Offers & CRU – Crooks v Hendricks Lovell Ltd [2016]

On the 15th January 2016 the Court of Appeal gave judgment in the case of Crooks v Hendricks Lovell Limited [2016] EWCA Civ 8, which concerned the interpretation of an offer made by a Defendant to settle a claim for personal injury and associated losses.

As the overwhelming majority of the readers of this article will be aware the Social Security (Recovery of Benefits) Act 1997 (‘the 1997 Act’) introduced a scheme for the recovery of certain benefits paid to an individual as a result of an accident, injury or disease, where that individual subsequently received a compensation payment. The underlying principle of the 1997 Act is that an individual should not be compensated more than once for the injury which had been caused by the compensator. The scheme places the responsibility for repaying the relevant benefits not on the injured person himself, but on the compensator.

As Latham L.J. observed in the case of Williams v Devon County Council [2003] EWCA Civ 365 :

“[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…”.

The facts

The Claimant was employed by the Defendant as a lorry driver. On the 9th July 2009 the Claimant fell from a lorry, which he was loading in the Defendant’s yard and injured his neck and back (‘the accident’). The Defendant admitted liability for the accident in November 2009 but raised issues of medical causation.

Following the accident, the Claimant was off work and claimed state benefits. On the 23rd July 2012 the Compensation Recovery Unit (‘the CRU’) issued a certificate of recoverable benefits totalling £13,695.83, which was valid until the 11th November 2012.

On the 12th September 2012 the Defendant made an offer to settle the claim pursuant to CPR 36 for “£18,500 net of CRU and inclusive of interim payments in the sum of £18,500” (‘the Defendant’s Part 36 offer’). On the second page of the form N242A the Defendant ticked the box “this offer is made without regard to any liability for recoverable benefits under the Social Security (Recovery of Benefits) Act 1997”. No figure was entered in respect of the amount offered by way of gross compensation.

On the 14th August 2013 the CRU issued a further certificate of recoverable benefits totalling £16,262.76, which was valid until the 3rd December 2013.

The claim proceeded to trial on the 14th and 15th November 2013 in the County Court at Slough. The Claimant claimed special damages totalling £184,674 including £98,985 for past loss of earnings and £83,794 for future loss of earnings. The Defendant contended for an award of special damages in the sum of £3,419.77. As is often the case, the significant disparity in the values placed on the case by the parties were predicated upon the views expressed by their respective orthopaedic experts.

On the 15th November 2013 the Judge gave judgment for the Claimant in the sum of £29,550 (£4,000 general damages, £25,500 past loss of earnings [representing a period of 12 months] and £50 past miscellaneous expenses). The Judge adjourned the consideration of costs to await the outcome of a review by the CRU of the certificate of recoverable benefits, the Claimant having indicated his intention to appeal/review the certificate issued on the 14th August 2013.

On the 25th June 2014 in light of a revised (following the Judge’s findings) certificate of recoverable benefits, the Judge made an Order that:

The Claimant should give credit for interim payments made by the Defendant in the sum of £18,500.00;
The Claimant should give credit for the sum now payable to the CRU of £6,760.11; and
The Defendant should pay to the Claimant the outstanding sum of £4,289.89.

On the 17th October 2014, having considered the parties’ submissions on costs the Judge found that the Claimant had failed to beat the Defendant’s Part 36 offer and made an order that the Defendant pay the Claimant’s costs up to and including the 2nd October 2012 (21 days after the offer) and the Claimant pay the Defendant’s costs from the 3rd October 2012.

The issues on appeal

The issues on appeal were three-fold:
(1) Whether the Judge misconstrued the Defendant’s offer by misdirecting himself as to the words “net of CRU”;
(2) Whether CPR 36.14 (1) required the Judge to consider the effect of the offer on the 15th November 2014 (the day on which he gave judgment for the Claimant) as opposed to waiting for the CRU to review the certificate of recoverable benefits; and
(3) Whether the Judge was wrong to award costs in favour of the Defendant.

• The meaning of the Defendant’s offer?

The Court of Appeal (with Lindblom L.J. giving the lead judgment) concluded that the offer was a valid Part 36 offer, pursuant to CPR 36.15 (3) (a) [as it then was]. The crucial point was not the gross amount of compensation contemplated by the Defendant when the offer was made (which the Defendant was entirely silent about) but the meaning of the expression “net of CRU”. Lindblom L.J. concluded that the offer could not sensibly be read in any other way than “as remaining after all necessary deductions of benefit”. If the Judge was interpreting the offer as £18,500 net of CRU, plus a payment of £16,262.76 to the CRU, he was mistaken. The offer was made in terms of £18,500 leaving aside any liability in respect of recoverable benefits once such a liability had crystallized. It followed that for the Claimant’s purposes the offer meant that the £18,500 already paid to him by the Defendant (by way of interim payments) would not be reduced by the Defendant’s liability for recoverable benefits, whatever that might ultimately be.

• Should the Judge have made his decision on costs on the 15th November 2014?

The Court of Appeal rejected the Defendant’s argument that pursuant to CPR 36.14 (1) (a) [as it then was] the Judge should have made his determination in respect of costs on the day he gave judgment as opposed to waiting for a review of the certificate of recoverable benefits by the CRU. As the Judge recognised, the correct amount to be paid to the CRU remained to be determined and it would have been wrong for him to proceed on the basis of a decision by the CRU that did not reflect the true position. The Judge had been right to proceed as he did by adjourning the consideration of costs to ensure that the critical question of whether the Claimant had beaten the Defendant’s offer could be fairly addressed in light of the CRU’s final determination of the recoverable benefits.

• Was the Judge wrong to make an order for costs in the Defendant’s favour?

At first instance the Defendant submitted that the Claimant had failed to beat its’ Part 36 offer either when judgment was given or following the review of the certificate by the CRU.

The Defendant argued that as of the date of the judgment (15th November 2013) the Claimant would have been entitled to damages of £13,287.24, which represented the judgment sum of £29,500 less the amount on the certificate of recoverable benefits (issued on the 14th August 2013) of £16,262.76, which meant that the Claimant had failed to beat the Defendant’s offer by £5,212.76.

The Defendant further argued that the effect of the review of the certificate by the CRU was that the Defendant was required to pay the Claimant the additional sum of £9,502.65 from the money returned by the DWP. After the review the offer therefore amounted to £18,500 in interim payments, £6,760.11 in deductible benefits and £9,502.65 out of the proceeds of the CRU appeal/review, which amounted to £34,762.76 and exceeded the judgment sum of £29,500 by £5,212.76.

The Judge accepted that prior to the review the offer effectively amounted to £18,500 plus a payment of £16,262.76 to the CRU whereas following the review it amounted to £18,500 plus a payment to the CRU of £6,760.11 and another payment to the Claimant of £9,502.65 representing the balance of the proceeds of the CRU appeal.

Linblom L.J. stated that it was “simply common sense” when considering whether a Defendant had beaten a Part 36 offer, to compare it 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, or including the figure for recoverable benefit if the offer was made in those terms (which it was not in this case).

In this case the amount of recoverable benefit in the original CRU certificate was not included in the offer and the final certificate issued by the CRU did not serve to vary the terms of the offer. The real measure of whether, after the CRU’s revised certificate had been issued the Claimant had bettered the offer, was whether the payment the Claimant would actually receive as a result of the judgment on the claim was more or less than the amount of the offer.

The correct approach was therefore to acknowledge that the judgment sum of £29,550 contained, as the relevant deductible amount, the sum of £6,760.11 (payable to the CRU), leaving the figure of £22,789.89 as the amount that was net of recoverable benefit. It was that figure which ought to have been compared to the figure of £18,500 “net of CRU” contained in the Defendant’s offer and that figure was £4,289.89 more than the sum offered by the Defendant, in other words, he had beaten the offer.

In those circumstances, the approach taken by the Judge was wrong and the appeal was allowed with an order that the Defendant do pay the Claimant’s costs of the proceedings, to be subject to detailed assessment if not agreed.

Comment

This case demonstrates that even following judgment on the second day of a multi track trial the Court of Appeal considered it perfectly proper for the Court to adjourn the consideration of the principle of costs in order to allow a review/appeal of the certificate of recoverable benefits. If the Court had determined the issue on the date of judgment the Claimant would have failed to beat the Defendant’s Part 36 offer because the net sum payable to him would have been £13,287.24 however, following the review, the net sum payable to the Claimant was £22,789.89 and he beat it.

The case also emphasises the importance of and distinction between offers being made in gross or net terms. For example, had the Defendant taken account of the certificate of recoverable benefits on the 12th September 2012 in the sum of £13,695.83 and increased the gross amount of its’ offer accordingly, which is the other option open to the Defendant on the form N242A, the Claimant would have failed to beat the offer having secured judgment for £29,550 as against the £32,195.83 offered. After all, had the Claimant accepted the Part 36 offer which the Defendant did in fact make, the Defendant would still have been required to discharge the sum of £32,195.83 (£18,500 to the Claimant and £13,695.83 to the CRU), subject to a review/appeal of the certificate of recoverable benefits, the outcome of which would have been far from certain.

Toby Coupe has a nationwide practice encompassing a wide range of personal-injury (PI) and clinical negligence work. Toby also appears before a variety of other tribunals, including the Coroner’s Court, Criminal Injuries Compensation Appeal Tribunal and Compensation Recovery Unit Appeal Tribunal. To book Toby, please contact his clerks on 01132 459763