A High Court Master recently held in MRA v The Education Fellowship Limited  EWHC 1069 (QB) that a claimant, who had accepted an offer to settle their claim two years after the offer had expired, still had to pay the defendant’s post-expiry costs, despite the fact that the claimant was a minor. As a result, their awarded damages were cut in half (and then some).
Is there a gap in the law?
What is a Part 36 Offer?
“Part 36” is a provision contained in the Civil Procedure Rules (CPR) designed to enable parties to reach settlement without the need for a trial. Both claimants and defendants can utilise Part 36 to make an offer. These offers are also made “without prejudice”, meaning that the court is not made aware of the offer until after judgment has been reached.
The important point to note about Part 36 offers is that rejecting an offer made by the other side can come with financial implications. The rules are complex, however in general terms if a party rejects an offer made under Part 36, there is a risk that they may become liable to pay the other side’s costs from the date of expiry of the offer.
If a claimant rejects a defendant’s offer, costs may be payable if they fail to obtain a more advantageous judgment.
Conversely, if a defendant rejects a claimant’s offer, costs may be payable if the claimant obtains a judgment that is at least as advantageous as the offer made.
It is this financial risk that encourages the parties to make Part 36 offers and to carefully consider any offer that they receive, as the costs implications can be significant.
Why is MRA v The Education Fellowship Limited  EWHC 1069 (QB) notable?
The Claimant, with ASD and ADHD diagnoses, claimed compensation for historic child abuse by a teacher employed by the defendant. The teacher was prosecuted and sentenced to prison.
The judgment concerns the cost consequences following from the claimant’s acceptance of a Part 36 offer of £80,000 on 2nd April 2020, the offer having been made on 19th January 2018, almost 26 months’ after its expiry.
The claimant was a minor and the late acceptance of the offer was caused by the claimant’s uncertain prognosis, which had to be fully determined before any offer could be considered and accepted.
Although the claimant was a minor, and therefore a ‘protected party’, the Court held that the usual Part 36 costs consequences should still apply. The result was that the claimant lost approximately £45,000 in costs from their £80,000 settlement – a significant sum.
The reason for this is that a defendant can only be awarded its costs for the late acceptance of a Part 36 offer in a personal injury/clinical negligence case where judgment has taken place, or there is an order for damages. In cases involving a protected party, any settlement reached out of court must be approved by way of an order- and that was what happened in this case. As the claimant was a protected party, an order of the court had to be obtained approving the settlement, and as a result the defendant was awarded their post-expiry costs against the damages.
The purpose of having the court approve an out of court settlement is to safeguard protected parties and to ensure that the settlement is fair. However, it is this very safeguard that is resulting in protected parties having to pay the defendant’s post-expiry costs where they would otherwise not have if they had capacity.
In contrast, a claimant who is not a protected party does not need court approval for an out of court settlement, and as such is not liable to pay the defendant’s post-expiry costs in the absence of any order or judgment.
This case highlights the real disadvantage for minors (and those otherwise lacking capacity) in the late acceptance of a Part 36 offer, compared to claimants who have capacity. This is clearly demonstrated in MRA v The Education Fellowship Limited:- while the claimant in this case walked away with £35,000 in compensation, a non-protected claimant in the situation would have obtained £80,000.
Arguably, the law should be amended urgently to address this gap in the rules to ensure that protected parties are not being unfairly disadvantaged.