be asked to find such an order ‘unjust’. What is ‘unjust’ (within the terms of r 36.13(5)) is measured by the factors in r 36.17(5): that is all the circumstances of the case and the following inclusive list:

 

(5) … the court must take into account all the circumstances of the case including—

(a) the terms of any Part 36 offer;

(b) the stage in the proceedings when any Part 36 offer was made, including in particular how long before the trial started the offer was made;

(c) the information available to the parties at the time when the Part 36 offer was made;

(d) the conduct of the parties with regard to the giving of or refusal to give information for the purposes of enabling the offer to be made or evaluated; and

(e) whether the offer was a genuine attempt to settle the proceedings.

 

Judgment ‘more advantageous’

 

The scheme under r 36.17 (costs consequences following judgment), as for all of Pt 36, is to provide for costs which is designed to cater for Pt 36 offers both by claimants and defendants, and to provide a composite rule for both. In either case it depends on the judgment made at trial. If a claimant beats his/her offer, the defendant must pay costs, interest and other payments as set out in r 36.17(4) (below): that is to say, where a claimant’s judgment is ‘at least as advantageous’ (or better) than a defendant’s Pt 36 offer (36.17(1)(b)). In the case of a defendant, a claimant must pay the defendant’s costs in accordance with r 36.17(3) if s/he does not beat the defendants Pt 36 offer (r 3617(1)(a).

 

The terminology used in r 36.17(1) is that the Pt 36 is more ‘advantageous’, so if the offer is no monetary this may have to be taken into account in assessment of how the dice fall under r 36.17(1). Rule 36.17(2) elaborates a little: ‘in relation to any money claim or money element of a claim, “more advantageous” means better in money terms by any amount, however small, and “at least as advantageous” shall be construed accordingly’, but perhaps only deals with the more obvious – ie monetary – aspect of r 36.17(1).

 

(1)        Claimant’s costs

 

The consequences for a claimant who beats a defendants off is intended to reflect that the claimant is regarded, by the rule-makers, as at a disadvantage (as against the pre-CPR rules where there was no requirement on a plaintiff to make an offer to settle). The costs order for the claimant is as follows:

 

(4) Subject to paragraph (7) [ie if the offer is withdrawn or changed adversely], where paragraph (1)(b) applies, the court must, unless it considers it unjust to do so, order that the claimant is entitled to—

(a) interest on the whole or part of any sum of money (excluding interest) awarded, at a rate not exceeding 10% above base rate for some or all of the period starting with the date on which the relevant period expired;

(b) costs (including any recoverable pre-action costs) on the indemnity basis from the date on which the relevant period expired;

(c) interest on those costs at a rate not exceeding 10% above base rate; and

(d) provided that the case has been decided and there has not been a previous order under this sub-paragraph, an additional amount, which shall not exceed £75,000, calculated by applying the prescribed percentage set out below to an amount which is—

(i) the sum awarded to the claimant by the court; or

(ii) where there is no monetary award, the sum awarded to the claimant by the court in respect of costs—

Amount awarded by the court Prescribed percentage
Up to £500,000 10% of the amount awarded
Above £500,000 10% of the first £500,000 and (subject to the limit of £75,000) 5% of any amount above that figure.

 

Costs payable on the indemnity basis under r 36.17(4)(b) are intended to stigmatise the defendant. It is merely part of the Pt 36 scheme to encourage settlement (McPhilemy v Times Newspapers Ltd & Ors [2001] EWCA Civ 933, [2002] WLR 934).

 

(2)        Defendants costs

 

Where costs are due to a defendant then, unless the court considers a payment ‘unjust’ (r 36.17(3)), the court must award:

 

(a) costs (including any recoverable pre-action costs) from the date on which the relevant period expired; and

(b) interest on those costs.

 

In either case the court can override the automatic awards because it considers their award to be unjust, and on the basis set out (see above) in r 13.17(5).

 

Mediation

 

In SW & TW (Human Rights Claim: Procedure) (No.1) [2017] EWHC 450 (Fam), Cobb J (at [3](x)) stressed the dangers that in HRA damages litigation, costs can quickly dwarf the damages which can be claimed. The same point was made by the Court of Appeal in Anufrijeva and anor v Southwark London Borough Council [2003] EWCA Civ, [2004] 1 FLR 8. Cobb J urged mediation (and see Cowl & Ors v Plymouth City Council [2001] EWCA Civ 1935, [2002] Fam Law 265 for use of mediation in administrative law cases).

 

An offer in mediation cannot be a Pt 36 offer: it must be confirmed in writing using the formalities in r 36.5(1); though a written offer, not in r 36.5 terms can, be taken into account by the court in the exercise of its discretion where written in Calderbank terms (CPR 1998 r 44.2(4)(c); Calderbank v Calderbank [1976] Fam 93, [1975] 3 WLR 586, CA: letter written ‘without prejudice save as to costs’).

 

Failure to engage in mediation or to respond to a request to mediate may be amongst the factors under r 36.17(5) which could persuade a court to find a costs order unjust (Halsey v Milton Keynes General NHS Trust [2004] EWCA Civ 576; PGF II SA v OMFS Company 1 Ltd [2013] EWCA Civ 1288).

 

Part 36 is designed to encourage settlement. Mediation can be part of the settlement process. Both are important parts of the courts’ concern to find ways to avoid litigation; and judges are alert to this at all times. Family lawyers rarely have the costs risk approach which most civil litigators have. Costs orders are very rare in children proceedings, and (for different reasons) in ancillary relief cases. If involved with HRA damages claims family lawyers must be alert to the extent to which Pt 36 can help to protect their local authority clients exposure to costs or to the corrosion of a damages award if claimant offers are not made.

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Offers to settle: HRA damages claims and CPR Part 36 – Part I

Human Rights Act 1998: damages claims under s 8

 

In SW & TW (Human Rights Claim: Procedure) (Rev 1) [2017] EWHC 450 (Fam), Cobb J expressed the view obiter – the question was not formally before him – that Human Rights Act 1998 (‘HRA 1998’) s 8 damages claims (‘HRA damages claims’) alongside care proceedings Cobb J must be issued under CPR 1998 Pt 8. The terms of HRA 1998 s 8(2) – that damages claims must be ‘in civil proceedings’ – makes this the logical view. This article proceeds on the assumption that Cobb J’s guidance in SW & TW is correct.

 

It follows from this, that the CPR 1998 Pt 36 regime – ‘Offers to settle’ – applies to HRA damages cases. Part 36 represents the modern view for civil litigation: that parties be encouraged to reach a settlement by the modern, and less formalistic, equivalent of payments into court; or a slightly formalised version Calderbank correspondence. It can be contrasted with the primitive rejection of costs restraints in ancillary relief proceedings, where the rules committee have rejected the civilising concepts of costs penalties for financial remedy cases (as narrowly defined); though costs are not rejected in all other forms of family and wider definition financial remedy proceedings (‘clean sheet’ costs applications: eg interim financial hearings; Children Act 1989 Sch 1 claims etc). Part 36 represents a much simpler – dare one say more logical? – scheme than anything known to family proceedings.

 

HRA damages claims: the plot to March 2017

 

The last three months has seen a variety of reported cases of litigation over HRA damages claims for children, and their parents, in care proceedings where there is criticism of the local authority in treatment of such children (HRA 1998 ss 6-8). The plot so far on such claims has progressed a little like a game of judicial tennis between Keehan J and Cobb J – as their views have developed and contrasted:

 

  • P v A Local Authority [2016] EWHC (Fam) saw Keehan J serving. The LAA had said, in separate HRA damages proceedings (for which they refused legal aid) and which followed funded wardship proceedings, that the legal aid statutory charge applied to those earlier proceedings. Keehan J disagreed, firmly.
  • In CZ (Human Rights Claim: Costs) [2017] EWFC 11, Cobb J responded low over the net and deep into Keehan J’s back-hand. He said that a HRA damages claim attracted the charge for the parallel care proceedings (wrongly in my view); and left it to a circuit judge to deal with any final costs order.
  • Late in the proceedings in H (A Minor) v Northamptonshire County Council & Anor [2017] EWHC 282 (Fam) before Keehan J, the LAA conceded that the charge did not apply, where they had issued a separate certificate for the damages proceedings; but, despite the LAA capitulation – in that case – Keehan J was able to respond to Cobb J by setting out guidance for HRA damages claims. The statutory charge issue remained at large.
  • In SW & TW (Human Rights Claim: Procedure) (No.1) [2017] EWHC 450 (Fam) Cobb J conceded the procedural game to Keehan J, and further developed its ramifications. He concludes that Human Rights Act 1998 claims should be in civil proceedings under Civil Procedure Rules 1998 (‘CPR’); but largely left open the legal aid statutory charge issue which is likely to be reconsidered before him in April.

 

My views on the extent to which the charge does not, I believe, applies appears in a number of places (see eg https://dbfamilylaw.wordpress.com/2017/03/03/hra-damages-and-legal-aid-a-pyrrhic-exercise/). In summary, care proceedings and any HRA damages claim are ‘separate’ proceedings (Civil Legal Aid (Procedure) Regulations 2012 reg 37(3)); that they would not be associated in civil proceedings if the solicitor’s lien were to apply (Solicitors Act 1974 s 73); and therefore for LAA to claim a charge over care proceedings costs – and thus almost invariably to wipe out any damages recovered under HRA 1998 s 8 – is unlawful. This is for Cobb J to decide at the adjourned hearing in SW & TW (above). Into this costs law mulch must then be mixed CPR 1998 Pt 36 for the family lawyer, whose clients are now required to take proceedings under CPR 1998 Pt 8 for HRA damages.

 

CPR 1998 Part 36: an introduction

 

CPR 1998 Pt 36 provides a self-contained offer procedure which defines how costs may be awarded where offers are accepted or offers beaten following a final hearing. This article explains how an offer is made. A follow up article will explain the consequences in term of award of costs.

 

Part 36 replaces the former procedure for payment into court (abolished since 2007) and all but replaces Calderbank letters (Calderbank v Calderbank [1976] Fam 93 CA) for civil claims. It provides a procedure which enables the following:

  • Offers to settle to be made before issue of proceedings (CPR 1998, r 36.7(1));
  • Offers to be made in respect of individual issues; and
  • It is intended to encourage claimants to put forward proposals for settlement on similar costs terms as defendants (with the added incentive provided by favourable rates for payment in r 36.17(4)).

 

Part 36 offers can be made by claimant or defendant provided they are in the form required by r 36.5. Proposals then become akin to without prejudice or Calderbank proposals which cannot be disclosed to the court (r 36.16). Specific costs consequences follow from any acceptance of an offer (r 36.13); or from a judgement and from the fact of beating or failing to beat a Pt 36 proposal (r 36.17). In SW v TW Cobb J stressed the importance of claimants being realistic as to the amounts of their claims (paras [41]-[45]); and see HRA 1998 s 8(4): principles of award in European Convention 1950 jurisprudence). Claimants are urged by the new rules to make offers to settle in a way that, pre-Pt 36, they were under no obligation; but in exchange r 36.17(4) provides an extra incentive to place their cards on the table at an earlier stage than might previously have been the case.

 

Rule 36.2(1) makes it clear that Calderbank letters or other forms of offer to settle are still available; but that if the benefits of near automatic costs orders under Pt 36 are to be achieved, offers must be made in accordance to what is required by r 36.5. Thus, even without compliance with r 36.5 the court still has discretion as to award of costs under Senior Courts Act 1981 and CPR 1998 r 44.2 (French v Groupama Insurance Company Ltd [2011] EWCA Civ 1119). For an example of the court holding a defendant to a costs order where she refused pre-proceedings Calderbank proposals in what would now be TOLATA 1996 proceedings, see Butcher v Wolfe and Wolfe [1999] 1 FLR 334, CA.

 

Form and content of a Part 36 offer

 

Rule 36.7(1) makes it clear that a Pt 36 offer made before issue of proceedings is as effective as an offer made following issue. Rule 36.5 sets out the formal terms for an offer, by claimant or defendant. It includes that the offer must be in writing; that it must make clear that it is made pursuant to Part 36; and it must specify ‘a period of not less than 21 days within which the defendant will be liable for the claimant’s costs in accordance with r 36.13 [(see below])… if the offer is accepted’ (r 36.5(1)).

 

Acceptance can only be in writing (r 36.11(1)). It may be in Form 242A; but it must be served (PD36A para 3.1):

  • the offeror or their legal representative (if represented); and
  • the court.

 

The formalities of offer and of acceptance, or preparation for final hearing with offers made, are now in place. In Part II the costs consequences of Part 36 offers will be explained.