There is an ongoing debate about whether the Defendant should, or does, face any adverse consequences when a Claimant’s Part 36 offer is accepted late. I had a recent email from solicitor John McQuater of Atherton Godfrey. Here I look at two contrasting cases and, with his permission, John’s views – to add to the debate.
DECISION 1: LATE ACCEPTANCE IN ITSELF DOES HAVE CONSEQUENCES:
John was the solicitor in Sutherland -v- Khan (DJ Besford 21st April 2016) (This is from his note on the case).
“The defendant argued any order for costs should be on the standard basis and that that would, in any event, mean that Part 45.29B applied, limiting the claimant to fixed costs on the basis that these, under that rule, were “the only costs allowed”. The defendant resisted the argument that the claimant should recover indemnity costs by relying on Fitzpatrick Contractors Limited –v- Tyco Fire & Integrated Solutions (UK) Limited (No 3)  EWHC 274 (TCC). Giving judgment in that case Coulson J, on the basis of earlier authorities such as Petrotrade Inc –v- Texaco Limited  All ER (D) 724, held that the claimant, who had been spared the costs, disruption, and stress of trial, should not recover indemnity costs on late acceptance of a Part 36 offer by the defendant.
Here the claimant, however, emphasised the importance of Part 36 in the need to incentivise parties to both make and accept offers, an example cited being Broadhurst –v- Tan  EWCA Civ 94.
District Judge Besford preferred the argument advanced by the claimant and held:
“The interpretation of these cases put forward by Coulson J is not, with respect how I read the more recent cases coming forth from higher courts. My understanding is, as I have alluded to, that there has been a tightening up as to the ‘carrot and stick effect’ of part 36 offers. To my mind, notwithstanding the comments of Coulson J, if there was no incentive or penalty there would be little point in a defendant accepting offers early doors, as opposed to waiting immediately prior to trial. It also seems to me unsatisfactory that there should be penalties flowing if you do not beat an offer at trial, whereas if you settle before trial there are none. This position does not sit comfortably with the overriding objective of saving expense. In my view, I think that Fitzpatrick is perhaps a statement of the law as it was in 2009, but not necessarily the way the law in respect of part 36 is being interpreted in 2016.”
Consequently, District Judge Besford considered that:
“In conclusion, I do not find that the court has to find that the defendant has, in some way been guilty of inappropriate behaviour or conduct capable of censor before I can consider making an order for costs on an indemnity basis.”
Following this analysis the judge turned to the terms of Part 36, noting that Part 36.13 (6) requires the court, when considering whether it would be unjust to make the usual order on late acceptance specified in Part 36.17 (5), to take account of all the circumstances of the case, but specifically the matters identified in Part 36.17 (5).
On this basis the judge considered Part 36.17 (5) required consideration of whether it would be unjust to make the orders ordinarily flowing under Part 36.17 (4) which included indemnity costs.
On this basis the judge reviewed the circumstances of the case, including the factors expressly referred to in Part 36.17 (5) and noted:
The terms of the Part 36 offer were clear and unambiguous.
The offer made at an appropriate stage.
Both parties had material information to make and consider the offer at the time it was made.
There was no relevant conduct.
There was no suggestion the offer was not a “genuine offer to settle” and, in any event, that offer having been accepted suggested it was indeed genuine.
Accordingly, District Judge Besford ruled:
“It follows that for the court to deny the consequences that flow from accepting a part 36 out of time the court has to make pretty exceptional findings and there has to be some very good reason as to why it is unjust not to make the usual order. The very fact that the claimant obtains a ‘windfall’, most certainly does not constitute unjustness, under part 36.17.”
The claimant was, accordingly, awarded costs, to be assessed on the indemnity basis, from the end of the relevant period in the claimant’s Part 36 offer.”
COMPARE AND CONTRAST: DECISION 2: LATE ACCEPTANCE DOES NOT NORMALLY HAVE CONSEQUENCES
This has to be compared with the case of Whiting v Carillionamey (Housing Prime) Limited (Claim No B80YM364) reported by Andrew Hogan on his blog Costs Barrister. This was an appeal to His Honour Judge Hughes QC in the County Court at Winchester. The judge overturned decision of a Deputy District Judge awarding indemnity costs following late acceptance of a claimant’s Part 36 offer.
Andrew’s blog post describes Sutherland -v- Khan as a “curious case” and John replies:
“I note a different approach appears to have been taken by HHJ Hughes QC in the County Court at Winchester, the basis of that decision appearing to be that there is nothing “out of the norm” which would justify indemnity costs just because there has been late acceptance. These are my thoughts.
1. The approach of District Judge Besford appears to reflect the increasing willingness of the courts to treat any failure to engage in ADR, which can extent to not promptly accepting reasonable offers, as something “out of the norm”. It is not clear, from the extract of the judgment I have seen, whether HHJ Hughes QC was referred to ABC -v- Barts Health NHS Trust  EWHC 500 (QB) where a late accepting claimant was ordered to pay the defendant’s costs on an indemnity basis.
2. There is also the question of whether, in any event, the claimant is entitled to judgment following late acceptance by the defendant, or at least if any order which is then made by the court amounts to such a judgment, because that then triggers the claimant’s entitlement to indemnity costs under Part 36.17 and that arises without the need to establish anything “out of the norm” as a number of the cases cited by HHJ Hughes QC make clear (although these refer to the earlier version of Part 36). Whilst Fitzpatrick Contractors Limited -v- Tyco Fire & Integrated Solutions  EWHC 274 (TCC), which was also relied on by HHJ Hughes QC, suggests some difficulty with this approach a careful reading of the judgment in that case indicates the judge considered that to get indemnity costs a claimant had to do better at trial than the claimant’s own offer whereas, whilst Part 36 was originally framed in this way, the requirement is now only to secure a judgment which is at least as advantageous.
3. Ultimately this point is about fairness and parity, if the defendant secures the benefits conferred by Part 36.17 when a claimant accepts a Part 36 offer late, then the claimant should get the corresponding benefits conferred by that rule when the defendant accepts a Part 36 offer late (the fact those benefits are slightly different, with the claimant getting indemnity costs, is irrelevant for the reasons explained in Kiam -v- MGN Ltd  EWCA Civ 66). That is particularly so in cases subject to fixed costs, such as Sutherland.”
RELATED POSTS: PART 36
- Has a Part 36 offer been beaten when the value of currency changes? A High Court decision.
- Claimant’s Part 36 offers: when has the claimant beaten its own offer?
- Part 36: additional amounts and interest.
- Indemnity costs on appeal after Part 36 offer.
- Costs should not normally be reduced when a claimant beats their own Part 36 offer: Court of Appeal decision.
- Part 36: the costs consequences of late acceptance
- Part 36 offer did not encompass payment on account
- Fixed costs and Part 36: the judgment in the Court of Appeal.
- Lord Chancellor gets a bonus: the powerful results of a claimant’s Part 36 offer.
- Not a racing certainty: but indemnity costs follow claimant’s Part 36 offer.
- Part 36: when the normal costs penalties may not apply
- Is this a claimant’s or defendant’s offer? Another important decision on Part 36
- Clarification of a Part 36 offer has a major effect on costs.
- Costs where a claimant accepts a Part 36 offer late: two cases where the claimant came to grief
- Another case where there was an invalid Part 36 offer
- Is this a Part 36 offer I see before me? That’s an important question
- How relevant are Part 36 offers to issue based orders?
- Knowing the risks and advantages for the claimant in the new Part 36.
- The costs consequences of Part 36 offers: do they always apply? The cases in detail.
- Costs consequences of Part 36 offers: some interesting examples
- Costs, conduct, Part 36 and the “Winning Party”.
- Interest and costs when a claimant beats their own Part 36 offer.
- Costs of £7 million: Part 36 bites hard on claimants who cleared a first hurdle but fell at the second.
- Claimant beats own Part 36 offer and receives an additional £75,000 in damages.
- The dangers of a Part 36 offer: Claimant pays three times more in costs than he receives in damages.
- Another example of a successful defendant not recovering all of its costs (and of the advantages of a Part 36 offer).
- Percentage costs orders after a claimant beats their own Part 36 offer: a High Court decision.
- Very important decision on Part 36 offers, assessment of costs and additional amounts when offers not beaten.
- Increased interest and costs after claimant beats its own Part 36 offer.
- Part 36 offer does not override the need to serve the claim form.
- Part 36: Indemnity costs when a defendant accepts out of time.