A regional costs judge has concluded that he was wrong to rule in a previous case that late acceptance of a Part 36 offer automatically entitled the claimant to an award of indemnity costs, and thus provided an escape route out of fixed costs.
Judge Ian Besford decided that his widely reported decision in Sutherland v Khan “is unsupported and can no longer stand”.
Part 36 is silent on whether fixed, standard or indemnity basis costs apply in fixed-costs cases where there has been late acceptance, save that references are made to CPR 36.17.
This provides that the defendant should be encouraged to settle before trial without unfair costs penalties, whereas a claimant does not want to be put to additional work without appropriate costs reimbursement.
In Sutherland, District Judge Besford applied the Broadhurst principle that a claimant beating a Part 36 offer that proceeded to trial was entitled to escape fixed costs, to cases that did not proceed to trial but were settled by accepting Part 36 offers outside the 21 day period for acceptance.
There have been conflicting circuit judge appeals on whether he was right.
According to the defendant in the new case, the judge’s ruling in Whalley v Advantage Insurance confirmed that unless there were ‘exceptional circumstances’ or conduct justifying indemnity costs, the fixed costs regime applied to acceptance of part 36 offers out of time.
A further case to be considered in this regard is the case of Starczawski –v- James, a Provisional Assessment that took place in October 2017 where District Judge Ellington awarded Standard Basis Costs from the expiry of the Claimant’s Part 36 offer in a Fixed Costs Claim.
I believe the lesson to take from all of the above is that unfortunately it is still a very murky river to swim in and until we have a definitive authority to work from, it is absolutely imperative that the receiving party continues to make well calculated and well timed Part 36 offers.