Factual and Procedural Background
The Claimant brought a medical negligence claim against the Defendant arising from the Claimant's birth, during which she suffered a Brachial Plexus Injury caused by shoulder dystocia. The Claimant alleged negligence in two respects: first, that the Defendant negligently failed to perform a Caesarean section despite indications during the labour; and second, that the vaginal delivery was negligently managed by midwives who failed to follow recognised procedures for shoulder dystocia. The trial Judge upheld the first allegation but rejected the second, entitling the Claimant to full damages for her injury.
Prior to trial, the Claimant made a Part 36 offer to settle liability at 65% of the full damages, which the Defendant rejected. The judgment was more advantageous to the Claimant than this offer. After judgment, the Claimant sought costs on an indemnity basis with enhancements under Part 36. The Defendant argued that it would be unjust to apply the normal Part 36 costs consequences in full, advocating for a proportionate costs order excluding costs related to the unsuccessful second allegation.
The trial Judge made a costs order excluding costs attributable to the second allegation, awarding the Claimant indemnity costs with enhancements only for costs related to the first allegation from the effective date of the Part 36 offer. The Claimant appealed this costs order.
Legal Issues Presented
- Whether the trial Judge had the power under CPR Part 36 to make an issues-based or proportionate costs order that excludes costs related to a part of the claim on which the Claimant was unsuccessful, despite the Claimant being a successful party under Part 36.
- Whether the Claimant was entitled to all her costs, including those related to the unsuccessful second allegation, both before and after the effective date of the Part 36 offer.
- The proper construction and application of CPR Part 36 concerning costs awards and the discretion of the court under Part 36.14(3) (now 36.17(4)) in relation to indemnity costs and enhancements.
- Whether it would be unjust under Part 36 to award the Claimant all her costs, including those attributable to the unsuccessful allegation.
Arguments of the Parties
Claimant's Arguments
- The Claimant contended that she was entitled to all her costs before the effective date of the Part 36 offer under Part 44, as the second allegation was reasonably pursued and related to the same birth event.
- Regarding costs after the effective date, the Claimant argued that Part 36 restricts the court's discretion to only the basis of assessment of costs (e.g., indemnity or standard), not to depriving a successful claimant of costs for part of the claim.
- The Claimant submitted that a successful claimant can only be deprived of costs if it is shown to be unjust, and the Judge erred in law by depriving her of costs attributable to the second allegation.
Defendant's Arguments
- The Defendant maintained that the Judge was entitled to exercise his discretion under Part 44 to deprive the Claimant of costs relating to the unsuccessful second allegation before the effective date.
- For costs after the effective date, the Defendant argued that Part 36.14(3)(b) applies only to costs determined under Part 44.2, allowing the Judge to restrict costs to those related to the successful allegation and order indemnity assessment only on those.
- The Defendant contended that the Judge properly found it would be unjust for the Claimant to recover costs related to the second allegation and was entitled to make a proportionate costs order accordingly.
Table of Precedents Cited
| Precedent |
Rule or Principle Cited For |
Application by the Court |
| Fleming v Chief Constable of Sussex [2004] EWCA Civ 643 |
Standard of appellate review on costs discretion; judge’s decision will only be overturned if erroneous in principle or perverse. |
The court applied this standard, emphasizing deference to the trial Judge's familiarity with the case in assessing the costs order. |
| HLB Kidsons v Lloyds Underwriters [2007] EWHC 2699 (Comm) |
There is no automatic rule requiring reduction of a successful party's costs if they lose on some issues; partial success is common. |
Supported the conclusion that the Claimant’s partial failure did not justify depriving her of costs before the effective date. |
| Fox v Foundation Piling [2011] EWCA Civ 790 |
In personal injury cases, winning on some issues and losing on others is not normally a reason to deprive a claimant of part of their costs. |
Reinforced the principle that the Claimant’s reasonable pursuit of the second allegation did not justify a costs deduction. |
| Kastor Navigation Co Ltd v Axa Global Risks (UK) Ltd [2004] EWCA Civ 277 |
Construction of Part 36 costs provisions; costs to be assessed under Part 44 before applying indemnity basis under Part 36. |
The court distinguished this precedent as based on materially different provisions and did not follow its reasoning. |
| Shovelar v Lane [2011] EWCA Civ 802 |
Part 36 is a self-contained code that trumps Part 44 in relation to costs consequences of Part 36 offers. |
Supported the interpretation that Part 36 governs costs consequences exclusively, limiting the court’s discretion under Part 44 when Part 36 applies. |
| Smith v Trafford Housing Trust [2012] EWHC 3320 (Ch) |
Principles for deciding whether it is unjust to depart from Part 36 costs consequences, including assessing who is the unsuccessful party causing unnecessary costs. |
Guided the court’s assessment of injustice in awarding costs to the Claimant, emphasizing the Defendant’s failure to accept the Part 36 offer. |
| Matthews v Metal Improvements Co. Inc [2007] EWCA Civ 215 |
Injustice is the key test for departing from Part 36 costs consequences. |
Referenced to underline the importance of injustice as the basis for depriving a successful claimant of costs. |
| Factortame v Secretary of State [2002] EWCA Civ 22 |
Court should identify the real unsuccessful party responsible for incurring unnecessary costs. |
Applied to consider that the Defendant could have avoided costs by accepting the Part 36 offer. |
| Lilleyman v Lilleyman [2012] EWHC 1056 (Ch) |
The court’s discretion to depart from Part 36 costs consequences is not limited to the factors listed in Part 36.14(4). |
Supported the view that the court may consider a wide range of circumstances when deciding if it would be unjust to award full costs. |
Court's Reasoning and Analysis
The Court began by recognising the high threshold for overturning the trial Judge’s costs discretion, requiring an error in principle or a perverse decision. It analysed the costs incurred before and after the effective date of the Part 36 offer separately.
Regarding costs before the effective date, the Court found that the Claimant was reasonably entitled to pursue both allegations as part of a single birth event. The unsuccessful second allegation was not pursued unreasonably, and established authority supports that partial success does not automatically justify costs reduction. Therefore, the Judge erred in depriving the Claimant of costs related to the second allegation before the effective date.
On costs after the effective date, the Court examined the proper construction of Part 36.14(3)(b), concluding that “his costs” means all costs of the successful claimant unless it would be unjust to award all costs. The Court distinguished the earlier Kastor Navigation decision as based on materially different rules and did not consider it binding.
The Court emphasised that Part 36 is a self-contained code that limits the court’s discretion under Part 44 when Part 36 costs consequences apply. The discretion under Part 36 includes not only the basis of assessment but also the determination of which costs are awarded. However, depriving a successful claimant of any costs requires a finding of injustice.
Crucially, the Court found the Judge failed to consider that the Defendant could have avoided the trial costs by accepting the Claimant’s favourable Part 36 offer. This failure undermined the justification for a proportionate costs order excluding costs related to the unsuccessful allegation after the effective date.
Accordingly, the Court concluded that it was unjust to deprive the Claimant of any of her costs, including those attributable to the second allegation, both before and after the effective date.
Holding and Implications
The Court ALLOWED THE APPEAL and set aside the material parts of the trial Judge’s costs order. The Defendant was ordered to pay all of the Claimant’s costs, such costs to be assessed on the indemnity basis from the effective date of the Part 36 offer.
The direct effect of this decision is that a successful claimant under Part 36 is generally entitled to recover all costs incurred, including those attributable to unsuccessful parts of the claim, unless the court finds it would be unjust to do so. The decision clarifies that the court’s discretion to make proportionate or issue-based costs orders under Part 36 is limited and must be exercised only on grounds of injustice, taking into account all circumstances, including the conduct of the parties and whether the defendant failed to accept a reasonable Part 36 offer. No new precedent altering the established principles of Part 36 or Part 44 costs discretion was created; rather, the Court reinforced the self-contained nature of Part 36 and the high hurdle for departing from its ordinary costs consequences.