Considering the cost consequence when a Claimant’s Part 36 offer is accepted out of time
It is illuminating to consider the very first rule in the CPR:
CPR 1.1 (1) These Rules are a new procedural code with the overriding objective of enabling the court to deal with cases justly and at proportionate cost.
I have added the emphasis to stress a point. In modern litigation, for better or worse, proportionality of costs is of equal importance to achieving justice itself.
‘In modern litigation, for better or worse, proportionality of costs is of equal importance to achieving justice itself.’
To implement the overriding objective, Parliament, the Rules Committee and the Judiciary have employed a number of tools to reduce the cost of litigation. It is increasingly apparent that the wearisomely unwieldy Part 36 is to play a critical role.
Within his report published in 2010, Lord Justice Jackson wrote the following regarding Part 36 offers:
‘As the law now stands, the claimant is insufficiently rewarded and the defendant is insufficiently penalised, when the claimant has made an adequate offer.’
Giving Part 36 offers meaningful consequences when they should be accepted but are not, should in theory reduce costs as Claimants are motivated to make early Part 36 offers and Defendants are given a reason to seriously consider them or face possible adverse consequences.
Last year I wrote here about the importance of making Part 36 offers when pursuing a claim which is subject to the fixed costs regime. Within the article I offered the opinion that ‘the natural extension of the Court’s stance is that a Claimant will also benefit from indemnity costs should the Defendant accept a Part 36 offer out of time, but prior to a Judgment.’ Increasingly this view is supported by caselaw.
Sutherland v Khan, Kingston Upon Hull County Court, Case Number A81YM424 determined (albeit at first instance) that late acceptance of a Part 36 offer would result in indemnity costs from the date the offer became effective. District Judge Besford explained:
‘A generous outcome in such circumstances is consistent with rule 3.14(3) as a whole and its policy of providing claimants with generous incentives to make offers, and defendants with countervailing incentives to accept them.’
Even more recently the Gazette has reported on Car Craft Test Centre and Martin v Trotman & Advantage Insurance Company wherein the Claimant’s Part 36 offer was accepted 10 months out of time and as a result the Claimant was awarded their indemnity costs from the expiry of the offer’s relevant period.
While neither case is binding, we are finding that Courts at assessment are increasingly in agreement with the reasoning provided therein. As such, while there is no guarantee that indemnity costs will be awarded following late acceptance of a Claimant’s Part 36 offer, this is likely to be the starting point a Judge will adopt and it will be for the Defendant to convince the Court that to award indemnity costs would be unjust with reference to the points in CPR 36.17.
‘While there is no guarantee that indemnity costs will be awarded following late acceptance of a Claimant’s Part 36 offer, this is likely to be the starting point a Judge will adopt.’
With Justice on an equal footing with proportionality, and cost consequence following late acceptance of a Part 36 offer designed to encourage swift proportionate settlements. It is likely Defendants would be fighting an uphill battle to persuade a Judge that indemnity costs should not apply following late acceptance of a Part 36 offer. As District Judge Besford makes entirely clear in Sutherland:
‘The very fact that the claimant obtains a ‘windfall’, most certainly does not constitute unjustness’
That said, pending an authoritative case or indeed amendments to the rules themselves, the position will remain far from certain. This is illustrated by the matter of Whiting v Carillionamey (Housing Prime) Limited (Claim No B80YM364) in which indemnity costs were not awarded after late acceptance of a Claimant’s Part 36 offer. The decision cites pre-Jackson reform authorities, however it is worth noting that according to District Judge Besford these authorities are outdated and not a reflection of the law as it is today.