The awarding of issue based costs – a recent decision overturned
There has always been discretion available to the Court to make issue-based costs orders where a party succeeds on only part of its case. Where a Claimant beats its own Part 36 offer, but succeeds in only part of its case, can the Court make an issue-based order for costs thus excluding the costs of the unsuccessful elements? In Webb (by her litigation friend) v Liverpool Women’s NHS Foundation Trust  EWCA Civ 365, the Court of Appeal has now provided some clarification as well as very useful direction in these circumstances upon the application of our old friend CPR 44, as well as a Trial Judges’ power under Part 36.
This was a clinical negligence claim involving a serious obstetric injury. The claimant made two allegations of negligence against the trust in respect of her birth. 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 offer was rejected by the Defendant.
At Trial the Claimant’s first allegation was upheld, but not the second. In respect of the costs which followed the Defendant contended that the normal consequences of Part 36.14(3) should be disapplied because, by reference to Part 36.14(4), in the circumstances it would be unjust to apply them. It argued that Part 36 did not prevent the court from making an issue-based or proportionate costs order to reflect the fact that the Claimant failed in respect of the second allegation, which was a discrete and independent allegation. The Claimant should have her costs with the Part 36 enhancements in respect of her costs referable to the first allegation but she should not be awarded costs for the unsuccessful prosecution of the second allegation, much less with any Part 36 enhancements.
HHJ Saffman sitting as a High Court Judge held that although there had been a Part 36 offer made by the Claimant which the Claimant’s had done better than, the claimant would only recover her costs of the successful first allegation.
On appeal, Sir Stanley Burnton held that the trial judge wrongly failed to address separately costs incurred before and after the “effective date” of the relevant Part 36 offer.
Applying CPR 44 (applicable to costs incurred before the effective date), the Trial Judge should not have deprived the Claimant of the costs of the second allegation. Although the allegations concerned different aspects of the claimant’s mother’s labour, they related to one event (the claimant’s birth) and having regard to CPR 44.2 (5), it could not be said that the second allegation had been pursued unreasonably. Clearly, failure on some points is not unusual, particularly in personal injury claims, and will not normally justify depriving claimants of part of their costs.
Under CPR 36.14(3)(b), a successful claimant is entitled to all of their costs after the effective date on an indemnity basis, unless that would be “unjust” (Kastor Navigation Co Ltd v Axa Global Risks (UK) Ltd  EWCA Civ 277, which was based on materially different versions of CPR 36 and 44, could be distinguished). Although Part 36 does not preclude the making of an issue-based or proportionate costs order, a successful claimant should only be deprived of part of their costs if it would be unjust for them to receive those costs in “all the circumstances of the case”. In exercising its discretion, the court must take account of the fact that the unsuccessful defendant could, and should, have avoided the costs of the trial by accepting the claimant’s Part 36 offer.