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Court of Appeal considers dishonesty and its effect on Part 36 offers

A decision on dishonesty and its effect on costs has now been considered by the Court of Appeal in the case of Tuson v Murphy.  This concerned the issue of costs whereby a Defendant’s Part 36 offer was made in the knowledge of a Claimant’s material non-disclosure.

The background of this case involved a Claimant who sustained an injury in August 2010, and broke her right arm.  Liability was admitted.  The Claimant subsequently gave up work as a schoolteacher in September 2012 and issued proceedings in August 2013.  Initially the claim was valued at a sizable 1.5 million.  In 2013 the Claimant obtained a playgroup franchise and ran the first session in January 2014.  However, in April 2014, the Claimant served a witness statement which failed to mention the franchise.  Additional statements and reports from third parties served subsequently failed to address the franchise as well.  The Claimant’s Schedule of Loss, served in July, included a substantial claim for future loss of earnings based on the opinion of an expert who had not been informed about the franchise.

The Defendant became aware of the franchise and informed the claimant of their knowledge in June 2015.  The Claimant eventually dealt with this and provided reasons for her non-disclosure in a third witness statement served in September 2015.

A week later the Defendant made a Part 36 offer and on 1st December 2005 the Claimant accepted this.  However, there was a failure to agree costs which resulted in the matter going before HHJ Harris for a ruling.

HHJ Harris ordered that "the Defendant to pay the Claimant’s costs only up to 1st April 2014 and ordered the Claimant to pay the Defendant’s costs thereafter”.

On appeal the Claimant argued that the offer had been made by way of Part 36 and in the full knowledge of the Claimant’s non-disclosure and the costs consequences of making such an offer.  The Defendant, did in fact, have the opportunity to make a Calderbank offer which could specify the exact consequences of acceptance.

Whilst the Appeal Judge commented that the reasons given in the Claimant’s third witness statement were "unconvincing” and that HHJ Harris was "entitled to described her conduct as dishonest and misleading” he could not agree the his decision on costs or the reasoning that led him to that decision.

"The defendant’s insurers, through their very experienced solicitors, made the unconditional Part 36 offer in the full knowledge of the claimant’s material non-disclosure and knowing that acceptance within 21 days would (by virtue of CPR 36.13(1)) give the claimant her costs to date as of right”.

He therefore ordered the defendant to pay the claimant’s costs up to 8th October 2015, and the claimant to pay the defendant’s costs until 1st December 2015.

Who is to say how the defendant may have dealt with this claim had section 57 of the Criminal Justice of Courts Act had been in play at the time the claim commenced.  However, in the case of Tuson the Court of Appeal made the important point that in making the Part 36 offer in this instance the defendant was aware of the non-disclosure but settled the claim on a value they were satisfied it was worth.

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