UK: Kennedys Scores Significant Success Against Irwin Mitchell On Costs Where Settlement Figure Was Only Marginally Higher Than Much Earlier Part 36 Offer

Last Updated: 14 September 2009
Article by Radd Seiger, Partner

Kennedys and its client Carillion scored a major success recently at Sheffield County Court against a claimant represented by Irwin Mitchell.

The claim arose out of a construction site accident where two workers were crushed following the collapse of an internal wall, both suffering serious multiple skeletal and facial injuries. John Marshall was the more seriously injured of the two. His schedules of special damages repeatedly claimed in excess of £500,000. He was however well motivated to get back to work and was very receptive to the Defendant's offers of rehabilitation and participated well in the programme.

Carillion made an early Part 36 offer to settle Mr Marshall's claim for £265,000 in October 2007. Irwin Mitchell's response to that offer was merely to reject it out of hand, with no suggestion of a counter proposal or willingness to discuss settlement. The claim continued towards trial without any counter proposals for settlement from Irwin Mitchell, and it was not until late 2008 that the idea of a joint settlement meeting (JSM) was floated on Mr Marshall's behalf.

The JSM took place in March 2009. Following negotiations, Mr Marshall's claim was settled in the sum of £285,000 i.e. £20,000 more than the offer made in 2007, subject to CRU deductions of £13,000.

Following the decisions in Carver v BAA [2008] and Multiplex v Cleveland [2008], we argued that Mr Marshall should suffer a very severe costs penalty on the basis that, although he had done marginally better at the JSM than the original offer, he had made no attempt to negotiate and had simply rejected the earlier offer. Further, particularly when recoverable benefits were taken into account, he had in fact done no better than had he accepted the original offer and invested that sum.

Irwin Mitchell would not accept these arguments so the parties took the discrete issue of costs and Mr Marshall's conduct to a hearing at Sheffield County Court before HHJ Bulliemore on 11 May 2009. The Judge agreed with our arguments. He found that:

  • Mr Marshall had simply rejected Carillion's offer outright and made no counter proposals or any other attempt to negotiate.
  • Although he had accepted an increased offer from Carillion at the JSM, the reality of the situation was that that settlement was much less than the £500K+ sum he was looking for.
  • Had he accepted the original offer and invested the sum, he would in fact have been better off.
  • The Judge therefore disallowed Mr Marshall's costs from the last date on which he could have accepted the offer in 2007, a sum estimated to be in the region of £80,000 - £100,000. Carillion were awarded their costs of and occasioned by the costs hearing.

Comment: It is becoming an increasingly common trend for claimants and their solicitors to reject defendants' offers without any counter proposals in return. This may be due to inexperienced unqualified staff running the claims, which invariably means they are in no position to have a reasonable discussion with the defendant, and which in itself results in claims being prolonged and costs being increased.

However, following Carver and Multiplex however, Kennedys and Carillion tested the courts' views again on these practices in Mr Marshall's claim. We asked the Court to consider how a situation should be approached where the defendant had made an offer which was nearly but not quite sufficient and the other party had rejected that offer outright without any attempt to negotiate. The Court took a dim view indeed on this occasion of Irwin Mitchell's handling of Mr Marshall's claim. His damages were ring fenced under the terms of the CFA so the loss here was entirely Irwin Mitchell's.

It is clear following this judgment that the courts will apply the principles laid down in Carver and Multiplex and will look to penalise parties whose conduct leads to needless increases in costs.

Defendants should therefore continue to:

  • Make early substantive Part 36 offers wherever possible.
  • Vigorously look to penalise claimants where the offer needs to be increased "marginally" but where claimants reject such offers and refuse to talk until late in the day.
  • Gone are the days where claimants, who either beat a defendant's offer or reach a compromise which betters the offer monetarily, will automatically receive a favourable costs order, particularly where they refuse to talk.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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