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Costs: Calderbank offers can be accepted after hearing has started

  • Legal Development 9 June 2020 9 June 2020
  • UK & Europe

  • Insurance & Reinsurance

The High Court has held that a Calderbank offer relating to costs could be accepted by the claimant part way through the detailed assessment hearing. The decision starkly illustrates the difference between a Calderbank offer and an offer pursuant to Part 36 of the Civil Procedure Rules.

Costs: Calderbank offers can be accepted after hearing has started

MEF v St George’s Healthcare NHS Trust [2020] EWHC 1300 (QB)

It was held at first instance, that unlike a Part 36 offer, the Defendant’s Calderbank offer was capable of acceptance without the permission of the Court, despite the hearing having started.  The Defendant appealed.  However, the High Court upheld the first instance decision, finding that it had been open to the Defendant to withdraw the offer at any time, or place a time limit on acceptance of the offer.

Facts

Following the conclusion of a clinical negligence claim in which the Defendant agreed to pay the Claimant’s costs, the Claimant submitted a bill of costs in excess of £620,000.

On 19 August 2019 the Defendant made an offer ‘without prejudice save as to costs’ (a Calderbank offer) to settle the Claimant’s costs at £440,000.  This offer, previously made in September 2018, was clarified as being “only capable of acceptance subject to the agreement of the Defendant’s costs of Detailed Assessment incurred since that date.”

During the second day of a three-day detailed assessment, it was apparent that the assessment would result in the Claimant would recovering less than £440,000. The Claimant emailed the Defendant accepting the offer of £440,000.

Master Rowley held this was a valid settlement of the Claimant’s claim. It was found that the Defendant had failed to protect its position and the fact that it had not done so was no reason for the judge “to say that the offer has not been validly accepted in accordance with ordinary common law principles.”

The Defendant appealed.

Appeal

The appeal was heard before Mr Justice Morris.

The Defendant argued that Master Rowley should have found that the August 2019 offer came to an end after the lapse of a reasonable time which was no later than the start of the detailed assessment hearing. Further, the Defendant’s offer was conditional upon the Claimant paying the specific amount of the Defendant’s detailed assessment costs and not “the Defendant’s reasonable costs of detailed assessment” as written in the Claimant’s acceptance.

Furthermore, the Defendant argued that allowing the offer to remain open during the hearing provided a “perverse incentive” as the Defendant was in a worse position than if it had never made the offer at all. The amount of the assessment would have been significantly lower than £440,000 and the amount outweighed any benefit derived from the costs protection of the offer.

The Claimant submitted that as common law principles of offer and acceptance applied, the appeal raised no issue of legal principle. In addition, “it was the mutual understanding of the parties and inherent in the offer that it remained open unless and until withdrawn.” The Defendant had the option of making the offer time-limited or withdrawing it at any time but had not done so.

Outcome

Mr Justice Morris upheld the original finding, stating that the August 2019 offer had not lapsed; the Claimant’s email part way through the detailed assessment hearing “constituted acceptance of the August 2019 Offer and as a result gave rise to a contractually binding settlement of the detailed assessment proceedings.”

Master Rawley had correctly considered the common law principles of offer and acceptance and not Part 36. Indeed, the Defendant could have made the offer by way of Part 36 meaning the Claimant would have needed the Court’s permission to accept at that stage.

Mr Justice Morris found that the offer did not lapse at the door of the court but remained open for acceptance. The Defendant’s costs position was still protected regardless of whether the Claimant accepted the offer or not.  It was “always open” to the Defendant to time limit the offer and “equally it was open to it to withdraw the offer at any time,” including the duration of the second day of detailed assessment.

The Court also held found that a 'reasonable person' would have understood that should the Claimant accept the offer as restated in August 2019, then the agreement was to pay the Defendant’s costs of Detailed Assessment on the basis that they be assessed if not agreed.

What we can learn

  • Whilst the decision was beneficial for the Claimant in this case, it does not provide claimants with a tactical advantage over defendants in the future. It is open for a claimant to accept an offer after the hearing has started, yet a defendant is still able to withdraw the offer. This decision does reaffirm that offers open for acceptance should be continually monitored as cases progress. Defendants should take care to review any outstanding offers that are open for claimants to accept prior to a hearing taking place. Depending upon the circumstances of each individual case consideration needs to be given to time limiting offers or withdrawing them.
  • By contrast, whilst a Part 36 offer can be accepted at any time (unless withdrawn) pursuant to CPR 36.11(3), the court’s permission is required to accept a Part 36 offer where a trial is in progress. In considering the extent to which such permission is likely to be granted, Mr Justice Morris noted that “where the offeree is doing badly mid-trial, permission under CPR 36.11(3)(d) will rarely be granted”.

End

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