High Court warns that part 36 offer of 90/10 liability split is against letter and spirit of rule

8 March 2023

Mexico: Liability split offer made on holiday sickness claim

Making a part 36 offer of a 90/10 liability split in a straightforward case is an attempt to insure a claimant against not beating their monetary offer and contrary to both the letter and spirit of the rule, the High Court has ruled.

Mrs Justice Collins Rice, sitting in Bristol, heard that such offers have become common in litigation.

In Mundy v TUI UK Ltd [2023] EWHC 385 (Ch), the county court found that the illness caused while the claimant was on holiday in Mexico was less severe and long-lasting than he claimed in seeking between £25,000 and £35,000. He was awarded £3,700 in general damages and £105.60 in special damages.

Mr Mundy had made two part 36 offers on 2 November 2018. The first was for £20,000 but “net of acceptance of any liability offer”, and the second was to settle liability 90% in favour of the claimant. The defendant did not accept either and, just over a year later, made a part 36 offer itself of £4,000, which was also not accepted.

The county court judge ordered the defendant to pay the claimant’s costs up to 19 December 2019, the date of the expiry of its offer, and the claimant to pay the defendants’ costs thereafter. The judge decided that the claimant’s second offer was to accept 90% of the value of the claim.

He added that, if he was wrong and the claimant’s offer should be understood as discounting for a contributory negligence plea, “then I take the view that in all the circumstances it would be most unjust for the usual consequences to follow, having regard in particular to CPR 36.17(5)(e)”.

In granting permission to appeal, Mr Justice Foxton noted that “the practice of making ‘90/10’ offers to secure costs benefits appears to be widespread and would benefit from an authority at High Court level”.

Collins Rice J said that counsel agreed that this practice “has indeed become widespread” and that they were unaware of any existing authority on precisely how such offers fitted into CPR 36.17 if rejected.

The liability offer was not an offer to settle the claim, “or a quantifiable part of or issue in the claim”, making it “difficult to fit into the part 36 scheme altogether”.

“A simple case like this, in which liability is not fought on a distinct issues basis but in its entirety, cannot produce anything other than a 100% result on liability either way; the value of a win on liability ‘in money terms’ is difficult if not impossible to separate from the quantum of damages awarded, and that will always and axiomatically be more advantageous to a claimant than 90% of it. There is a problematic degree of artificiality in all of this.”

It turned a 90/10 liability offer “into a means for a claimant, who fails to beat a money offer to settle his claim, to recoup a substantial premium for ‘winning’ the case nevertheless”, the judge continued.

“It is an attempt at a unilaterally imposed insurance policy to reverse the losses otherwise provided for by CPR 36.17. It is, in other words, an attempt to use CPR 36.17 against itself, contrary to both its letter and its spirit.”

As a result, Collins Rice J was “unpersuaded” that such a rejected offer was consistent with the terms of CPR 36.17(1)(b) – that the judgment was at least as advantageous to the claimant as the offer. “Trying to do so strains the language of the provision, undermines its careful balance, and introduces a degree of complexity and uncertainty which I am not persuaded is within its contemplation.”

It would fit into CPR 36.17(5), however – whether it would be unjust to visit the subsection (3) consequences on the claimant.

“I can see that in an appropriate case – and whether or not a 90/10 liability offer counts as ‘any part 36 offer’ for the purposes of CPR 36.17(5)(a) – a court may be invited to consider any injustice arising by virtue of the defendant having rejected that offer.”

The judge stressed that the ‘unjust’ bar “remains a high one”. She continued: “It may be that 90/10 liability offers, where no issue of split liability genuinely arises, largely need to rely on any inherent attractiveness and incentivisation they may have in the context of a particular case to achieve an outcome – agreement to avoiding a liability trial – if that is in the commercial best interests of both parties.

“It may be that they cannot rely on the incentivisation furnished by the ‘part 36’ consequences of rejection. It may be, in other words, that in a simple case like the present they are all carrot and no stick.

“If so, that is a result which seems to me entirely consistent with the letter and spirit of the part 36 code, and its focus on backing sensible money offers to settle claims or quantifiable parts of claims.”

Here, the key issue at trial had been how far Mr Mundy’s debilities were attributable to the cyclospora infection he suffered. That was a quantum and causation question but the 90/10 offer on liability was “at large and unparticularised”.

The court had found that the failure to make clear whether the defendant was being invited only to admit a breach of duty or go further to admit what damage it accepted was caused by the breach of duty.

In such circumstances, Collins Rice J said, it was “hard to see that the county court judge was ‘wrong’ to see injustice in the conventional operation of CPR 36.17(4) in the present case had he been persuaded it applied here”.

She rejected the appeal except on a set-off issue that had subsequently been settled by the Supreme Court in Ho v Adelukun.

Ian Pennock (instructed by Eatons Solicitors) for the appellant. James Laughland (instructed by Kennedys Law) for the respondent.

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08 Mar 2023

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