Matthews (a patient) v Metal Improvements Co Inc

Factual and Procedural Background

The Plaintiff, born in June 1944, suffered a workplace accident on 21 March 2000 resulting in a minor head injury and a subsequent dissociative disorder. The Plaintiff brought a claim against the Defendant, his employer, alleging negligence and breach of statutory duty. The Defendant's insurers admitted primary liability subject to medical causation evidence. During the litigation, the Plaintiff was also diagnosed with an unrelated lymphoma, which later became relevant to the claim's valuation due to changes in prognosis.

The claim form was issued in March 2003, with particulars of claim served in May 2003. The Defendant initially denied liability and alleged contributory negligence but later amended the defence to admit primary liability in August 2005. On 8 August 2005, the Defendant made a Part 36 payment into Court, unaware of recent developments regarding the Plaintiff’s lymphoma.

The Plaintiff did not accept the payment within the prescribed 21-day period, rejecting it based on an expectation of a higher valuation reflecting a normal life expectancy. Subsequent biopsy results in January 2006 revealed an aggressive lymphoma, drastically reducing the Plaintiff’s life expectancy, leading to reconsideration and acceptance of the Part 36 payment with court approval.

The Deputy District Judge approved the settlement and ordered the Defendant to pay the Plaintiff's costs, including those incurred after the 21-day acceptance period. The Defendant appealed this costs order.

Legal Issues Presented

1. Whether it was unjust to depart from the usual costs order under CPR Part 36.20 whereby the claimant pays the defendant's costs incurred after the expiration of the acceptance period for a Part 36 payment.
2. How the court should approach costs incidence when a claimant accepts a Part 36 payment late due to new evidence affecting claim valuation.
3. The extent of the court’s discretion in approving costs orders in claims brought on behalf of patients requiring court approval of settlements.

Arguments of the Parties

Defendant's Arguments

• The Deputy District Judge applied the wrong test by focusing on whether the Plaintiff acted reasonably rather than whether it was unjust to make the usual costs order.
• The Defendant was entitled to the costs protection provided by the Part 36 payment and no valid reason existed to deprive them of that protection.
• The Defendant contended it should only pay costs incurred up to the expiration of the 21-day acceptance period, with the Plaintiff liable for costs thereafter except for those of the approval hearing.

Plaintiff's Arguments

• The Deputy District Judge properly exercised her wide discretion in ordering the Defendant to pay all costs, including those incurred after the 21-day period.
• The reasons for rejecting the Part 36 payment initially were proper and valid, given the Plaintiff's medical condition and uncertainties about prognosis.
• No special rules applied beyond the requirement for court approval and permission to accept the payment out of time.

Table of Precedents Cited

Court's Reasoning and Analysis

The court began by affirming that interference with a discretionary costs order requires an error of principle. It confirmed that the Defendant is entitled to the same costs protection under Part 36 whether the claimant is a patient or not.

The Deputy District Judge's decision was scrutinized and found flawed because she equated the question of unjustness with whether the Plaintiff’s advisors acted reasonably in rejecting the Part 36 payment. The court clarified that the discretion to depart from the usual costs order is limited and must be based on whether it would be unjust to impose the standard order that the claimant pay the defendant’s costs after the acceptance period.

The court emphasized the function of a Part 36 payment as placing the claimant on a costs risk if they fail to beat the payment at trial or otherwise. Changes in circumstances after the payment—such as new evidence affecting life expectancy—are contingencies inherent in litigation and do not ordinarily justify depriving the defendant of costs protection.

The court noted that once the Plaintiff’s advisors received the oncologist’s letter indicating prognosis uncertainty, they should have sought an extension of time or a stay to consider the Part 36 payment properly. The failure to do so and the subsequent rejection of the payment when prognosis was uncertain further supported the usual costs order.

Accordingly, the court concluded that no facts rendered it unjust to make the usual costs order and that the Deputy District Judge had erred in her reasoning.

Holding and Implications

The court ALLOWED THE DEFENDANT'S APPEAL and substituted the costs order. The Defendant was ordered to pay the Plaintiff's costs incurred up to 29 August 2005 and the costs of the approval hearing. The Plaintiff was ordered to pay the Defendant’s costs incurred after 29 August 2005, except those of the approval hearing. All disputed costs were to be subject to detailed assessment on the standard basis.

This decision enforces the ordinary operation of CPR Part 36 costs rules, confirming that late acceptance of a Part 36 payment due to changed circumstances does not automatically shift costs liability. No new precedent was established; rather, the ruling reaffirmed the limited scope of judicial discretion to depart from the usual costs order and underscored the importance of procedural steps such as seeking extensions or stays when new evidence arises.