One dilemma that arises from time to time is how a court is to balance the competing considerations which can arise at trial, where a claimant succeeds in beating their own part 36 offer at trial but loses on substantial issues along the way, which in turn have generated significant amounts of costs. In the case of Webb v Liverpool Women’s NHS Foundation Trust  EWCA Civ 365 Webb v Liverpool Women’s NHS Foundation Trust  EWCA Civ 365 the dilemma came into sharp focus.
The facts of the case were simply stated. It was a clinical negligence case which had progressed to trial.
3. The claim resulted from the Claimant’s birth, in the course of which she suffered a Brachial Plexus Injury as a result of shoulder dystocia. She claimed that her injury was the result of the Defendant’s negligence. The Claimant’s allegations of negligence fell into two main parts:
(a) That, during the labour of the Claimant’s mother the need for a Caesarean section was indicated on 4 occasions, but, negligently, no Caesarean section was performed and instead the Defendant negligently decided that the birth should be allowed to proceed to a vaginal delivery (the first allegation).
(b) That the vaginal delivery itself was negligently managed because the midwives undertaking it failed to adopt recognised procedures to deal with the shoulder dystocia that the claimant suffered in the course of the vaginal delivery (the second allegation).
4. The Judge upheld the first allegation, but rejected the second allegation. Having succeeded in establishing that her injury was caused by the Defendant’s negligence, the Claimant was entitled to full recovery of damages for her injury and loss.
The claimant had obviously been alive to certain vulnerabilities in her case on liability:
5. On 1 October 2014 the Claimant had made a Part 36 offer to settle liability on the basis that she received 65% of the damages that would accrue on a 100% basis. That was rejected on 9 October. Its effective date (“the effective date”) was 23 October 2014.
As the Court of Appeal observed:
6. The judgment was clearly more advantageous to the Claimant than the proposal contained in her Part 36 offer. When judgment was handed down, her counsel contended that the consequences of what was then Part 36.14(3) applied and that she should have all her costs on an indemnity basis from the expiry of the relevant period plus interest thereon at the enhanced “Part 36 rate” plus the enhancements specified in Part 36.14(3)(a) and (d).
However the defendant argued for an issues based costs order. Adopting the wisdom of Solomon, the trial judge made the following order:
11. In his careful judgment, the Judge held:
a) Part 36 does not prevent the Court from making an issues-based or proportionate costs order. In other words, the Court has a discretion to make such an order, notwithstanding that the Claimant was a successful claimant.
b) In the circumstances of this case, it was just to make an issues-based proportionate costs order, under which the Claimant would not recover her costs of the second allegation.
12. The order made by the Judge was that the Claimant should recover her damages to be assessed with the 10 per cent addition required by CPR 36.14(3)(d), plus her costs excluding those referable to the second allegation. The Judge therefore excluded from her recovery the fees of her midwifery expert (whose evidence was confined to the second allegation) and 25 per cent of her solicitors’ time costs, being his assessment of the solicitors’ costs referable to the second allegation. The Claimant’s costs, other
than the excluded 25 per cent of her solicitors’ time costs, incurred after 22 October 2014 were to be assessed on an indemnity basis pursuant to CPR 36.14(3)(d), and the Defendant was ordered to pay interest on those costs incurred after 22 October 2014.
The claimant appealed. The Court of Appeal first dealt with the question of costs before the effective date of the part 36 offer:
24. This is a relatively straightforward issue. I have not found it easy, but have been persuaded that the judge could not properly have deprived the Claimant of her costs relating to the second allegation, essentially for the reasons put forward by the Claimant. Although the two allegations related to separate parts of the Claimant’s mother’s labour, they were part of one event, namely the Claimant’s birth. Her injuries were such as would not in general be caused without negligence in the care of her birth.
25. There were 3 particulars of negligence in relation to the second allegation. Two of these had been added to the Particulars of Claim by amendment on the first day of the trial, although they arose from the experts’ reports and had been adumbrated earlier, which enabled the Defendant to consent to the amendment. They were rejected by the Judge relatively briefly, in paragraphs 249 to 255 of his substantive judgment, and there could not have been much in the way of costs attributable to them. The judge considered the third particular, that the midwives had exerted excessive traction in the vaginal delivery, at length.
26. It could not be said, and Mr Mansfield did not suggest, that it had been unreasonable for the Claimant to make and to pursue the second allegation, which was supported by her expert evidence. Although it is not necessary for the conduct of a party to be castigated as unreasonable in order for her to be deprived of all or part of her costs, it is significant that Part 44.2 provided:
“(4) In deciding what order (if any) to make about costs, the court will have regard to all the circumstances, including –
(a) the conduct of all the parties;
(b) whether a party has succeeded on part of its case, even if that party has not been wholly successful; and
(c) any admissible offer to settle made by a party which is drawn to the court’s attention, and which is not an offer to which costs consequences under Part 36 apply.
(5) The conduct of the parties includes –
(b) whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue;
27. It is not unusual for a claimant to succeed on some, but not all, allegations, particularly in a personal injury case such as the present. In HLB Kidsons v Lloyds Underwriters 2007 EWHC 2699 (Comm), Gloster J, as she then was, said:
“11. There is no automatic rule requiring reduction of a successful party’s costs if he loses on one or more issues. In any litigation, especially complex litigation such as the present case, any winning party is likely to fail on one or more issues in the case. As Simon Brown LJ said in Budgen v Andrew Gardner Partnership  EWCA Civ 1125 at paragraph 35:
‘the court can properly have regard to the fact that in almost every case even the winner is likely to fail on some issues.’ Likewise in Travellers’ Casualty  EWHC 2885 (Comm), Clarke J said at paragraph 12:
‘If the successful Claimant has lost out on a number of issues it may be inappropriate to make separate orders for costs in respect of issues upon which he has failed, unless the points were unreasonably taken. It is a fortunate litigant who wins on every point.’”
28. In Fox v Foundation Piling  EWCA Civ 790  6 Costs LR 961, Jackson LJ said, in a judgment with which the other members of the Court agreed:
“48. In a personal injury action the fact that the claimant has won on some issues and lost on other issues along the way is not normally a reason for depriving the claimant of part of his costs: see Goodwin v Bennett UK Limited  EWCA Civ 1658. For example, the claimant may succeed on some of the pleaded particulars of negligence, but not on others. Indeed the fact that the claimant has deliberately exaggerated his claim may in certain instances not be a good reason for depriving him of part of his costs: see Morgan v UPS  EWCA Civ 1476. …”
29. I see nothing in this case to take it out of the ordinary or to justify the Claimant being deprived of part of her costs.
The claimant can be regarded as fortunate in this approach by the Court of Appeal: because unlike a typical personal injury claim where 10 particulars of negligence are pleaded and only 1 succeeds, but the costs incurred are the same whether 1 or 10 particulars are made out, this was a case where the trial judge had been able to isolate particular elements of costs attributable to the case that failed.
Dealing with the claimant’s costs post the effective date, an interesting point of construction arose:
36. These differences in my judgment require this Court to consider the meaning and effect of Part 36.14 untrammelled by the decision in Kastor. My view as to the meaning of Part 36.14 is supported by the substantial line of authority to the effect that Part 36 is now a self-contained code, see, e.g., Ward LJ in Shovelar v Lane  EWCA Civ 802  1 WLR 637 at paragraph 52:
“52. … Part 36 is a separate, self-contained code. It must be applied as such. If the offer is one to which the costs consequences under Part 36 apply, then it cannot be taken into account under Part 44 because, although CPR 44.3(4)(c) requires the court to have regard to “any payment into court or admissible offer to settle”, those words are qualified by the words which follow namely ‘which is not an offer to which
costs consequences under Part 36 apply’. Part 36 trumps Part 44.”
37. In deciding what costs order to make under 36.14, the Court does not first exercise its discretion under Part 44. Its only discretion is that conferred by Part 36 itself. The alternative construction requires the Court first to exercise its discretion under Part 44, on the basis of all the circumstances of the case, and then to exercise its discretion under Part 36, again having regard to all the circumstances of the case. This makes no sense.
38. It follows from the above, and in particular that Part 36 is a self-contained code, that the discretion under 36.14 relates not only to the basis of assessment of costs, but also to the determination of what costs are to be assessed. I agree with the Judge that Part 36 does not preclude the making of an issue-based or proportionate costs order. However, a successful claimant is to be deprived of all or part of her costs only if the court considers that would be unjust for her to be awarded all or that part of her costs. That decision falls to be made having regard to “all the circumstances of the case”. In exercising its discretion, the Court must take into account that the unsuccessful defendant could have avoided the costs of the trial if it had accepted the claimant’s Part 36 offer, as it could and should have done. The principles were aptly summarised by Briggs J (as he then was) in Smith v Trafford Housing Trust  EWHC 3320
“13. … For present purposes, the principles which I derive from the authorities are as follows:
a) The question is not whether it was reasonable for the claimant to refuse the offer. Rather, the question is whether, having regard to all the circumstances and looking at the matter as it affects both parties, an order that the claimant should pay the costs would be unjust: see Matthews v Metal Improvements Co. Inc  EWCA Civ 215, per Stanley Burnton J (sitting as an additional judge of the Court of Appeal) at paragraph 32.
b) Each case will turn on its own circumstances, but the court should be trying to assess “who in reality is the unsuccessful party and who has been responsible for the fact that costs have been incurred which should not have been.” : see Factortame v Secretary of State  EWCA Civ 22, per Walker LJ at paragraph 27.
c) The court is not constrained by the list of potentially relevant factors in Part 36.14(4) to have regard only to the circumstances of the making of the offer or the provision or otherwise of relevant information in relation to it. There is no limit to the types of circumstances which may, in a particular case, make it unjust that the ordinary consequences set out in Part 36.14 should follow: see Lilleyman v Lilleyman (judgment on costs)  EWHC 1056 (Ch) at paragraph 16.
d) Nonetheless, the court does not have an unfettered discretion to depart from the ordinary cost consequences set out in Part 36.14. The burden on a claimant who has failed to beat the defendant’s Part 36 offer to show injustice is a formidable obstacle to the obtaining of a different costs order. If that were not so, then the salutary purpose of Part 36, in promoting compromise and the avoidance of unnecessary expenditure of costs and court time, would be undermined.”
39. I am clear that, for the reasons I have given in relation to the Claimant’s costs before the effective date, it cannot be said that it would be unjust for her to be awarded all her costs. Furthermore, in making his determination, the Judge did not take into account, as he should have, the fact that the Defendant could have avoided all the costs of the trial by accepting the Claimant’s favourable Part 36 offer. The
considerations to which I referred apply even more strongly in relation to her costs after the effective date, when the question is not whether it is just for her to be awarded all her costs, but whether it would be unjust for that award to be made.
Effectively part 36 ousts part 44 to substitute a narrower test where “all of the circumstances” is replaced by a focus on any injustice in making a prescribed order. The practical effect of this judgment is that where a part 36 offer “bites” there is very little scope for argument that a paying party can pray in aid issues which they succeeded upon, along the way, but which failed to alter the overall conclusion that a receiving party’s part 36 offer should have been accepted as representing a better result for a paying party than they achieved at trial, despite much expense of time and treasure.