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the professional negligence blog

A collaboration between Rebmark Legal Solutions and 1 Chancery Lane

Disclosure under the Professional Negligence Pre-Action Protocol: Webb Resolutions Ltd v Waller Needham & Green [2012]

Non-compliance by claimants with their disclosure obligations under the Professional Negligence Pre-Action Protocol can prove an expensive mistake.  Webb Resolutions Ltd v Waller Needham & Green [2012] EWHC 3529 (Ch) shows why.

 

The Claimant, a purchaser of mortgage loans from institutional lenders – c.f. the preceding post – wished to sue the Defendant solicitors who had been engaged by the original lender.  In July 2010 it sent the Defendant a Letter of Claim.  After initial exchanges the Defendant wrote in January 2011 requesting sight of 12 classes of documents which it said it needed to prepare its Letter of Response.  The Claimant asserted that the documents were for the most part unnecessary and that no more would be provided until liability was admitted.  In May 2011 the Claimant made a Part 36 Offer on the usual 21-day terms.  The Defendant objected that it could neither serve a Letter of Response nor advise on the merits of the offer without receipt of the requested documents.

 

The Claimant was having none of that.  In September 2011 it went ahead and issued proceedings.  In its Defence the Defendant pleaded extensively from the Protocol and repeated its stance regarding the documents.  In March 2012 the Claimant provided standard disclosure, inspection took place, and in May 2012 the Defendant accepted the Part 36 Offer made a year earlier.

 

As the offer had been accepted after expiry of the 21-day period the automatic costs provision in rule 36.10(1) – defendant pays all – no longer applied, and instead costs became a matter for the court’s discretion under rule 36.10(4).  The default setting in that situation is that the claimant gets his costs up to the date when the relevant period expires, and the offeree is liable for the offeror’s costs thereafter until acceptance: rule 36.10(5).  The court should depart from the normal order only if it would be unjust not to, having regard to all the circumstances but in particular the four matters set out in the analogous rule 36.14(4): SG v Hewitt [2012] EWCA Civ 1053.

 

In this case the normal order would have resulted in the Defendant paying all of the Claimant’s costs both before and after issue.  However the judge (John Baldwin QC sitting as a deputy) was underwhelmed by the Claimant’s conduct.  He noted that the stated aim of the Protocol (paragraph A2) is to establish a framework in which there is an early exchange of information so that the claim can be fully investigated and, if possible, resolved without the need for litigation.  He found that although the Defendant’s early requests for disclosure were overambitious the Defendant had made out a good case for why it needed some of the documents and the Claimant, if acting reasonably, would have supplied copies of the files and not merely extracts from them.  By failing to do so the Claimant offended against the letter and the spirit of the Protocol.  That justified a departure from the normal order.

 

What order to make instead?  The judge began by holding that the Defendant should pay the Claimant’s costs incurred up until the end of the 21-day period (i.e. until June 2011), notwithstanding that the Defendant had been awaiting sight of the documents since the previous January.  He rejected the Defendant’s argument that the Claimant’s costs should be disallowed from that earlier date, reasoning that that would place the Defendant in a better position than if it had accepted the Claimant’s Part 36 Offer in time and the automatic costs order under rule 36.10(1) had taken effect.  It would be “rare indeed”, he said, that a party could improve his position on costs by waiting till the relevant period had expired, so as to take advantage of the more flexible position under rule 36.10(4).

 

In so saying the judge was perhaps overlooking two things.  First, it didn’t follow that settlement by acceptance of the Claimant’s Part 36 Offer was the best the Defendant could have hoped for.  Given the judge’s finding that the Claimant’s conduct had reduced the prospects of early settlement he could have concluded that, if the disclosure had been provided promptly, the case would probably have settled earlier even than June 2011 - for example, as the result of acceptance of a Part 36 Offer made by the Defendant upon viewing the documents.  (The Defendant had in fact made its own offer as early as December 2010, albeit at a nuisance level.)  So the judge wasn’t bound to treat all costs incurred prior to the end of the 21-day period as necessarily beyond the reach of his discretion.

 

Secondly, the automatic costs order under rule 36.10(1) is not quite as inflexible as it looks.  In Lahey v Pirelli Tyres Ltd [2007] EWCA Civ 91 the Court of Appeal held that although the rule deprived the court of its general discretionary powers under rule 44.3, nonetheless on any detailed assessment the costs judge could still disallow entire sections of the claimant’s bill of costs on the footing that they were costs "unreasonably incurred": rule 44.4(1).  The Court cited as an example (at [24]) that if the costs judge considered that the claimant had acted unreasonably in refusing an offer to settle made before proceedings were issued, he was entitled to disallow all the costs post-issue.  (See too Re (Edwards & Anor) v Environment Agency & Ors [2010] UKSC 57 at [21].)  So if the judge in Webb Resolutions had deprived the Claimant of some of its costs incurred before June 2011 he wouldn’t necessarily have been rewarding the Defendant for its delay: even if the matter had concluded with an acceptance of the Claimant’s Part 36 Offer, a costs judge could have disallowed just such costs on a detailed assessment anyway.

 

As for the costs incurred after June 2011, the judge felt unconstrained by the automatic rule and adopted a harder stance.  He held that it was significantly more likely than not that such costs would not have been incurred at all had the Claimant acted reasonably and responded properly to the letters of request for disclosure: by implication, the matter would have settled.  Therefore the Claimant, far from having its costs in respect of that period, should be ordered to pay the equivalent costs incurred by the Defendant.

 

One further point is worth making.  For the purposes of rule 36.10(1) “the relevant period” for accepting a Part 36 offer means, in the case of an offer made more than 21 days before trial, the period stipulated in the offer letter “or such longer period as the parties agree”: rule 36.3(1)(c)(i).  So a defendant who receives a Part 36 offer at a time when the information available to him is incomplete should be wary of negotiating any extension of time for acceptance until after provision of the missing documents.  If the defendant then accepts the offer within the extended period he will deprive himself of any opportunity to recover any of his own costs from the claimant, because the automatic rule will take effect.  Even if he then delays acceptance until after the extended deadline, he is still likely to be met with the argument that he must bear all the claimant’s costs up to the deadline on the authority of Webb Solutions.  Better, then, to protest at the claimant’s breach of the Protocol and let the original acceptance period go by default.

 

 
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