Tuson v Murphy  EWCA Civ 1461
This claim concerned personal injuries sustained by the Claimant as a result of a horse riding accident at the Defendant’s riding school in August 2010. The Defendant accepted liability, but disputed quantum. Proceedings were issued in August 2013 by which time, the Claimant had given up her work as a schoolteacher in September 2012.
In November 2013, the Claimant had obtained a franchise in a playgroup organisation (Creation Station) and ran her first session in January 2014. This venture did not last and by January 2015, the franchise had been transferred.
The Claimant served a witness statement in April 2014 which failed to mention the franchise. Additional statements and reports from third parties were also absent any reference to the franchise.
The Claimant’s Schedule of Loss included a substantial claim for future loss of earnings which had been based upon expert opinion and without the knowledge of the franchise.
The Defendant had become aware of the omission by June 2015 and had informed the Claimant’s Solicitors of the same. The Claimant’s updated evidence in September 2015 (3rd witness statement) consequently disclosed the information.
In full knowledge of this, the Defendant made a Part 36 offer a week after receipt of the Claimant’s statement. The Claimant accepted the offer 54 days after the expiry of the offer’s “relevant period”.
The normal course of events in this situation is that CPR 36.13 (5) applies. The parties will usually agree this as the default position. In this case, the parties were unable to reach such an agreement and therefore, referred to the Court to decide upon the appropriate and just Order for costs.
At the first instance, the Court found that the application of the usual consequences would be unjust as the, “defendants were being actively misled”. Accordingly, the Defendant was Ordered to pay the Claimant’s costs up to the point at which the Claimant commenced to mislead the Defendant (1 April 2014) and thereafter, the Claimant to pay the Defendant’s costs.
The Claimant appealed on the basis that had the Part 36 offer been accepted within the “relevant period”, there would have been an automatic entitlement by virtue of CPR 36.13(1). However, where the offer is accepted out of time, one of the facts to consider when making an Order for costs is at CPR 36.17(5) is, “the information available to the parties at the time when the Part 36 offer was made”.
Court of Appeal Ruling
Although the Court of Appeal ruled that the Judge in the first instance was entitled to find the Claimant’s conduct as dishonest and misleading, the decision to sanction the Claimant on costs was considered to be flawed and therefore, overturned.
The Court of Appeal’s decision rested heavily on the fact that the Defendant was fully aware of the true state of affairs by the time Part 36 offer had been made and notwithstanding this, chose to make the Part 36 offer in any event.
Of course, had the Defendant’s assessment of the value of the claim at the time of making the Part 36 offer had been undermined by subsequent events and/or the discovery of additional or unknown facts, the Court acknowledged that the situation may have given rise to a different outcome.
This potential situation was addressed in the Supreme Court case of Hayward v Zurich Insurance Company as there was only a suspicion of deceit when the claim settled. If it later came to light that the Claimant had been dishonest, then such an agreement could be set aside subject to proof of fraud thereon. The Defendant in the instant claim was already aware of the issues and approached their offer with regard to the same.
What should we learn from this? Well, a starting point is that the decision serves as a reminder and presses home even further the stringency of the rules governing Part 36 offers and the costs consequences that follow.
Of course, Judges do have a certain amount of discretion upon these issues, but that discretion is limited and, as was found in this case, that discretion was simply flawed.
So, the lesson here is to simply proceed with caution. Part 36 offers can be an invaluable part of the litigation armoury. Use them and/or accept them wisely. The rules will be adhered to, even in cases of dishonesty as demonstrated in this case.