Warrilow -v- Norfolk and Norwich NHS Trust (2006)
Clinical Negligence case where the Claimant suffered serious bladder injury as a result of the Defendant’s failure to catheterise her after childbirth. Extensive loss of future earnings and care claim. Numerous issues raised in relation to causation and the acceptance of Part 36 offers.

JAYNE WARRILOW (a patient by her litigation
friend and husband NICHOLAS JAMES WARRILOW)
-v-
NORFOLK AND NORWICH UNIVERSITY HOSPITALS NHS TRUST

FACTS
In a ruling on 25th November 2005 Langstaff J held the Defendant liable for injuries caused to the Claimant by failures to catheterise her during childbirth.  A trial on quantum ensued claiming in excess of £6 million.  At the time of trial the Court of Protection had determined that the Claimant was under a disability and she was represented by her husband acting as litigation friend.

After the conclusion of the trial on liability a number of offers to settle were made.  On 28th November 2005, the Claimant’s solicitors wrote to the Defendant’s solicitors and offered to settle for £4.5 million.  This was rejected by the Defendant the following day and a counter-offer of £2.68 million was made in the style of a Crouch offer1 (the “Settlement Offer2”). 

At the very heart of the Claimant’s case was the suggestion that she had been so badly disabled by her bladder injury that normal living on a day to day basis was not possible. The Defendant’s case developed during the course of the trial.  Early suggestions that the Claimant was exaggerating were ramped up by the end of the trial to encompass the frank suggestion that she and her husband were deliberately misleading the Court.  During cross-examination of her husband before lunch on the second day, questions arose as to the number and nature of breaks and holidays (in particular foreign holidays) that had been taken by the Claimant since 2001 and, in particular, whether these were disclosed by the witness statements.  Immediately after the lunch break and prompted by this line of cross-examination Leading Counsel for the Claimant sought to accept the Defendant’s Settlement Offer, being within the 21 day period during which the offer indicated it would remain open.  Simultaneously Leading Counsel for the Defendant requested permission from the judge to withdraw the offer.  The decision as to whether the offer had in fact been accepted was adjourned off to be heard on another date but in any event before the quantum evidence was concluded and heard submissions on 19th January 2006. 

TERMS OF THE DEFENDANT’S OFFER TO SETTLE
The Defendant’s Settlement Offer was couched in terms similar to, but evolved from the offers considered by the Court of Appeal in Crouch and no payment into court had been made. Specifically, the Settlement Offer began, “this offer is made on behalf of the Defendant….under the provisions of Parts 36 and 44 of the CPR…” and contained the following statements:

The final sentence of the offer promising not to withdraw the offer without permission was an additional safeguard that had not been incorporated in the original Crouch letters.

ISSUES
Given that the Claimant had purported to accept the Settlement Offer, the fundamental issue before Langstaff J was whether the Defendant could withdraw its offer in the absence of court permission.  This fell to be decided against the backdrop of the Claimant being a patient and the associated requirement for court approval of the quantum of any compromise (CPR rules 36.18(1) and 21.10 )

SUBMISSIONS
Central to the submissions made on behalf of the Claimant was the Defendant’s express intention to treat its offer as equivalent to a Part 36 payment along with the stated undertaking that this would not be withdrawn (see the Non-Withdrawal Paragraph).  More specifically it was argued that the Settlement Offer in fact contained two distinct offers: firstly, a monetary offer to settle, acceptance of which would effect a compromise of the claim, and secondly, an offer to hold the offer to settle for £2.68 million open for 21 days, with the result that it could and would only be withdrawn on terms applicable to a Part 36 payment (ie with the court’s permission, see CPR rule 36.6(5)3).  Characterised in this way, the second offer was capable of acceptance, amounting to a binding contract at the point of acceptance.  This was notwithstanding the Claimant’s status as a patient, which only became important (in terms of court approval being needed) when compromise was reached.

By contrast, counsel for the Defendant contended that it was artificial to divide the Settlement Offer into two offers, the first of which was incapable of acceptance (because of the Claimant’s disability) while the second could be accepted.  Further, the guarantee not to withdraw the offer without court permission only applied after expiry of the first 21 days and in the presence of inaction by the Claimant to otherwise accept it. 

DECISION
The approach taken by Langstaff J to the application marked out two separate and distinct components of offers to settle: firstly, the status and validity of contracts that may arise out of such offers to settle and secondly, their costs consequences, having regard to CPR Part 36 and Part 44.  On the facts of this case, the former was clearly the more pertinent concern.  The court had no difficulty following Dietz v Lennig Chemicals [1969] 1 A.C. 170, deciding that because the Claimant was a patient, a proposed compromise had no validity unless and until it was approved by court order.   Additionally, the judgment of Lord Justice Simon Brown in Drinkall v Whitwood [2004] 1 WLR 462 provided authority for two propositions.  The first was that the rule in Dietz remained binding post-CPR while the second was that the rule applied in equal measure to both partial and full compromises. The result was that a Defendant was entitled to renege on an apparent agreement for good reason or no reason prior to the court’s approval. 
The issue being one of contract for Langstaff J, he framed the following two questions:

The judge’s response to each individual question entailed a rejection of the Claimant’s case that permission was required before the Settlement Offer could be withdrawn.

As to the second inquiry, he found that the Non-Withdrawal Paragraph had to be understood against the wider function of the letter containing the Settlement Offer,  that was a document directed towards compromise.  He stated at paragraph 24, “it is only if a compromise is not to be effected that the offer is not to be withdrawn, because it is only if it is not withdrawn and remains capable of acceptance that the defendant would get any cost benefit from it: to confer such a benefit is the other purpose of the letter.”

It followed from this that compromise or costs’ benefits were the two alternative consequences of the letter and “either the offer is accepted, or if not accepted within the time specified it will be held open to the regime of the court with a view to costs’ consequences at the conclusion of the case” (at paragraph 25).  According to the judge this was a powerful argument for construing the promise not to withdraw the offer in the Non-Withdrawal Paragraph as one coming into effect after the expiry of 21 days.  Given that counsel for the Claimant purported to accept the offer within the 21 day period, it was not an offer capable of acceptance at this time.

Dealing with the first question, the judge rejected the Claimant’s submissions that the letter contained two separate offers, each capable of acceptance.  When the Settlement Offer was accepted it was accepted as a whole and on the facts there was no separate acceptance of an offer to hold the offer open.  One distinct and ancillary part of the contract could not be accepted in isolation: “an offeree is not entitled to cherry pick an offer” (at paragraph 19), and as the judge had already decided, both Dietz and Drinkall established that even acceptance of the whole contract could not amount to a valid contract.  As further confirmation of the non-existence of a contract, the judge relied on the absence of valid consideration.


Accordingly the judge refused to make any order to the effect that the Defendant’s offer of £2.68 million had been accepted by the Claimant.

DISCUSSION
This case adds a further layer of complexity to the increasingly intricate rules relating to Part 36 offers and payments, and adds weight to arguments that a lack of clarity in this area risks negative outcomes for Claimants and Defendants alike.  The significant implications of accepting or rejecting a settlement in terms of costs and the management of litigation mean that a clear and predictable body of rules is essential.  The soundness of Langstaff J’s reasoning in this case comes into conflict with its practical application on the facts of the case. 

A number of interesting points arise out of this case, some of which are obscured by the fact that the decision was in large measure determined by the Claimant’s status as a patient.  The clear rule in Dietz (as applied in Drinkall)infused much of the judgment.  Because there could be no valid compromise of the claim without court approval, there was no question of the Claimant accepting the Settlement Offer.  Therefore the issue of whether the Defendant was precluded from withdrawing the offer without first getting court approval could not even arise.  Drinkall provided authority for the proposition that a compromise offer could not be split into parts, some of which a patient could accept without complying with the procedures of Part 21.  Therefore it could not be argued that the Claimant was capable of accepting an offer not to withdraw the Settlement Offer, an offer the court termed “ancillary” to the overall Settlement Offer. 

So, would the result have been different if the Claimant had not been a patient?  For a number of reasons it seems the answer is no.  This conclusion is reached because of the emphasis placed on the contractual nature of the Settlement Offer.  Langstaff J stated that “the issue must be approached as one of contract” (at paragraph 22) and although the primary impediment to a valid acceptance was the Claimant’s disability, the comments of Lord Justice Waller in Crouch provided the backdrop to Langstaff J’s decision.  Counsel for the Claimant drew his Lordship’s attention to paragraphs 27 and 28 of Crouch to argue that the parties could, by agreement, treat an offer as if it were a payment into court and so invoke the Part 36 procedural rules and consequences.  The Judge firmly qualified this proposition by stating that the judgment in Crouch also required the court to be slow to spell out a contract unless there was clear agreement by the Claimant that although payment into court was unnecessary, Part 36 machinery would still apply, with the Defendant thereafter relying on that agreement.  In this case there was no suggestion any such agreement had been reached between the parties.  It is likely that contract law’s antipathy towards acceptance by silence will result in the court rejecting that the full panoply of Part 36 rules is applicable in the absence of clear consent.

At first blush the obvious solution to the apparently precarious character of Settlement Offers of this type is for the Claimant to set out in writing that he or she agrees that the rules of Part 36 should govern.  But because this would entail the Claimant surrendering to the costs consequences of rule 36.204, the drawback is immediately obvious.  However, given that in a large number of cases the court’s discretion will be exercised to produce this result in any event, it is for Claimant to identify whether there are advantages to agreement and decide if these can outweigh the disadvantages.  That the onus to take steps is on the Claimant is reinforced by the Judge’s approach in this case to the view expressed by Lord Justice Waller in Crouch (at paragraph 28): “It would furthermore seem to me that the terms of the contract must be clear if they are to have the consequences desired by the NHS, including some express reference to the offer being incapable of being withdrawn without the permission of the court”.  Counsel for the Claimant in Warrilow contended that this direction was the inspiration for the Non-Withdrawal Paragraph, but it would appear that Langstaff J’s focus on the need for clear acceptance by the Claimant rendered this otiose.  The precise terms of the Settlement Offer could only become binding if converted by consent into the equivalent of a Part 36  payment.

As referred to above, it was pointed out by the Judge that case law in the area of Part 36 addressed two issues: one going to contractual status and validity and the other to costs consequences. Whether the court’s approach will have ramifications for the latter is difficult to predict.  The NHSLA’s concern in Crouch was to make its operation of litigation more efficient and cost effective, and predominantly to carve out a means of maintaining the certainty of Part 36 costs’ rules.   Warrilow may provide some ammunition for Claimant’s to challenge the practice as it has developed, and this was recognised by the Judge (at paragraph 22):“I have to approach this case….upon the facts of this particular case, whatever the consequences may be.  As to that I only comment that I have little doubt that if the submission has been put forward as it has by [counsel for the Defendant], that his client should be entitled to withdraw, and have withdrawn, this letter then those who know that this has happened in this case may be able to rely upon that fact in arguing in future cases against the exercise of any strict or automatic discretion in line with part 36 when a written offer is made by way of part 36 offer as opposed to a payment into court.”

In this succinct warning, the Judge adumbrated the potential for further disputes over the status and consequences of Crouch offers, something that can only be negative for the NHSLA, both in terms of reducing predictability and incurring the costs of expensive litigation on the point.  Furthermore, the risk exists that the ‘dependability’ of Crouch offers in the minds of Claimants will be undermined.  Indeed, counsel for the Claimant asked the court to be mindful of the general importance of the issues, warning of the likelihood that insurance companies will seek to adopt Crouch practices in the future. 

It is probable that the specific circumstances in which the Defendant sought to withdraw its Settlement Offer had considerable influence on judicial decision making.   Indeed Langstaff J made clear that his focus was on the facts of the case rather than the more general repercussions of his decision.  Cross-examination of the Claimant’s husband brought to light a number of significant facts which had the capacity to seriously affect the court’s assessment of quantum and the Defendant  clearly deemed it vital to withdraw its offer in the light of these developments.  The judge will have had considerable appreciation of this change in circumstances but how much this influenced his decision making cannot be measured. In Flynn v Scougall [2004] 3 All ER 609 it was decided that an application to withdraw a payment in can be made even if the Claimant serves a notice of acceptance during the 21 day period, but that generally permission would only be granted if there was a sufficient change in circumstances.  In Flynn, a medical report was received just after the Defendant made a payment in which prompted the Claimant to accept the payment and the Defendant to seek to withdraw it.  The court decided that this change was insufficient to justify withdrawal.  Comparing Flynn and Warrilow goes to further highlight the different position that the Claimant is put in when the NHSLA does not make a payment in, that is, the Claimant is deprived of his unfettered right to accept the payment unless and until the Defendant gets the court’s permission to withdraw. 

Of course, if Warrilow does not lead to further arguments about the costs’ consequences of Crouch offers, it may well be that the NHSLA have been put in a more favourable position, securing the benefits of protection from unlimited costs liability along with the flexibility to withdraw offers in a unlimited range of circumstances. 

1 See Peter Crouch v King’s Healthcare NHS Trust: Pema Lucy Murry (by her mother and litigation friend Kathryn Murry) v Blackburn Hyndburn and Ribble Valley Healthcare NHS Trust [2005] 1 WLR 2015.
2 The precise terms of the Settlement Offer are considered below.

3 R 36.18(1) “Where a Part 36 offer or a Part 36 payment is made in proceedings to which rule 21.10 applies-

R 21.10(1) “Where a claim is made-

no settlement, compromise or payment and no acceptance of any money paid into court shall be valid, so far as it relates to the claim by, on behalf or against the child or patient, without the approval of the court.”
4 R 36.6(5) “A Part 36 payment may be withdrawn or reduced only with the permission of the court”.
4 R 36.20(1) “This rule applies where at trial a claimant-

(2) Unless it considers it unjust to do so, the court will order the claimant to pay any costs incurred by the defendant after the latest date on which the payment or offer could have been accepted without needing the permission of the court.”