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Limited Discretion to Depart from Part 36 costs convention

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Recently in the case of Tuson v Murphy, the Court of Appeal overturned the decision of the High Court which had ordered that the Claimant should pay legal costs going back a previous year and a half, to when she purportedly began to mislead the Defendant about the effects of her accident as an additional punishment to the late acceptance of a Part 36 offer.

It was stated by Lord Justice Bean that despite the Claimant’s material non-disclosure, the Judge’s exercise of his discretion was ‘flawed’ and the appeal should be allowed. The Judge in the first instance had ruled the Defendant should pay the Claimant’s costs only up to 1 April 2014 and the Claimant pay the Defendant’s costs thereafter. The Judge said the Claimant should be sanctioned in some way and that the Defendant should be allowed to use the Part 36 mechanism to argue injustice and avoid a normal costs order. 

The material non-disclosure in this matter was that following the accident, the Claimant gave up job and initially valued her claim at more than £1.5m on the basis she would not work again. However, the Claimant later obtained a franchise in a playgroup organisation, this venture was not contained in her first witness statements from April 2014. However, within a year she had ceased operating the franchise and it was subsequently transferred.

The Defendant’s solicitors became aware of the Claimant’s franchise and notified the Claimant’s solicitors of this, who in turn served a supplementary witness statement addressing this point. This was followed by the Defendant’s solicitors making a Part 36 offer of £352,060, with costs paid on the condition it was accepted within 21 days, also in September 2015. This offer was accepted outside of this time scale.

It is usually the position to apply the default costs rule in a case where the facts were known to the Defendant’s advisers at the time of the Part 36 offer, particularly where those circumstances did not change significantly before the offer was accepted. The appeal Judge therefore felt that where the Defendant’s representatives made the Part 36 offer ‘in full knowledge’ of the Claimant’s material non-disclosure, that the Judge at first instance had taken too much of a broad-brush approach thinking that the decision about costs was entirely a matter of discretion, even in a case where a party might have behaved dishonestly. 

The result was that the appeal was allowed and the position was reverted to the usual position in relation to Part 36 costs conventions whereby the Claimant was ordered to pay just the extra costs incurred by her delayed acceptance of the Part 36 offer. 

 

This article is not a definitive statement of the law. It is designed as a free update on the law at the time of publishing. It is not a substitute for legal advice on specific facts and circumstances. BakerLaw LLP and/or the writer accepts no liability or responsibility for reliance on this article and recommends that you seek independent legal advice on your specific circumstances prior to taking any steps.

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