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Case confirms defendant costs protection rights

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Matthews v Metal Improvements Co (Court of Appeal - 14 March 2007)

The claimant developed a hysterical conversion disorder as a result of an accident at work. Unrelated to this accident, the claimant was suffering from non-Hodgkin's lymphoma and, during a medical examination, a lymph node was detected and a biopsy carried out.

Shortly afterwards, the defendant made a Part 36 payment into court, unaware of the fact that a lymph node had been discovered. This was rejected by the claimant's solicitors. When the results of the biopsy later became available, it was discovered that the lymphoma was aggressive and his life expectancy was just seven years. This reduction in the claimant's life expectancy compelled his solicitors to accept the offer out of time. The defendant was content for this to happen subject to the question of costs.

At first instance, the judge decided that, in accordance with Part 36.20(2) CPR, the claimant should pay the defendant's costs after the latest date for acceptance of the Part 36 payment 'unless ... unjust to do so'. The judge commented that it had been reasonable for the claimant to reject the offer based on the evidence available at the time and so there was no reason why discretion should be exercised in favour of the defendant rather than the claimant.

The defendant appealed. The Court of Appeal held that the judge had applied the wrong test in considering whether the claimant had acted reasonably in rejecting the offer initially. Changes in circumstances between the date of a Part 36 payment and trial were 'contingencies inherent in litigation' and should not in themselves justify a conclusion that the defendant should be deprived of costs protection. The defendant's appeal was allowed.

COMMENT

This case reinforces the costs protection afforded to defendants by the use of Part 36 payments. It is, as yet, uncertain to what extent the precedent set by this case will transcend the changes to Part 36, which have effect from 6 April 2007. In the new Part 36.10(5), which deals with acceptance out of time, the words 'unless it considers it unjust to do so' are replaced by the slightly less favourable 'unless the court orders otherwise' when referring to the court ordering the offeror's costs from the last date of acceptance. - Marie Broomhall, BLM Manchester.

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