High Court ruling in professional negligence case reaffirms Part 36 rules

Professional negligence practitioners may already be familiar with the Court of Appeal’s 2015 decision on the defence of tender before claim, in the accountants’ negligence case of RSM Bentley Jennison and Ors v Ayton.

Now in another interesting judgment in the same case the High Court has reaffirmed that if defendants refuse offers to settle, and refuse to engage with the Part 36 regime, they will be liable for costs on the indemnity basis if the claimant ‘beats’ his own Part 36 offer. As opposed to costs awarded on the standard basis, costs assessed on the indemnity basis are not subject to the test of proportionality. Any doubt about the reasonableness of indemnity costs is resolved in the receiver’s favour.

In Ayton v RSM Bentley Jennison and Others, Mrs Justice May reversed the judgment of Senior Master Fontaine. Master Fontaine had awarded the claimant only 70 per cent of his costs, to be assessed on the standard basis, even though Mr Ayton had made three early Part 36 offers and did better than all of them at the trial.

 

In this professional negligence claim against a firm of accountants, the Defendants failed to send a letter of response under the Professional Negligence Pre-action Protocol. Instead, they sent the claimant a cheque for the amount claimed plus interest. Presumably, they hoped that this would be enough enticement for the claimant to settle the matter and not pursue costs; a strategy that had worked with some other investors who suffered similar losses in the same fraud.

Graham Balchin, Professional Negligence Partner at Carter Lemon Camerons and who ran the case for the claimant, explains that the claim was for compensation for a lost investment entered into on the advice of RSM Bentley Jennison. This investment opportunity turned out to be an advance fee fraud, even though the accountants had given written assurances that they knew all of the parties, that the underlying transaction was genuine, and that they had carried out due diligence.

Balchin observes that this judgment is a cautionary tale for parties who attempt to subvert the Part 36 regime. He warns that:  “the Court’s judgment gives certainty and reaffirms that parties ignore Part 36 offers at their peril as to the costs consequences.”

Contact our lawyers in Carter Lemon Camerons Solicitors for advice on professional negligence claims. The specialist team at Carter Lemon Camerons Solicitors can assist you with all litigation matters including professional negligence. Our years of expertise in these areas mean that we can provide tailored solutions for you making sure that you are in the best possible position. For more details, please contact Graham Balchin, Partner in our litigation team or call us on +44 (0) 20 7406 1018.