Crooks v Hendricks Lovell Ltd [2016] EWCA Civ 8

[2016] EWCA Civ 8

Case No B3/2014/3951

IN THE COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE COUNTY COURT AT SLOUGH

MR RECORDER CATFORD

2YK71281

Venue Royal Courts of Justice, Strand, London, WC2A 2LL

Date 15 January 2016

Before

LORD JUSTICE MOORE-BICK

LADY JUSTICE ARDEN

LORD JUSTICE LINDBLOM

Between

Colin CrooksAppellant

Hendricks Lovell LimitedRespondent

Mr Christopher Barnes (instructed by BGR Bloomer) for Appellant

Mr Angus Withington (instructed by Langleys Solicitors LLP) for Respondent

Hearing Hearing date: 26 November 2015

Judgment

Introduction

[1]This appeal concerns the meaning of a defendant’s offer to settle a claim for damages for personal injury under CPR Part 36, and the consequences of that offer for costs once judgment had been given for the claimant and a revised certificate of recoverable benefits issued by the Compensation Recovery Unit (“CRU”).

[2]The appellant, Mr Colin Crooks, is the claimant in these proceedings. The respondent, Hendricks Lovell Ltd., is the defendant. Mr Crooks was employed by Hendricks Lovell as a lorry driver. On 9 July 2009, at Hendricks Lovell’s yard in Dawley, he fell from the lorry he was loading and injured his neck and back. Hendricks Lovell admitted liability for the accident in November 2009, but issues of medical causation remained. Mr Crooks’ claim in negligence and breach of statutory duty was issued in July 2012. It went to trial in November 2013, before Mr Recorder Catford in the Slough County Court. On 15 November 2013 the recorder gave judgment for Mr Crooks in the sum of £29,550, adjourning his consideration of costs to await the outcome of a review by the CRU of the certificate of recoverable benefits it had issued in August 2013. On 25 June 2014, in the light of a revised certificate issued by the CRU in March 2014, the recorder ordered that Mr Crooks was to give credit for Hendricks Lovell’s interim payments of £18,500 and for the sum of £6,760.11 now repayable to the CRU, and that Hendricks Lovell were to pay him the remaining sum of £4,289.89. But on 17 October 2014, having considered the parties’ submissions on costs, the recorder found that Mr Crooks had failed to better a Part 36 offer made by Hendricks Lovell in September 2012 for “£18,500 net of CRU …”. He therefore made an order for costs in favour of Hendricks Lovell.

[3]Mr Crooks now appeals against that order with permission granted by Dame Janet Smith.

The issues in the appeal

[4]As they emerge from Mr Crooks’ grounds of appeal and Hendricks Lovell’s respondent’s notice, the three main issues in the appeal are these: first, whether the recorder misconstrued Hendricks Lovell’s Part 36 offer, misdirecting himself as to the meaning of the words “net of CRU” (ground 1 in the appellant’s notice); second, whether CPR Part 36.14(1) required him to consider the effect of the offer on 15 November 2013, the day on which he gave judgment for Mr Crooks, rather than waiting for the CRU’s decision on its review of the certificate (ground 1 in the respondent’s notice); and third, whether he was wrong to award costs in favour of Hendricks Lovell. That third issue requires us to consider whether the recorder was wrong to find that Mr Crooks had failed to beat the Part 36 offer (ground 2 in the appellant’s notice). It also embraces two subsidiary questions raised in the appellant’s notice: whether, in reaching his decision on costs, the recorder was wrong to have regard to the fact that Mr Crooks could have sought a review or appealed the original CRU certificate (ground 3), and whether he was wrong to reinstate the part of his order dated 21 November 2013 (approved by him on 15 November 2013), in which he had referred to the relevant amounts of recoverable benefit as they were at that time (ground 4). Finally, it is asserted on behalf of Hendricks Lovell that if this is not a case truly within the scope of Part 36 the recorder should nevertheless have made the order he did on 17 October 2014, in the exercise of his discretion under CPR Part 44 (ground 2 in the respondent’s notice).

CPR Part 36

[5]The relevant provisions of CPR Part 36, as they were at the time of the recorder’s decision on costs, were these:

“Costs consequences following judgment 36.14 (1) This rule applies where upon judgment being entered – (a) a claimant fails to obtain a judgment more advantageous than a defendant’s Part 36 offer; or (b) judgment against the defendant is at least as advantageous to the claimant as the proposals contained in a claimant’s Part 36 offer. (1A) For the purposes of paragraph (1), in relation to any money claim or money element of a claim, “more advantageous” means better in money terms by any amount, however small, and “at least as advantageous” shall be construed accordingly. (2) Subject to paragraph (6), where rule 36.14(1)(a) applies, the court will, unless it considers it unjust to do so, order that the defendant is entitled to – (a) his costs from the date on which the relevant period expired; and (b) interest on those costs. … (4) In considering whether it would be unjust to make the orders referred to in paragraphs (2) and (3) above, the court will take into account all the circumstances of the case including – (a) the terms of any Part 36 offer; (b) the stage of the proceedings when any Part 36 offer was made, including in particular how long before the trial started the offer was made; (c) the information available to the parties at the time when the Part 36 offer was made; and (d) conduct of the parties with regard to the giving or refusing to give information for the purposes of enabling the offer to be made or evaluated. … (6) Paragraphs (2) and (3) of this rule do not apply to a Part 36 offer – (a) that has been withdrawn; (b) that has been changed so that its terms are less advantageous to the offeree, and the offeree has beaten the less advantageous offer; (c) made less than 21 days before trial, unless the court has abridged the relevant period. (Rule 44.3 requires the court to consider an offer to settle that does not have the costs consequences set out in this Part in deciding what order to make about costs.) Deduction of benefits and lump sum payments 36.15 (1) In this rule … (a) “the 1997 Act” means the Social Security (Recovery of Benefits) Act 1997; … (c) “recoverable amount” means – (i) “recoverable benefits” as defined in section 1(4)(c) of the 1997 Act; … … (d) “deductible amount” means – (i) any benefits by the amount of which damages are to be reduced in accordance with section 8 of, and Schedule 2 to the 1997 Act (“deductible benefits”) … … (e) “certificate” – (i) in relation to recoverable benefits is construed in accordance with the provisions of the 1997 Act … … (2) This rule applies where a payment to a claimant following acceptance of a Part 36 offer would be a compensation payment as defined in section 1(4)(b) or 1A(5)(b) of the 1997 Act. (3) A defendant who makes a Part 36 offer should state either – (a) that the offer is made without regard to any liability for recoverable amounts; or (b) that it is intended to include any deductible amounts. (4) Where paragraph (3)(b) applies, paragraphs (5) to (9) of this rule will apply to the Part 36 offer. (5) Before making the Part 36 offer, the offeror must apply for a certificate. (6) Subject to paragraph (7), the Part 36 offer must state – (a) the amount of gross compensation; (b) the name and amount of any deductible amount by which the gross amount is reduced; and (c) the net amount of compensation. (7) If at the time the offeror makes the Part 36 offer, the offeror has applied for, but has not received a certificate, the offeror must clarify the offer by stating the matters referred to in paragraphs (6)(b) and (6)(c) not more than 7 days after receipt of the certificate. (8) For the purposes of rule 36.14(1)(a), a claimant fails to recover more than any sum offered … if the claimant fails upon judgment being entered to recover a sum, once deductible amounts identified in the judgment have been deducted, greater than the net amount stated under paragraph (6)(c). (Section 15(2) of the 1997 Act provides that the court must specify the compensation payment attributable to each head of damage. …) (9) Where – (a) further deductible amounts have accrued since the Part 36 offer was made; and (b) the court gives permission to accept the Part 36 offer, the court may direct that the amount of the offer payable to the offeree shall be reduced by a sum equivalent to the deductible amounts paid to the claimant since the date of the offer. (Rule 36.9(3)(b) states that permission is required to accept an offer where the relevant period has expired and further deductible benefits have been paid to the claimant.)” (1) This rule applies where upon judgment being entered – (a) a claimant fails to obtain a judgment more advantageous than a defendant’s Part 36 offer; or (b) judgment against the defendant is at least as advantageous to the claimant as the proposals contained in a claimant’s Part 36 offer. (1A) For the purposes of paragraph (1), in relation to any money claim or money element of a claim, “more advantageous” means better in money terms by any amount, however small, and “at least as advantageous” shall be construed accordingly. (2) Subject to paragraph (6), where rule 36.14(1)(a) applies, the court will, unless it considers it unjust to do so, order that the defendant is entitled to – (a) his costs from the date on which the relevant period expired; and (b) interest on those costs. … (4) In considering whether it would be unjust to make the orders referred to in paragraphs (2) and (3) above, the court will take into account all the circumstances of the case including – (a) the terms of any Part 36 offer; (b) the stage of the proceedings when any Part 36 offer was made, including in particular how long before the trial started the offer was made; (c) the information available to the parties at the time when the Part 36 offer was made; and (d) conduct of the parties with regard to the giving or refusing to give information for the purposes of enabling the offer to be made or evaluated. … (6) Paragraphs (2) and (3) of this rule do not apply to a Part 36 offer – (a) that has been withdrawn; (b) that has been changed so that its terms are less advantageous to the offeree, and the offeree has beaten the less advantageous offer; (c) made less than 21 days before trial, unless the court has abridged the relevant period. (Rule 44.3 requires the court to consider an offer to settle that does not have the costs consequences set out in this Part in deciding what order to make about costs.) Deduction of benefits and lump sum payments (1) In this rule … (a) “the 1997 Act” means the Social Security (Recovery of Benefits) Act 1997; … (c) “recoverable amount” means – (i) “recoverable benefits” as defined in section 1(4)(c) of the 1997 Act; … … (d) “deductible amount” means – (i) any benefits by the amount of which damages are to be reduced in accordance with section 8 of, and Schedule 2 to the 1997 Act (“deductible benefits”) … … (e) “certificate” – (i) in relation to recoverable benefits is construed in accordance with the provisions of the 1997 Act … … (2) This rule applies where a payment to a claimant following acceptance of a Part 36 offer would be a compensation payment as defined in section 1(4)(b) or 1A(5)(b) of the 1997 Act. (3) A defendant who makes a Part 36 offer should state either – (a) that the offer is made without regard to any liability for recoverable amounts; or (b) that it is intended to include any deductible amounts. (4) Where paragraph (3)(b) applies, paragraphs (5) to (9) of this rule will apply to the Part 36 offer. (5) Before making the Part 36 offer, the offeror must apply for a certificate. (6) Subject to paragraph (7), the Part 36 offer must state – (a) the amount of gross compensation; (b) the name and amount of any deductible amount by which the gross amount is reduced; and (c) the net amount of compensation. (7) If at the time the offeror makes the Part 36 offer, the offeror has applied for, but has not received a certificate, the offeror must clarify the offer by stating the matters referred to in paragraphs (6)(b) and (6)(c) not more than 7 days after receipt of the certificate. (8) For the purposes of rule 36.14(1)(a), a claimant fails to recover more than any sum offered … if the claimant fails upon judgment being entered to recover a sum, once deductible amounts identified in the judgment have been deducted, greater than the net amount stated under paragraph (6)(c). (Section 15(2) of the 1997 Act provides that the court must specify the compensation payment attributable to each head of damage. …) (9) Where – (a) further deductible amounts have accrued since the Part 36 offer was made; and (b) the court gives permission to accept the Part 36 offer, the court may direct that the amount of the offer payable to the offeree shall be reduced by a sum equivalent to the deductible amounts paid to the claimant since the date of the offer. (Rule 36.9(3)(b) states that permission is required to accept an offer where the relevant period has expired and further deductible benefits have been paid to the claimant.)”

The statutory scheme for the recovery of benefits

[6]The 1997 Act introduced a scheme for the recovery of certain benefits, including social security benefits paid or likely to be paid in respect of injuries sustained in an accident at work, if a compensation payment has been made to the injured person (sections 1, 2 and 3 of the 1997 Act). The scheme is administered by the CRU within the Department for Work and Pensions. The underlying principle is that a person should not be compensated more than once for the injury the compensator has caused. No compensation payment may be made – other than an exempt payment – unless the compensator has applied to the CRU for a certificate specifying the recoverable benefits that have been or are likely to be paid and the total amount to be repaid (sections 4 and 5). The scheme places responsibility for repaying the relevant benefits not on injured person himself, but on the compensator. The compensator will be liable to pay damages to the injured person and to pay the Secretary of State for Work and Pensions an amount equal to the total amount of the recoverable benefits (section 6).

[7]Section 8 of the 1997 Act provides for the reduction of compensation payments:

“(1) This section applies in a case where, in relation to any head of compensation listed in column 1 of Schedule 2 – (a) any of the compensation payment is attributable to that head, and (b) any recoverable benefit is shown against that head in column 2 of the Schedule. (2) In such a case, any claim of a person to receive the compensation payment is to be treated for all purposes as discharged if – (a) he is paid the amount (if any) of the compensation payment calculated in accordance with this section, and (b) if the amount of the compensation payment so calculated is nil, he is given a statement saying so by the person who (apart from this section) would have paid the gross amount of the compensation payment. (3) For each head of compensation listed in column 1 of the Schedule for which paragraphs (a) and (b) of subsection (1) are met, so much of the gross amount of the compensation payment as is attributable to that head is to be reduced (to nil, if necessary) by deducting the amount of the recoverable benefit or, as the case may be, the aggregate amount of the recoverable benefits shown against it. (4) Subsection (3) is to have effect as if a requirement to reduce a payment by deducting an amount which exceeds that payment were a requirement to reduce that payment to nil. (5) The amount of the compensation payment calculated in accordance with this section is – (a) the gross amount of the compensation payment, less (b) the sum of the reductions made under subsection (3), (and, accordingly, the amount may be nil).” (a) any of the compensation payment is attributable to that head, and (b) any recoverable benefit is shown against that head in column 2 of the Schedule. (2) In such a case, any claim of a person to receive the compensation payment is to be treated for all purposes as discharged if – (a) he is paid the amount (if any) of the compensation payment calculated in accordance with this section, and (b) if the amount of the compensation payment so calculated is nil, he is given a statement saying so by the person who (apart from this section) would have paid the gross amount of the compensation payment. (3) For each head of compensation listed in column 1 of the Schedule for which paragraphs (a) and (b) of subsection (1) are met, so much of the gross amount of the compensation payment as is attributable to that head is to be reduced (to nil, if necessary) by deducting the amount of the recoverable benefit or, as the case may be, the aggregate amount of the recoverable benefits shown against it. (4) Subsection (3) is to have effect as if a requirement to reduce a payment by deducting an amount which exceeds that payment were a requirement to reduce that payment to nil. (5) The amount of the compensation payment calculated in accordance with this section is – (a) the gross amount of the compensation payment, less (b) the sum of the reductions made under subsection (3), (and, accordingly, the amount may be nil).”

[8]Sections 10 and 11 provide, respectively, for the review of, and appeals against, certificates of recoverable benefits. Section 14 contains supplementary provisions for reviews and appeals: “(1) This section applies in cases where a fresh certificate of recoverable benefits is issued as a result of a review under section 10 or an appeal under section 11. (2) If –(a) a person has made one or more payments to the Secretary of State under section 6, and

(b) in consequence of the review or appeal, it appears that the total amount paid is more than the amount that ought to have been paid, regulations may provide for the Secretary of State to pay the difference to that person, or to the person to whom the compensation payment is made, or partly to one and partly to the other. …”. (2) If – (a) a person has made one or more payments to the Secretary of State under section 6, and (b) in consequence of the review or appeal, it appears that the total amount paid is more than the amount that ought to have been paid, regulations may provide for the Secretary of State to pay the difference to that person, or to the person to whom the compensation payment is made, or partly to one and partly to the other. …”.

[9]The regulations made under section 14 are the Social Security (Recovery of Benefits) Regulations 1997. Regulation 11 provides for “Adjustments”. So far as is relevant here, it states:

“(1) Where the conditions specified in subsection (1) and paragraphs (a) and (b) of subsection (2) of section 14 are satisfied, the Secretary of State shall pay the difference between the amount that has been paid and the amount that ought to have been paid to the compensator. (2) Where the conditions specified in subsection (1) and paragraphs (a) and (b) of subsection (3) of section 14 are satisfied, the compensator shall pay the difference between the total amounts paid and the amount that ought to have been paid to the Secretary of State. (3) Where the Secretary of State is making a refund under paragraph (1), or demanding payment of a further amount under paragraph (2), he shall send to the compensator (with the refund or demand) and to the person to whom the compensation payment was made a statement showing – (a) the total amount that has already been paid to the Secretary of State; (b) the amount that ought to have been paid; and (c) the difference, and whether a repayment by the Secretary of State or a further payment to him is required. (4) This paragraph applies where – (a) the amount of the compensation payment made by the compensator was calculated under section 8; and (b) the Secretary of State has made a payment under paragraph (1). (5) Where paragraph (4) applies, the amount of the compensation payment shall be recalculated under section 8 to take account of the fresh certificate of recoverable benefits and the compensator shall pay the amount of the increase (if any) to the person to whom the compensation payment was made. …”. (2) Where the conditions specified in subsection (1) and paragraphs (a) and (b) of subsection (3) of section 14 are satisfied, the compensator shall pay the difference between the total amounts paid and the amount that ought to have been paid to the Secretary of State. (3) Where the Secretary of State is making a refund under paragraph (1), or demanding payment of a further amount under paragraph (2), he shall send to the compensator (with the refund or demand) and to the person to whom the compensation payment was made a statement showing – (a) the total amount that has already been paid to the Secretary of State; (b) the amount that ought to have been paid; and (c) the difference, and whether a repayment by the Secretary of State or a further payment to him is required. (4) This paragraph applies where – (a) the amount of the compensation payment made by the compensator was calculated under section 8; and (b) the Secretary of State has made a payment under paragraph (1). (5) Where paragraph (4) applies, the amount of the compensation payment shall be recalculated under section 8 to take account of the fresh certificate of recoverable benefits and the compensator shall pay the amount of the increase (if any) to the person to whom the compensation payment was made. …”

The proceedings before the recorder

[10]On 23 July 2012 the CRU issued a certificate of recoverable benefits, which specified, at 12 September 2012, figures of £4,524.70 for Industrial Injuries Disablement Benefit, £1,188.18 for Employment and Support Allowance (Income Related) and £7,982.95 for Employment and Support Allowance (Contributory), making a total of £13,695.83. This certificate was valid until 11 November 2012.

[11]Hendricks Lovell made its offer to settle the claim under CPR Part 36 on 12 September 2012. The offer was made in the standard form N242A “Notice of offer to settle”. In the box on the first page of the offer form the offer was stated to be:

“£18,500 net of CRU and inclusive of interim payments in the sum of £18,500.”

On the second page of the form, in the section headed “To be completed by defendants only”, the box against the statement “This offer is made without regard to any liability for recoverable benefits under the Social Security (Recovery of Benefits Act) 1997” was ticked. The alternative would have been to tick the box against the statement “This offer is intended to include any relevant deductible benefits for which I am liable under the Social Security (Recovery of Benefits Act) [sic] 1997”. No figure was entered in the space left for stating an “amount … offered by way of gross compensation”. No limit of time was imposed upon the offer.

[12]On 14 August 2013 the CRU issued a further certificate of recoverable benefits specifying recoverable benefits, at 13 November 2013, of £16,262.76 – comprising £6,475.92 in Industrial Injuries Disablement Benefit, £1,803.89 in Employment and Support Allowance (Income Related), and £7,982.95 in Employment and Support Allowance (Contributory). This certificate was valid until 3 December 2013.

[13]On 16 October 2013 Mr Crooks made a Part 36 offer of £47,500, also “net of CRU” and including the interim payments. Like Hendricks Lovell’s Part 36 offer, it was made on form N242A. It was in these terms:

“The Claimant offers the amount of £47,500.00 net of CRU and inclusive of interim payments in the sum of £18[,]500.00 in full and final settlement of the claim.”

This offer was withdrawn on 13 November 2013.

[14]The trial took place on 14 and 15 November 2013. By now Mr Crooks was claiming special damages of £184,674 – including £98,985 for past loss of earnings and £83,794 for future loss of earnings – and general damages of £12,500. Hendricks Lovell’s position in its “Counter Schedule of Special Damages” dated 20 September 2013 was that Mr Crooks was entitled to special damages of £3,419.77, including past loss of earnings of £3,199 but nothing for future loss of earnings. The difference between the parties was as great as this because the orthopaedic experts on either side were so far apart in their views on causation.

[15]In the judgment he gave on 15 November 2013 the recorder found that the symptoms in Mr Crooks’ lumbar spine had not been caused by the accident, that those symptoms would in any event have prevented him from continuing to work for Hendricks Lovell from 8 July 2010 – 12 months after the accident, that there were symptoms in his cervical spine sufficient to prevent him from working, but that these had resolved by 15 March 2011 – 20 months after the accident. The claim for loss of earnings was therefore limited to 12 months.

[16]The preamble to the recorder’s order of 15 November 2013 – which he approved on 21 November 2013 – stated that the court had awarded “damages of £25,500 (inclusive of interest) in respect of the Claimant’s past loss of earnings for the relevant period of 12 months”, and that “the amount awarded for loss of earnings [had] been reduced by £16,262.76 (comprising £6,475.92 by way of Disablement Pension (IIDB), £1,803.89 by way of Employment and Support Allowance (Income Related) (ESAI) and £7,982.95 by way of Employment and Support Allowance (Contributory) (ESAC)) in accordance with Section 8 and Schedule 2 to the Social Security (Recovery of Benefits) Act 1997 and the present CRU certificate issued by the Department of [sic] Work and Pensions”. It also recorded the fact that, between 21 April 2010 and 11 February 2011, Hendricks Lovell had paid Mr Crooks a total of £18,500 by way of interim payments. Paragraph 1 of the order stated that there was to be judgment for Mr Crooks in the sum of £29,550, comprising £4,000 for “general damages for pain, suffering and loss of amenity”, £25,500 for “past loss of earnings”, and £50 for “past miscellaneous expenses”, all these awards including interest. Paragraph 2 stated:

“The Defendant has discharged the judgment sum by virtue of the interim payments and deductible benefits referred to in the preamble above …”

. Because Mr Crooks had indicated his intention to “appeal and/or review” the CRU’s certificate of 14 August 2013, the recorder adjourned his consideration of costs for the parties’ further submissions in due course (paragraph 3(3) of the order).

[17]On 4 December 2013 Mr Crooks’ solicitors wrote to the CRU, requesting a review of the certificate. On 20 March 2014 the CRU issued its decision on the review, accepting that, in the light of the recorder’s judgment, “the Employment Support Allowance …, the Disability [L]iving Allowance … and the Industrial Injuries Disablement Benefit … can be limited to 15 March 2011”. It did not accept that the “[Employment Support Allowance] should be limited to 10 July 2010”, despite the fact that the recorder had found that Mr Crooks should then have been fit to return to work but for his underlying back condition. It said Mr Crooks’ accident “[did] not have to be 100% responsible for the claim to benefit”, that “[even] if the back problem was considered no longer relevant to the compensation claim by July 2010, it is apparent that he had ongoing issues with his shoulder, neck and right arm”, and that he had “scored more than enough points to satisfy the work capability assessment”. Because the recorder’s judgment had not compensated Mr Crooks beyond 15 March 2011, the recovery of all benefits was limited to that date. A revised certificate was issued, showing a gross liability to the Department for Work and Pensions of £11,735.91 for recoverable benefits paid to Mr Crooks as a consequence of the accident. This comprised £2,117.68 for Industrial Injuries Disablement Benefit, £4,642.43 for Employment and Support Allowance (Contributory) – making a total of £6,760.11 deductible from Mr Crooks’ compensation, plus £2,435.70 for Disability Living Allowance (the care component) and £2,540.10 for Disability Living Allowance (the mobility component). Thus the relevant difference in recoverable benefit between the August 2013 certificate and this one was £9,502.65.

[18]On 1 May 2014 Hendricks Lovell’s solicitors sent Mr Crooks’ solicitors a cheque payable to Mr Crooks for £9,502.65, which, we were told, was later returned.

[19]In a further order, dated 25 June 2014, the recorder varied his order of 21 November 2013, ordering that the judgment sum of £29,550 was to be discharged by Mr Crooks giving credit for Hendricks Lovell’s interim payments of £18,500 and “for the sum of £6,760.11 which is repayable to the Department of [sic] Work and Pensions Compensation Recovery Unit (comprising £4,642.43 ESAC and £2,117.68 IIDB)”, that Hendricks Lovell was to pay Mr Crooks “[the] remaining sum of £4,289.89” within 21 days, and that paragraph 2 of the order of 15 November 2013 was to be varied accordingly (paragraph 1 of the order); and that Hendricks Lovell was to be entitled to the benefit of any monies repaid by the Department for Work and Pensions (paragraph 2). He also gave directions for the parties to lodge written submissions on costs (paragraph 3).

[20]Hendricks Lovell made an application to the court on 3 July 2014 seeking to set aside paragraphs 1 and 2 of the order of 25 June 2014. The parties then made their written submissions on costs and on Hendricks Lovell’s application. On 17 October 2014, having considered the parties’ submissions, the recorder gave a judgment in which he concluded that Mr Crooks had failed to beat Hendricks Lovell’s Part 36 offer. He ordered that paragraphs 1 and 2 of his order of 25 June 2014 were to be set aside and paragraphs 1 and 2 of his order of 15 November 2013 reinstated (paragraph 1 of his order), that Hendricks Lovell pay Mr Crooks’ costs up to and including 2 October 2012 – 21 days after the Part 36 offer was made (paragraph 3), that Mr Crooks was to pay Hendricks Lovell’s costs on and after 3 October 2012 (paragraph 4), and that Mr Crooks was to pay the sum of £5,212.76 to Hendricks Lovell within 14 days “as a partial repayment of the interim payments previously made by [Hendricks Lovell], pursuant to CPR 25.8(2)(a)” (paragraph 7).

[21]On 3 November 2014 Hendricks Lovell’s solicitors wrote to Mr Crooks’ solicitors:

“Following the judgment of Recorder Catford [sic], please confirm whether you will now accept a cheque for £9,502.65 in return for a cheque for £5,212.76 to us? Alternatively, if it would assist and if you agree that this is the net effect of Mr Recorder Catford’s order, we could seek instructions from insurers as to whether they would be prepared to agree raising a cheque for you in the sum of £4,289.89. We look forward to hearing from you. …”

. We have not seen any further relevant correspondence.

Did the recorder misdirect himself as to the meaning of Hendricks Lovell’s Part 36 offer?

[22]The recorder found that the offer made by Hendricks Lovell on 12 September 2013 “was compliant with the provisions of Part 36” (paragraph 30 of his judgment of 17 October 2014). It complied, he said, with the applicable provisions of CPR 36.2(4) and CPR 36.3(2) and (4) (paragraph 31). He rejected the submission made on behalf of Mr Crooks that, because the gross value of the offer was not stated, it did not comply with CPR 36.15(6) (paragraph 32). Hendricks Lovell had elected under CPR 36.15(3)(a) to make that the offer “without regard to any liability for recoverable amounts”. Thus “the offer was exclusive” (paragraph 33), and “did not fall within the ambit of [CPR] 36.15(6)” (paragraph 34). In paragraph 35 of his judgment the recorder said this:

“What a Defendant does have to ensure is that a Claimant is aware of the net offer being made. The offer made did that.

(a) ”

Therefore, he found, it was on the basis that the offer “met the requirements of Part 36” that he had to consider whether it had been bettered (paragraph 36). This was not a case in which the court had to consider exercising its discretion as to costs outside the framework provided by Part 36 (paragraph 37). Later in his judgment, when considering whether Mr Crooks had beaten Hendricks Lovell’s offer, he said, in paragraph 57, that Hendricks Lovell “was originally offering” – by which he clearly meant in the Part 36 offer – “£18,500 plus a payment to CRU for £16,262.76”.

[23]For Mr Crooks, Mr Christopher Barnes submitted that the recorder was clearly wrong to interpret the Part 36 offer as being one of “£18,500 plus a payment to CRU of £16,262.76”. That was not the offer Hendricks Lovell had made. Their offer was a net offer made without regard to any liability for recoverable amounts. As I understood him, Mr Barnes did not maintain the submission he made to the recorder, that Hendricks Lovell’s offer ought to have stated “the amount of gross compensation”. But he did submit that it was impossible to reconcile the concept of the offer being made “net of CRU” with its being made “without regard to any liability for recoverable benefits”. For Hendricks Lovell, Mr Angus Withington submitted that when the recorder said the offer was one of “£18,500 plus a payment to CRU of £16,262.76” he was merely recognizing its practical effect, both before and after the review of the CRU certificate. This observation should not be taken out of its proper context. It does not betray a misunderstanding of the offer Hendricks Lovell had made. The offer was a valid Part 36 offer. It was made under CPR 36.15(3)(a) – “without regard to any liability for recoverable amounts”, not under CPR 36.15(3)(b) – with the intention “to include any deductible amounts”. So the provisions in CPR 36.15(5) to (9), including the requirement in CPR 36.15(6)(a) that a Part 36 offer made under CPR 36.15(3)(b) must state “the amount of gross compensation”, were simply not engaged.

[24]I am in no doubt that this was a valid Part 36 offer. I see no contradiction between the concept of the offer being made “net of CRU” and its being made “without regard to any liability for recoverable benefits”. This was plainly an offer made under CPR 36.15(3)(a), and therefore it was not required to state the amount of gross compensation under CPR 36.15(6)(a).

[25]The crucial point here, in my view, is not the amount of gross compensation contemplated by Hendricks Lovell when the offer was made. The offer was entirely silent about that. The crucial point is the meaning of the expression “net of CRU”, which is the way in which the offer was actually framed. I think one has to approach that question keeping in mind the purpose of the offer in the litigation. This was a defendant’s Part 36 offer to a claimant. It was made by Hendricks Lovell, as defendant, with a view to bringing about a settlement of the proceedings. It encouraged Mr Crooks, as claimant, bearing in mind the predictable consequences in costs, to consider whether he would be better off accepting the settlement now offered to him than he would be if his claim proceeded to trial. It must be understood, therefore, as representing the potential advantage to him of accepting what he was now being offered. The potential advantage to him would be the total monetary value of the offer to him as offeree, no matter how much it would cost Hendricks Lovell, as offeror, to settle the claim in this way.

[26]What thendoes the Part 36 offer mean? More particularly, what do the words “net of CRU” mean? The natural meaning of the expression “net of” in a context such as this is familiar. It is that the amount stated to be “net of” something else is the amount that remains after a deduction of tax or other contributions. The appropriate definitions in the New Shorter Oxford English Dictionary (4th edn.) is“(of an amount, weight, etc.) free from or not subject to any deduction, remaining after all necessary deductions have been made; (of a price) to be paid in full, not reduceable; …”. Construing the expression “net of CRU” as “remaining after all necessary deductions of benefit [under the statutory scheme administered by the CRU]” seems to me to make good sense in an offer under CPR 36.15(3)(a) – an offer “made without regard to any liability for recoverable amounts”. This, I believe, is the meaning of the words “net of CRU” in Hendricks Lovell’s Part 36 offer. They cannot sensibly be read in any other way.

[27]It follows that when an offer made in such terms has to be compared to damages awarded by the court so that the court can resolve the question in CPR 36.14, it is necessary to consider the amount of damages in the judgment award after any corresponding adjustments for recoverable benefit have been made to it. The words “without regard to any liability for recoverable amounts” do not mean that the court is to have no regard to the amount of recoverable benefit when deciding whether or not the claimant has obtained a judgment more advantageous than the defendant’s Part 36 offer. In undertaking that task the court must obviously have regard to any necessary subtraction of the final figure for recoverable benefit from the total figure in the judgment award. Otherwise, it would not be comparing like with like. By contrast, an offer made under CPR 36.15(3)(b), which deliberately includes “any deductible amounts”, would have to be compared to the total amount of the judgment award without such adjustment.

[28]In my view the recorder was clearly right to regard Hendricks Lovell’s Part 36 offer as an offer made under CPR 36.15(3)(a). One can only make sense of the offer in that way, giving the words “net of CRU” their natural meaning and the meaning they must bear in the context of Hendricks Lovell’s election that the offer was one “made without any regard to liability for recoverable benefits …”. But if, in paragraph 57 of his judgment, the recorder was intending to interpret the offer as meaning “£18,500 net of CRU plus a payment to CRU for £16,262.76 and inclusive of interim payments in the sum of £18,500”, he was in my view mistaken. The offer was not made in those terms. It was for £18,500, leaving aside any liability in respect of recoverable benefits once such liability had crystallized. So far as Mr Crooks was concerned, the words “net of CRU” meant that the £18,500 already paid to him by Hendricks Lovell would not be reduced by their liability for recoverable benefits, whatever that liability might turn out to be. The final amount of recoverable benefit was at that stage unknown. When it was made, the offer did not seek to anticipate the result of the CRU process, after any review or appeal. It did not identify a hypothetical gross sum, including any notional deductible amounts. It did not set any level or limit to repayments that might in due course fall to be made under the statutory scheme. It acknowledged the statutory scheme only in stating that it was made “net of CRU”. That is how Hendricks Lovell chose to express their offer, and that is how it had to be read when the time came for the court to consider whether, after trial, Mr Crooks had secured a more advantageous result.

Should the recorder have made his decision on costs without awaiting the CRU’s review?

[29]Inhis judgment of 17 October 2014 the recorder said that at the date when judgment on the claim had been given it appeared that Mr Crooks had failed to better Hendricks Lovell’s Part 36 offer “in that after the deduction of benefits in the sum of £16,262.76, he was entitled to £13,287.24 which was £5,212.76 less than the £18,500 being offered” (paragraph 9). The recorder said he had adjourned consideration of costs because he had concluded that “where the appropriate costs order might be dependent on the outcome of the appeal against the CRU certificate” an order in that form was appropriate, because it “avoided a premature determination which one or other party might then seek to overturn following any CRU appeal” (paragraph 12). He accepted that his order of 25 June 2014 should be set aside, and the order of 21 November 2013 reinstated, because when he made the second order he had been unaware of some of the parties’ relevant correspondence with the court (paragraph 29).

[30]The recorder rejected the contention made on behalf of Hendricks Lovell that he had to consider the consequences of the Part 36 offer as they were on 15 November 2013, the date on which judgment on medical causation was given, because, it was said, this was the true effect of the words “upon judgment being entered” in CPR 36.14(1). He said that in his view those words meant that “the elements of the judgment need to be delivered in order to enable a decision to be made as to who is the winner, including the efficacy of any offers”, and this was “not necessarily the same thing as requiring the court to decide the costs issues as that time” (paragraph 39). Here, he said, the parties had known that the CRU’s certificate was to be reviewed in the light of his findings on causation, and one of the reasons for the issue of costs being adjourned was to allow that review to take place before costs were assessed, and it would be “wrong for the Court to proceed on the basis of a CRU deduction which does not reflect the true position” (paragraph 40). Expedition in dealing with the issue of costs was desirable, but it had been “just” in this case to await the outcome of the CRU’s review (paragraph 41). The recorder saw support for this conclusion in the decisions of the Court of Appeal in Williams v Devon County Council

[2003] EWCA Civ 365

andDavies v Inman [1999] PIQR Q26 (paragraph 42). It was his view, therefore, that the issue of costs “can be considered as at the present time; and in the light of the Review Decision of the CRU” (paragraph 43).

[31]Before us Mr Withington repeated the argument that had failed before the recorder. He submitted that the recorder was wrong to take CPR 36.14(1)(a) as meaning the effect of a Part 36 offer could be considered at some stage “after judgment”. This, he said, was contrary to good practice. It is obviously preferable for a court to be able to rule on costs without delay at the conclusion of the litigation – and in this case the court could and should have done that. The rules require Part 36 offers to be expressed sufficiently clearly to enable the court to discern, when judgment is given, whether the judgment is more or less advantageous than the offer to the party to whom the offer was made. In this case it was possible, when judgment was given, to ascertain whether Mr Crooks had done better or worse than the Part 36 offer. If the consequences for costs of a Part 36 offer in a case where the statutory scheme for recoverable benefits is in play can only be determined after a review of, or an appeal against, a certificate issued by the CRU, a party’s Part 36 offer might be rendered ineffective by its own success at trial. It could also lead to the perverse position in which either party could seek advantage by maintaining an argument in a CRU review or appeal contrary to the position it had taken at trial. These difficulties are well illustrated in this case, submitted Mr Withington. Mr Crooks was seeking to persuade the court that although he had not beaten the Part 36 offer when judgment was given he has now beaten it as a result of the CRU’s review. Mr Barnes submitted that the recorder was clearly right to proceed as he did. The statutory arrangements for reviews and appeals under the statutory scheme allow for a review or appeal to follow the settlement or resolution of a claim. In this case, as the recorder rightly held, it was necessary for him to wait for the result of the CRU review before deciding whether Mr Crooks had beaten the Part 36 offer.

[32]I think Mr Barnes’ submissions here are correct. I cannot accept that the words “upon judgment being entered” in CPR 36.14(1) are to be understood in the way Mr Withington suggests, which is that they have the temporal connotation “only on the day when judgment is given and not at any time after that”. That, it seems to me, is an unjustifiably narrow interpretation of those words. They are, I think, properly to be read as meaning “once judgment has been given and not before then”. The regime in CPR 36.14 must be understood as applying to the relevant circumstances as they are once judgment has been given, but not necessarily only at the moment at which it is given. There will be cases in which a judge is entitled not to proceed straight away to make his decision on costs. These will include cases where a judge has to compare a pre-trial offer to settle proceedings and the award of damages he has made in the trial.

[33]The facts of this case demonstrate why that must be so. Here, as the judge knew, the relevant circumstances had not all occurred at the time when judgment was given. The correct amount of recoverable benefits remained to be determined in the CRU’s decision on the review. That decision was not made, and could not have been made until after judgment had been given, because it was a decision that had to be made in the light of the judgment itself. The judge was not constrained by CPR 36.14(1) to make his decision on costs in ignorance of the outcome of the CRU’s review, either leaving that process entirely to one side or speculating on what its result might be. As he said in paragraph 40 of his judgment, it would have been wrong for him to proceed on the basis of a decision of the CRU that did not reflect the true position. He was entitled to proceed as he did, and in my view he was right to do so. He adjourned his consideration of costs for what seems to me a perfectly sensible reason. He wanted to ensure that the critical question bearing on that consideration – the question of whether Mr Crooks had bettered the Part 36 offer – could be fairly addressed in the light of the CRU’s final determination of the amount of recoverable benefits, it being clear that the CRU’s decision might well make a difference to his own decision. There was no undue delay or expense. This is not to say that it will always be necessary or appropriate for a trial judge to proceed in this way. Cases will arise in which, for perfectly good reasons, one party or the other, or conceivably both, may wish to invite the CRU to revisit its initial decision once judgment has been entered. So it was in this case. And I do not think it can be said that the recorder exercised his procedural discretion unreasonably or unfairly to either side in the circumstances as they were when judgment was given.

[34]I do not think the decision of the Court of Appeal (Hale and Latham L.JJ.) in Williams v Devon County Council suggests a different conclusion. When that case was decided the relevant rule – then CPR 36.20(1) – applied where “at trial” the claimant had failed to better a Part 36 payment or had failed to obtain a judgment more advantageous than a defendant’s Part 36 offer. As Latham L.J. said (in paragraph 31 of the judgment of the court), “the question arose as to whether or not a possible solution might be to defer the question of costs until after any appeal against a certificate [of recoverable benefits] had been heard, so that the full position could be considered by the court”, but that had not been possible because the outstanding appeal to the Court of Appeal meant that the claim had not been “finally disposed of” for the purposes of section 11(3) of the 1997 Act. But it “could … have been achieved at first instance if the court had dealt with all matters except for costs”. Although the court cautioned that this “would involve inevitable delay and further expense” and did not seem “the preferable solution” under the rules as they were, it did not say that in principle it was inappropriate (see also the judgment of Roch L.J. in Davies v Inman, at pp.Q36-Q39, acknowledging that under Order 37, rule 1 of the County Court Rules it was open to the a trial judge to reassess an award of costs in the light of a reviewed certificate of total benefit under section 97 of the Social Security and Administration Act 1992).

Was the recorder wrong to make an order for costs in favour of Hendricks Lovell?

[35]In paragraphs 44 to 59 of his judgment of 17 October 2014 the recorder dealt with the two crucial questions for him, which were, as he put them:

“How should the Court treat the review of the CRU certificate? Has the Claimant done better than the Defendant’s offer?”

. For Mr Crooks it had been submitted that the approach indicated by the Court of Appeal in Fox v Foundation Piling Ltd.

[2011] EWCA Civ 790

should be followed in this case. When judgment was given on 15 November 2013 he was entitled to damages of £13,287.24, which was £5,212.76 less than the net amount offered by Hendricks Lovell. But after the CRU’s decision on the review he was entitled to damages of £22,789.89, which exceeding the offer by £4,289.89. He had now, therefore, bettered the offer, and under the general rule in CPR 44.2(2)(a) should be awarded the costs of the claim (paragraph 45). For Hendricks Lovell it had been submitted that both when judgment was given on the claim and after the CRU’s review Mr Crooks had failed to beat the Part 36 offer. The effect of regulation 11(4) and (5) of the 1997 regulations, after the review decision, was that Hendricks Lovell had to pay Mr Crooks £9,502.65 “out of the money returned by the DWP” (paragraph 52). Under the original CRU certificate Mr Crooks had received £5,212.76 too much, and this was still so. After the review, the value of the offer was £18,500 in interim payments, plus £6,760.11 in deductible benefits, plus £9,502.65 as Hendricks Lovell’s payment “out of proceeds of CRU appeal”, making a total of £34,762.76, which exceeded the judgment sum by £5,212.76 (paragraph 53).

[36]The recorder accepted Hendricks Lovell’s argument as correct. His essential reasoning for that conclusion is in paragraphs 55 to 57 of his judgment:

“55. The Claimant’s position fails to take account of the mechanism provided in Regulation 11 of the 1997 Regulations. It is necessary to ask: what is the effect of the Review Decision on the Defendant’s original Part 36 offer? The Claimant’s position is superficially attractive, in suggesting that he has now bettered the Part 36 offer. But that interpretation is only looking at the terms of the judgment in the light of the Review Decision. What should also be done is to look at the Part 36 offer, which was made net of CRU, in the light of the Review Decision. Looking at the matter otherwise is an unfair comparison. 56. The Claimant’s position fails to give effect to the requirements of the 1997 Act and Regulation 11 of the 1997 Regulations, and the obligation on the Defendant to pay the overpayment to the Claimant. 57. The result of the Review Decision is that the Defendant now has to pay £9,502.65 to the Claimant following the review. The Defendant was originally offering £18,500 plus a payment to CRU for £16,262.76. The effect of the Part 36 offer in the light of the Review Decision is that the Defendant’s offer becomes £18,500 plus one payment to CRU of £6,760.11 and another payment to the Claimant (of the balance of the proceeds of the CRU appeal) of £9,502.65. On both bases by the judgment the Claimant has failed to beat the offer: both on the day of trial, and following the Review Decision.”

The recorder then referred to a “secondary point”:

“58. As a secondary point, had the Claimant accepted the original offer in 2012, he could have appealed the CRU certificate, and then been in a better position than he secured by the judgment.”

He concluded that Mr Crooks had failed to better Hendricks Lovell’s offer both before and after the CRU’s review decision (paragraph 59). The provisions in CPR 36.14(1)(a) and (2) were therefore engaged. There was nothing unjust in the making of such an order. Mr Crooks was entitled to his costs up to and including 2 October 2012, but was to pay Hendricks Lovell’s costs incurred after that date, with interest (paragraph 60).

[37]Mr Barnes submitted that the recorder was wrong to conclude that Mr Crooks had failed to better Hendricks Lovell’s offer after the CRU’s review decision. The offer was explicitly a net offer. If one ignored the statutory scheme for recoverable benefits altogether, one would compare an offer of £18,500 with the recorder’s judgment in the sum of £29,550. On that basis, clearly, Mr Crooks would have beaten the Part 36 offer. But if the operation of the statutory scheme is allowed for, he has still beaten the offer. Under the offer he would receive from Hendricks Lovell the sum of £18,500, which had already been paid to him in interim payments. After judgment, and as a result of the CRU review, he would receive the £18,500 already paid to him, plus the sum of £9,502.65, and minus the repayment of £5,212.76, which makes £22,789.89. The calculation put forward on behalf of Hendricks Lovell, set out in paragraph 53 of the recorder’s judgment was flawed, because it took into account the deductible amount of £6,760.11, which Mr Crooks had already received before trial and did not have to repay. To establish whether he had bettered Hendricks Lovell’s offer one must consider whether the total payments he would receive from Hendricks Lovell under the judgment are more or less than the offer. They clearly are more. Mr Barnes relied on these observations of Latham L.J. in Williams v Devon County Council (at paragraph 23 of the judgment of the court):

“… [The 1997 Act] is intended to set up a scheme for recovery by the tax payer of benefits paid which had been the result of [the] compensator’s fault. It is not intended to provide an alternative means of compensating the claimant. The compensator remains primarily liable for the damage which has been caused to the claimant. The Act is not intended to distort in any way the litigants’ or the court’s approach to any claim. …”

[38]Mr Withington submitted that, given the terms of the Part 36 offer, the recorder was right to conclude as he did. He had recognized that Mr Crooks was required to give credit against his loss of earnings claim for the benefits – amounting to £6,760.11 – specified in the certificate issued by the CRU after the review. Hendricks Lovell were not required by the recorder’s judgment to make a further payment to Mr Crooks; they were obliged to make a further payment to Mr Crooks as a consequence of the CRU’s revised certificate – a payment that Mr Crooks has so far refused to accept. In the result, Mr Crooks was still liable to repay Hendricks Lovell the sum of £5,212.76. That had not changed. The consequence of the CRU’s review decision was simply that some of the benefits Mr Crooks had received were no longer to be regarded as attributable to the injury he had suffered in the accident. Those benefits were therefore properly to be disregarded in any assessment of his damages, so that money originally paid by Hendricks Lovell to the Department for Work and Pensions was now to be paid to Mr Crooks. Thus, as the recorder found, Mr Crooks had failed to beat the Part 36 offer, both before the CRU’s review and after it. In September 2012, when the offer was made, the amount of recoverable benefit, according to the CRU certificate of 23 July 2012, was £13,695.83. Adding this to the interim payments of £18,500 would have produced a total of £32,195.83, which was about £3,000 more than the judgment award of £29,550. And Mr Crooks might have been able to improve his position considerably had he sought a review of the CRU certificate at that stage. When judgment was entered in November 2013 the aggregate of interim payments (£18,500.00) and deductible benefits under the CRU certificate of August 2013 (£16,262.76) was £34,762.76, which, given that the judgment sum was £29,550.00, represented an “overpayment” of £5,212.76. After the CRU issued its revised certificate of recoverable benefit, the situation was, in effect, no different. The aggregate of interim payments (£18,500.00), deductible benefits (£6,760.11) and the Department for Work and Pensions refund, payable to Mr Crooks (£9,502.65) was £34,762.76, the judgment sum £29,550.00, and the “overpayment” still £5,212.76.

[39]As I have said,when considering whether a defendant has beaten a Part 36 offer, it is necessary to compare the offer with the judgment award on the same basis, allowing for any necessary subtraction of the figure for recoverable benefit from the total figure for damages in the judgment award if that was the nature of the offer – as it was here – or including the figure for recoverable benefit if the offer was made in those terms – which here it was not. This is simply common sense. It is consistent with the approach taken by the Court of Appeal in Fox v Foundation Piling Ltd. – though that was a case in which a Part 36 offer had been made inclusive of recoverable benefit. In his judgment in that case, with which Ward and Moore-Bick L.JJ. agreed, Jackson L.J. referred (at paragraph 33) to what were then the provisions of CPR 36.10(8), which stated that in determining whether the claimant had obtained a more advantageous result than the defendant’s offer, one had to look at the net sum paid to the claimant, not the gross sum including monies payable to the CRU. Having reviewed the relevant jurisprudence on Part 36 (in paragraphs 36 to 50), he went on to consider what had happened in that case (in paragraph 51):

“The gross sum which the defendant offered on 29 September 2008 amounted to £63,000.00, inclusive of payments to the CRU. The gross sum which the defendant ultimately paid amounted to £37,500.00, inclusive of payments to the CRU. At first blush, therefore, it may be thought (as the defendant argued below) that the claimant failed to beat the defendant’s Part 36 offer. However (as the defendant concedes in this court), that analysis is not correct. The net sum which the defendant offered to pay to the claimant in September 2008 was £23,550.79. The net sum which the claimant finally recovered was £31,702.53. Accordingly, as the defendant now accepts, the claimant is the successful party in this litigation. Therefore the starting point must be that the defendant should pay the claimant’s costs of the action.”

[40]I cannot accept Mr Withington’s argument that the CRU’s review decision made no difference to the true comparison between the Part 36 offer and the recorder’s judgment. The thrust of Mr Withington’s argument appears to be that the position was no different because, both under the certificate of 14 August 2013 and on the fresh certificate issued after the review, Hendricks Lovell would have had to pay out precisely the same amount. That, in my view, is to look at the matter in the wrong way. It is to consider the effect of the offer and the effect of the judgment from the standpoint of Hendricks Lovell as defendant, without regard to the value of each to Mr Crooks as claimant. It ignores the comparison between the value of the offer to Mr Crooks and the value of the judgment award that he had managed to secure, seen in the light of the CRU’s revised certificate of recoverable benefit. The real measure of whether, after the CRU’s revised certificate had been issued, Mr Crooks had bettered the Part 36 offer was whether the total payment he would actually receive as a result of the recorder’s judgment on the claim was more or less than the amount of the offer. That proposition is consistent with the approach indicated in CPR 36.14(1), (1A) and (2). Those provisions focus on the question of comparative advantage to the claimant, as between offer and judgment, not disadvantage to the defendant.

[41]In this case the amount of recoverable benefit in the original CRU certificate was not included in the Part 36 offer (see paragraph 25 above). The final certificate issued by the CRU after its review did not serve to vary the terms of the offer. In my view, therefore, the recorder was wrong to answer the question he had posed for himself in paragraph 55 of his judgment – “what is the effect of the Review Decision on the Defendant’s original Part 36 offer?” – by finding, in paragraph 57, that the Part 36 offer had now become an offer of “£18,500 plus one payment to [the] CRU of £6,760.11 and another payment to [Mr Crooks] (of the balance of the proceeds of the CRU appeal) of £9,502.65”.

[42]The approach I think the recorder should have taken, but did not, was to consider the effect of the CRU’s review decision on the composition of the judgment award, once the final figure for recoverable benefit was incorporated in the amount awarded for loss of earnings. This was the comparison required under CPR 36.15(3)(a) and CPR 36.15(8). It is the comparison between the respective net sums, after the deduction of recoverable benefits under the statutory scheme. Had the recorder made that comparison, he would have had to acknowledge that the judgment award of £29,550 contained, as the relevant deductible amount under the CRU’s review decision, the sum of £6,760.11, leaving the figure of £22,789.89 as the amount that was net of recoverable benefit. This is the figure that ought to have been compared to the figure of £18,500 “net of CRU” in the Part 36 offer – which had of course remained unchanged – because this was the value of the judgment award “net of CRU”.Before the CRU’s review decision, the amount of recoverable benefit was certified as £16,262.76, which meant that the element of the judgment award of £29,550 that was net of recoverable benefit was only £13,287.24 – £5,212.76 less than the Part 36 offer of £18,500 “net of CRU” and including the interim payments already made to Mr Crooks. After the CRU’s review of the certificate of recoverable benefit in the light of the recorder’s judgment, the amount of recoverable benefit had been reduced by £9,502.65 – the difference between £16,262.76 and £6,760.11. So the element of the judgment award that was now net of recoverable benefit, or “net of CRU” – the figure of £22,789.89, was £4,289.89 more than the sum offered to Mr Crooks “net of CRU” in the Part 36 offer – £18,500. Thus the judgment award, once it reflected the true amount of recoverable benefit in the light of the CRU’s review decision, left Mr Crooks in a better position – by £4,289.89 – than he would have been in had he accepted the Part 36 offer. In other words, he had beaten the Part 36 offer.

[43]That analysis, I believe, reflects the reality of the situation as it was when the recorder made his decision on costs, which is that the value of the judgment award to Mr Crooks was greater after the CRU’s review decision than it had been before. This is to recognize the operation of the statutory scheme for the recovery of benefits, including the arrangements for the reduction of compensation payments in section 8 of the 1997 Act, and the provisions for review and appeal in sections 10, 11 and 14 and regulation 11 of the 1997 regulations.

[44]Was the recorder entitled to have regard to the fact that if Mr Crooks had accepted the Part 36 offer when it was made in September 2012, he could have appealed the CRU certificate and might then have been in a better position than he secured by the judgment on the claim? Mr Withington submitted that he was; Mr Barnes that he was not. But, as the recorder said, this was only a “secondary point” in his analysis. It does not seem to have been essential to his conclusion on the question of whether Mr Crooks had done better than the Part 36 offer. Nor should it have been. In Fox v Foundation Piling Ltd. Jackson L.J. was not attracted by an argument that the claimant in that case could have achieved a better outcome by accepting an offer that had been made some time before trial and then appealing against the assessment of sums due to the CRU. He said (at paragraph 55) that “[it] would have been hypocritical if the claimant had accepted the defendant’s original offer on the basis of several years’ disability and had then appealed against the CRU assessment on the basis that his disability benefits were not referable to the accident …” and in any event “the outcome of any appeal was uncertain”. Mr Withington pointed out that in that case the court was considering the exercise of the court’s discretion as to costs under CPR 44.3, the claimant having rejected a Part 36 offer, but having accepted a later offer not made under Part 36. But I think Mr Barnes was right to submit that, in the circumstances of this case, if Mr Crooks had accepted Hendricks Lovell’s Part 36 offer he would have had nothing to gain by challenging the certified amount of recoverable benefit by way of review or appeal at that stage. Once judgment on his claim had been given, however, the review was clearly worthwhile.

[45]Was the recorder wrong to set aside paragraphs 1 and 2 of his order of 25 June 2014 and to reinstate the part of his order of 15 November 2013 in which he had referred to the then relevant amounts of recoverable benefit under the CRU certificate of 14 August 2013? In my view he was. He ought to have referred in his order of 17 October 2014 – as he had in his order of 25 June 2014 – to the amount of recoverable benefit under the CRU certificate of 20 March 2014: £6,760.11, comprising £4,642.43 for Employment and Support Allowance (Contributory) and £2,117.68 for Industrial Injuries Disablement Benefit.

[46]The final question to be considered here, raised in ground 2 of the respondent’s notice, is contingent on the status of Hendricks Lovell’s offer of 12 September 2012. If that offer was not, in truth, a Part 36 offer, should the recorder still have made the order for costs that he did? As will be clear, this question does not in my viewarise, because I am satisfied that the offer of 12 September 2012 was a Part 36 offer, properly made in accordance with CPR 36.15(3)(a). But if that were not so, and the court had to exercise its discretion as to costs in the circumstances referred to in CPR 44.3(4)(c) – where an “admissible offer to settle” has been made – I would still have concluded that Mr Crooks was the successful party in the litigation and that costs should have been awarded in his favour under the general principles in Part 44. Not only did the judgment award comfortably exceed the level of damages admitted by Hendricks Lovell in their “Counter Schedule of Special Damages”, though of course it fell far short of the level of damages claimed (see paragraph 14 above); it also exceeded the offer made by Hendricks Lovell on 12 September 2012. In those circumstances an award of costs in Mr Crooks’ favour would clearly have been justified under Part 44.

[47]For the reasons I have given, I think the recorder was wrong to conclude that Mr Crooks had failed to beat Hendricks Lovell’s Part 36 offer. Mr Crooks did, in the end, obtain a more advantageous result than the Part 36 offer, and he had to pursue his claim to do so (see paragraph 46 of Jackson L.J.’s judgment in Fox v Foundation Piling Ltd.). And in my view there would be no injustice here in giving effect to the consequences provided for in CPR 36.14(2). As Jackson L.J. said in Fox v Foundation Piling Ltd. (at paragraph 63), in personal injury litigation “where a claimant has a strong case on liability but quantum is inflated, the defendant’s remedy is to make a modest Part 36 offer”, and “[if] the defendant fails to make a sufficient Part 36 offer at the first opportunity, it cannot expect to secure costs protection”.

[48]The outcome of the appeal, however, should not flow merely from this court’s disagreement with the costs order made by the recorder. It is necessary for us to consider whether the basis upon which he exercised his discretion as to costs has been shown to be flawed (see the judgment of Chadwick L.J. in Summit Property Ltd. v Pitmans

[2001] EWCA Civ 2020

, at paragraph 26). For the reasons I have given I think this was so. It would follow, in my view, that we can properly set aside the order made by the recorder on 17 October 2014, and that, in the exercise of our own discretion, we should make an order that Hendricks Lovell are to pay Mr Crooks’ costs of the proceedings, subject to detailed assessment if not agreed.

Conclusion

[49]I would therefore allow the appeal.

[50]I agree.

[51]I also agree.