Court of Appeal vindicates our belief that children should be protected

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We are delighted to report the CA decision in  SG by his mother and litigation friend AG v Hewitt.  An appeal against the judgement of Mr Justice Popplewell made on 2 December 2011.

He approved acceptance of Part 36 offer of £500,000 but ordered that Defendants were entitled to their costs in accordance with Part 36, despite the fact that the medical prognosis was uncertain and that had we applied to accept the offer when it was made he was unlikely to have approved it.

The case related to a 6 year old boy who suffered head injuries in a road accident in March 2003.  Liability was admitted early on but due to the injuries SG sustained his long term prognosis could not be known for many years. 

We obtained a preliminary neurological assessment in 2004 from Mr (now Professor) Vloeberghs.  He confirmed that the injury created sufficient uncertainty to mean that we needed to defer settlement until SG was much older.   In 2007 SG was examined by paediatric psychologist Dr Starza-Smith and she maintained that this was an 'evolving case'.

Relations with Hewitt's insurers were cordial and we kept them updated of developments. In 2008 SG was examined by their experts. The Defendant never disclosed the report from Mr Whitfield but in the report from Dr Rosenbloom, disclosed to us in March 2009, he referred to a passage in Mr Whitfield's report which stated that a final prognosis could not be known until SG had reached age 16.

A matter of weeks after disclosing the report of Dr Rosenbloom the Defendant's insurer made a pre-emptive Part 36 Offer of £500,000.  Of note is that proceedings had not been commenced; we had no intention of doing so, at least until some years if a settlement could not be achieved. SG was now 12 years old.

We sought the advice of Counsel Mr Paul Dean.  A conference was arranged as quickly as possible with Counsel and our expert Dr Starza-Smith and of course the litigation friend, SG's mother.  Following this Mr Dean produced a written advice upon the Defendant's offer.  A copy was sent to the Litigation Friend and also her Before the Event (BTE) insurer. In that advice Mr Dean said he would 'attempt the impossible'; if AG instructed us to accept the Part 36 offer requiring us to place this matter before the court for approval notwithstanding the weight of evidence advising us not to do so?   

Our advice to AG was not to reject the offer but wait and review the medical evidence as advised by all the experts.  It was impossible to know what the future held for SG. AG accepted the advice and we informed the Defendant that whilst their offer was not rejected, given the experts' opinion, we would instead carry out further investigations to determine if and when the offer might be reasonably considered with a view to seeking the court's approval of the same. 

This tactic carried with it huge risks. There was no rule in the CPR to confidently invite the Defendant to extend the time for acceptance and, proceedings had not been commenced. The Defendant could also have withdrawn the offer at any time; as it turned out they did not. In any event in August of that same year the Defendant said in open correspondence that if we accepted the offer out of time, they would refuse to pay our costs from the date of expiry of the offer and, that SG would have to pay their costs (citing Matthews).

AG's BTE insurer wanted an estimate of likely costs to be incurred if the offer was rejected,  which we provided.  They also asked for our opinion upon the prospects of the court finding for us on the Part 36 costs point.  That was also a near impossible task.  We said that in our opinion the discretion under CPR Part 36.10(5) must fall in favour of a child in these circumstances, but we could give no guarantees.  We asked the BTE insurer to confirm that indemnity remained in place and that they would support the action we proposed.  They never replied to that correspondence.

During the next two years we kept the Defendant fully appraised of our investigations.  SG was re-examined by his medical experts and a report was also obtained from educational psychologist, Beth Wicks.  All of the experts remained cautious.

Eventually, in July 2011, Professor Vloegerghs in conference stated that accepting the offer would now be to SG's advantage.  We informed the Defendant.  They replied to say that the offer was still open for acceptance provided SG paid their costs from 23 April 2009, estimated at close to £10,000.  We were surprised by the suggested level because effectively they had done little else than read correspondence we sent them updating SG's progress. 

They maintained their entitlement to costs under strict interpretation of CPR 36 and that we were seeking to accept an offer late.  We disputed this and cited Practice Direction to Part 21 and the essential requirement for court approval of any settlement involving a child or protected party. A court could only approve when medical evidence could be placed before the court giving a prognosis. They threatened to withdraw the offer and/or invoke contribution proceedings alleging that SG was not seat belted at the time of the incident. 

We pressed on.  Part 8 approval proceedings were commenced and the hearing was allocated to Master Leslie at the High Court.  The BTE insurer at that stage were not entirely clear upon whether they would indemnify SG and his mother for costs should the court determine against us.  Master Leslie was not impressed with their position.  He decided to adjourn the hearing to a Judge and we prepared to appear before Mr Justice Popplewell on 2 December 2011. The Defendants were resolute in their arguments as to Part 36 costs. 

When delivering his judgment that day we listened with hope. Approval of the £500,000 was a given and we were praised for our conduct. We had done no more than gather the medical evidence necessary to enable the Court to consider the settlement offer,  we had not rejected the Part 36 offer and we had kept the Defendant informed at all times.  Yet despite this he accepted the Defendant's argument that Part 36 was paramount and that despite the overriding objective of a decision needing to be fair and just, the uncertain medical prognosis for a 12 year old boy who suffered a head injury at age 6 was simply a contingency that fell "within the usual litigation risks of claims of this kind".  

We found his decision impossible to understand when he stated that had we applied in 2009 to accept the offer of £500,000, it was unlikely that he would have given approval. He also stated that we had "acted reasonably throughout". In those circumstances what were we supposed to do?

We were hampered by the BTE insurer.  They argued that because we had not informed them of the offer promptly nor sought their permission not to accept the offer, indemnity was withdrawn.  We advised them of the offer, when we had Counsel's written advice and our recommendation not to reject but simply wait further medical evidence. They were advised within weeks of the offer being made.  Had we written to them advising of the offer as soon as it was received, they would have wanted Counsel's advice which we obtained as quickly as possible.

We decided for all the right reasons that the costs order of Popplewell J was wrong in law and we lodged an application for permission to appeal. On 25 February 2012, Rt, Hon. Sir Richard Buxton gave permission to appeal.

The hearing was listed for three hours on Tuesday 3 July.  The BTE insurer was invited to reconsider their position. They first stated that they would, but only after the decision of the CA had been handed down.  They were pressed to make a final decision.  They did.  Their commercial interests came first, they refused to indemnify the child.  We were on our own. 

We offered AG a conditional fee agreement for the appeal which was accepted.  Mr Dean also entered into a CFA, such was his confidence, but we needed insurance to cover the Defendant's costs.  Applications for After the Event insurance were all refused.

We sought an audience with Master Leslie who at the adjourned November hearing had asked us to keep him advised as to developments.  He was invited to make an order whereby up to £50,000 of SG's damages could be used to run the appeal.  He agreed, upon the proviso that AG was to use all 'best endeavours' to reverse the decision of the BTE insurer by lodging a complaint about their conduct to the Financial Ombudsman.  At the time of writing, the ombudsman is to report back by mid-September.     

The Defendant instructed Lead Counsel. We followed suit and the marvellous Mr Michael Soole QC accepted our Brief, also under a CFA.

The hearing on 3 July crept into 4 July. It was a tough couple of days but we retired with a creeping feeling that the court would find for SG and his mother.  We stayed strong, and won.

We were open throughout with the Defendant and the CA agreed that investigating further with a view to accepting the Defendant's offer was no more than we could have done, given the opinion of the experts when the offer was made.  Only when we were in possession of sufficient expert evidence and supportive advice of counsel could we put this case before the court for approval.

The Defendant argued that SG had received a "windfall".  His recovery meant that his compensation claim was worth less than £500,000 and therefore he would not be disadvantaged by being ordered to pay his own and the Defendant's costs since 2009.    The CA rejected this argument. The Defendant had the advantage of when to make the Part 36 offer and also "had the option to withdraw it at a later stage but chose not to do so".

The Defendant also argued that CPR 36 should take precedence over the overriding objective and need to protect children.   We are delighted that the CA has rejected all these arguments.

The Judgment today of Lord Justice Pill, Lady Justice Arden and Lady Justice Black is one that will be welcomed by all personal injury lawyers who work tirelessly for seriously injured children and protected parties.  This case is however fact sensitive and will apply to all cases involving protected parties or children.

Lady Justice Black accepted that "all costs incurred after the making of the offer were incurred exclusively in investigating the acceptability of the offer and obtaining the evidence necessary to obtain approval" The further reports "were no designed to improve or expand the claimant's claim, merely to ascertain whether the deterioration that could occur with puberty/adolescence was in fact occurring or likely to occur".

The obiter comment of LJ Pill at para.88 confirms what we maintained throughout:

'The law protects those under age…it protects them by the provision of CPR.r.21.10 that, where a claim is made by or on behalf of a child, no settlement, compromise or payment and no acceptance of money paid into court shall be valid, so far as it relates to the claim by, or on behalf of the child, without the approval of the court.'

We hope this decision means that an insurer has no alternative but to wait until a final prognosis is available, to all.

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