High Court considers new bonus in Part 36 regime

High Court considers new bonus in Part 36 regime

Published:

Author: David Nessim

The recent case Feltham v Bouskell [2013] EWHC 3086 (Ch) is one of the first to consider the additional sanction under CPR 36.14(3)(d), introduced on 1 April 2013 as part of the Jackson Reforms.

Feltham v Bouskell concerned the professional negligence of a solicitor in failing to prepare a will for the relative of the claimant. Just prior to the commencement of trial, the claimant made a Part 36 offer which was not accepted by the defendant.

The court found in favour of the claimant, however the judgment awarded was only slightly more advantageous to the claimant than the Part 36 offer rejected by the defendant.

PART 36.14(3)(d)

In addition to the Part 36 implications and benefits that were in existence prior to the Jackson Reforms of 1 April 2013, the court must now also consider the additional sanction under CPR part 36.14(3)(d).

This rule only applies to Claimant Part 36 offers that were made on or after 1 April 2013. It allows for an additional award to the damages received by a successful claimant if they make a Part 36 offer that is rejected by the defendant and subsequently beaten at trial. The court may award an additional amount to the claimant, not exceeding £75,000, unless it is unjust to do so.

Under the new rule, for money claims, the additional damages will be an additional 10% of the first £500,000 of any judgment awarded. If the claimant is awarded more than £500,000 it will receive an additional 5% of the next £500,000 awarded in addition to the above. Whilst this "bonus" is limited to a maximum of £75,000 the additional sum can be a useful incentive for defendants to settle a claim at an early stage.

For claimants making a non-monetary claim, the Court has the power to award the claimant a bonus of 10% of their legal costs provided that they beat their own offer at trial.

In light of this it was necessary for the court to consider whether the additional amount should be awarded to the claimant, giving consideration to a number of factors, as set out in CPR 36.14 (4) (a) - (d).

DECISION

Despite the Claimant beating the Part 36 offer it had put forward, the Judge declined to award a bonus sum because he considered it would be unjust to do so. In reaching this decision, the following points were considered:

- The offer was made at the last minute. The 21 day period in which the defendant was able to accept the claimant's Part 36 offer without suffering the consequences of Part 36 expired a matter of days before the commencement of trial. With this in mind, and the fact that a lump sum payment cannot reflect the time at which an offer was made in the same way that an award for interest is able to, the judge considered that the very short period of time between the expiry of the offer and the trial may be a factor in rendering the payment unjust.

- A key allegation relied upon in the case by the claimant had not been raised prior to the trial. This was also the crucial ground upon which the judge had decided liability and was therefore of fundamental importance.

- Key documents had not been disclosed by the claimant until the eve of the commencement of trial.

The judgment confirms that it was not relevant to the decision regarding the additional sum that the claimant had only just beaten their Part 36 offer.

THE FUTURE 

This case provides one of the first indications as to how the court will apply the new sanction under Part 36, and how the court will establish whether or not the additional payment is unjust.
It is an important decision in relation to a sanction which is potentially tempting to oversell when considering whether to make a Part 36 offer or not.

The introduction of this "bonus" has caused great interest amongst individuals and their solicitors alike and as such, to have a firmer idea of how it will actually work in practice is quite a landmark moment in a period where, the vast changes of 1 April 2013 are still being appreciated and adopted.

Whichever side you are on, if you are in any doubt about what to do, seek legal advice.