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I am satisfied beyond doubt that a claimant who makes a Part 36 offer which is then accepted by the defendant after the expiry of 21 days is able to get indemnity costs from the defendant for the time after the date when the offer should have been accepted. It is not automatic, but of course will become so if a superior court gives appropriate guidance.
CPR 36.13(4) appears to put the matter beyond doubt:-
“(4) Where—
(a) a Part 36 offer which was made less than 21 days before the start of a trial is accepted; or
(b) a Part 36 offer which relates to the whole of the claim is accepted after expiry of the relevant period; or
(c) subject to paragraph (2), a Part 36 offer which does not relate to the whole of the claim is accepted at any time,
the liability for costs must be determined by the court unless the parties have agreed the costs.”
This is crystal clear. Unless the parties have agreed the costs where there has been late acceptance then the court must determine those costs. Thus in the three circumstances set out in (a) (b) and (c) the automatic Part 36 consequences do not follow.
36.13(4)(a) is self-explanatory, as is (b). The scenario in (c) would cover, for example, an acceptance of an offer of liability, but which does not deal with quantum.
It will be noted that CPR 36.13(4)(c) is subject to paragraph (2) but (2) relates exclusively to defendant’s Part 36 offers and thus has no application in relation to a claimant’s Part 36 offer.
CPR 36.13(5) then goes on to consider what the court should do when paragraph (4) (b) applies, that is the situation that we are talking about where a Part 36 offer relating to the whole of the claim is accepted late.
CPR 36.13(5) reads:-
“(5) Where paragraph (4)(b) applies but the parties cannot agree the liability for costs, the court must, unless it considers it unjust to do so, order that—
(a) the claimant be awarded costs up to the date on which the relevant period expired; and
(b) the offeree do pay the offeror’s costs for the period from the date of expiry of the relevant period to the date of acceptance.”
The wording is significant. It would have been very easy for (b) to read:-
“the claimant do pay the defendant’s costs for the period from date of expiry of the relevant period to the date of acceptance.”
It very deliberately does not so say. Clearly whether it is a claimant’s offer that is accepted or a defendant’s offer that is accepted the claimant gets costs up to the date on which the relevant period expired and CPR 36.13(5)(a) deals with that.
The wording in (b) very clearly and obviously leaves it open to cover either a situation in which the defendant has made the offer or the claimant has made the offer, hence the use of “offeree” and “offeror” rather than claimant and defendant. In a given case either, or indeed both, the claimant and defendant may be the offeror or the offeree.
Thus with a claimant’s Part 36 offer the offeree – that is the defendant – pays the offeror – that is the claimant – costs for the period from the date of expiry of the relevant period to the date of acceptance.
True it is that it does not there say that those costs should be on the indemnity basis, but neither does it say that they shall be on the standard basis.
CPR 36.13(6) states:-
“(6) In considering whether it would be unjust to make the orders specified in paragraph (5), the court must take into account all the circumstances of the case including the matters listed in rule 36.17(5).”
CPR 36.17(5) reads:-
“(5) In considering whether it would be unjust to make the orders referred to in paragraphs (3) and (4), the court must take into account all the circumstances of the case including—
(a) the terms of any Part 36 offer;
(b) the stage in the proceedings when any Part 36 offer was made, including in particular how long before the trial started the offer was made;
(c) the information available to the parties at the time when the Part 36 offer was made;
(d) the conduct of the parties with regard to the giving of or refusal to give information for the purposes of enabling the offer to be made or evaluated; and
(e) whether the offer was a genuine attempt to settle the proceedings.”
The reference back there to paragraph (3) and (4) is to those paragraphs within CPR 36.17 and not CPR 36.13.
Paragraph (3) relates only to a defendant’s Part 36 offer.
Paragraph (4) relates only to a claimant’s offer and reads:-
“(4) Subject to paragraph (7), where paragraph (1)(b) applies, the court must, unless it considers it unjust to do so, order that the claimant is entitled to—
(a) interest on the whole or part of any sum of money (excluding interest) awarded, at a rate not exceeding 10% above base rate for some or all of the period starting with the date on which the relevant period expired;
(b) costs (including any recoverable pre-action costs) on the indemnity basis from the date on which the relevant period expired;
(c) interest on those costs at a rate not exceeding 10% above base rate; and
(d) provided that the case has been decided and there has not been a previous order under this sub-paragraph, an additional amount, which shall not exceed £75,000, calculated by applying the prescribed percentage set out below to an amount which is—
(i) the sum awarded to the claimant by the court; or
(ii) where there is no monetary award, the sum awarded to the claimant by the court in respect of costs…”
There is then the table setting out additional damages which I will not go into here.
Thus the structure of what is admittedly a very complicated rule is that CPR 36.13(5)(b) states that the court must award the claimant costs from expiry to acceptance unless it will be unjust to do so and the factors that the court must take into account are all the circumstances of the case including, but not limited, to the matters listed in CPR 36.17(5) and as we have seen that rule gives an example of the circumstances that must be taken into account, but by specific reference, in the context of a claimant, to the claimant matching or beating its own offer and getting, amongst other things, indemnity costs from the period of expiry of the Part 36 offer.
It is true that the opening words of CPR 36.17 are:-
“(1) Subject to rule 36.21, this rule applies where upon judgment being entered…”
And yet we know the rule has a wider application because reference is made to its provisions applying to CPR 36.13. Furthermore 36.17(3) deals with the defendant’s entitlement to costs on late acceptance.
It will be noted that CPR 36.17 is subject to CPR 36.21 but in fact what CPR 36.21 says is that CPR 36.17 applies with certain modifications which are set out in that rule. Essentially they relate to claims that no longer continue under the Road Traffic Accident Portal or Employer’s Liability/Public Liability Portal. It deals only with the circumstances of a defendant’s Part 36 offer not a claimant’s Part 36 offer.
I accept that the drafting of CPR Part 36 would test Einstein, but it is clear that unless it is unjust to do so a defendant, on late acceptance of a claimant’s Part 36 offer, must pay the claimant’s costs to the date of acceptance. Nowhere are those costs restricted to standard costs and we now know, following Broadhurst v Tan and Taylor v Smith [2016] EWCA Civ 94 (23 February 2016) that the post-expiry costs even in a fixed costs case, are on the indemnity basis.
Thus there is no doubt at all that on judgment being entered the claimant gets indemnity costs from the date of expiry of the Part 36 offer until the judgment is entered, whether or not the matter is a fixed costs case or an open costs case. The Broadhurst ruling is a particular importance given the proposal to increase fixed costs to all claims of all kinds whether damages are £250,000.00 or less.
I refer there to judgment being entered. That is the standard defence line, that a claimant can only get the bonus if judgment is entered.
I disagree. The somewhat tortuous wording that I have set out above shows that it is mandatory for a court to consider and determine costs on late acceptance of a claimant’s Part 36 offer unless the parties have agreed costs.
Thus the scenario is that there is late acceptance and the claimant seeks indemnity costs for the period from the expiry to acceptance and the defendant refuses. Very clearly the claimant has the right to go to court and have those costs determined. It is a somewhat circular argument but of course the very fact that the claimant goes to court will mean that judgment will be entered and therefore, even on the standard defence line, that triggers the condition that means that indemnity costs should be ordered!
In my blog Claimant’s Part 36 Offer Overrides Fixed Costs – dealing with the Broadhurst case I made the following statement:-
“Firstly it is a recognition that a claimant gets indemnity costs even if the matter does not go to trial. Otherwise there would be no need to refer to “the last staging point” as it would only apply if the matter had gone to trial and no consideration of the different stages within the preparation for trial matrix would be necessary.”
I appreciate that that is also a somewhat circular argument in that it was predicated on the basis that the court was allowing both fixed costs and indemnity costs. That remains my view. However if I am wrong on that then there could be another explanation for the “last staging point” which is that even if the matter has gone to trial one needs to look at the last point before the expiry of the relevant period so as to determine the level of fixed costs and then run indemnity costs on.
In Jockey Club Racecourse Ltd v Willmott Dixon Construction Ltd [2016] EWHC 167 (TCC)
the Technology and Construction Court of the High Court held that where a claimant had made an offer to settle the matter on the basis of 95% liability and then succeeded on a full liability basis by way of settlement the claimant was entitled to indemnity costs in the usual way.
This is on all-fours with a defendant’s late acceptance of a claimant’s quantum offer. The fact that it was on liability is irrelevant – the issue here was whether a 95%/5% offer in cases where the court would have made an all or nothing order on trial was a genuine offer to settle and was genuinely offering some concession.
I deal with this case in my blog Part 36 – Important Recent Cases. This point was actually decided by the court at a Case Management Conference as the quantum hearing still had to proceed. Now it may be that judgment may have been entered at that hearing on the liability point but the decision on liability was not made at that hearing – it had been conceded and therefore this was a late acceptance case, albeit that there then was a completely separate hearing – the CMC. Two points arise. Firstly it would be absurd that the mere chance of there being another type of hearing – here a CMC – would give a claimant entitlement to indemnity costs but in the absence of that hearing there will be no such entitlement. It would also mean that defendants would be better off, where quantum remains in dispute, to never to submit to judgment when the claimant has made a Part 36 offer as submitting to judgment would trigger indemnity costs but doing a deal outside court would not.
In any event as I have pointed out above by the claimant refusing to agree costs unless paid on the indemnity basis the matter must go to court whereupon judgment can be entered. Once such a matter is at court the Jockey Club rule must apply and that is a binding decision of the High Court.
In the Jockey Club case the matter appears to have been dealt with by a consent order:
“A pre-trial review was fixed for 17 December 2015, by which the Defendant had conceded liability and the preliminary issues were resolved by consent in the Claimant’s favour.” (Paragraph 11).
“Accordingly the only issue that is left is the question of the basis on which the Claimant should be awarded its costs of the litigation in relation to liability. Miss Laney [counsel for the paying party] has, quite rightly in the circumstances, not taken a point as to whether or not the order by which the preliminary issues were resolved is a judgment for the purposes of Part 36. I therefore proceed on the basis that it is.” (Paragraph 22).
In ABC v Barts Health NHS Trust [2016] EWHC 500 (QB) (11 March 2016)
the Queen’s Bench Division of the High Court ordered a late accepting claimant to pay the trust’s costs from the date of the offers expiry until the date of its acceptance on the indemnity basis. Here the trust successfully argued that it would be unjust, given the particular circumstances of the case which I will deal with in a separate blog, simply to order the costs to be paid on the standard basis.
This is a most important case and a most important point. The general rule on late acceptance by a claimant, or indeed failure to beat a defendant’s offer at trial, is that costs are switched from the date of expiry of the relevant periods. Thus although the claimant has won he or she has to pay the defendant’s costs from that point on and that is the penalty, that is that a winning claimant nevertheless pays costs for that period. Here the court ordered them on the indemnity basis.
It cannot possibly be the case that a court has the power to impose that further penalty, that is not only costs switching but those costs to be on the indemnity basis in relation to late acceptance of a defendant’s Part 36 offer but not a claimant’s Part 36 offer.
If all that a claimant got was costs on the ordinary basis then there is no penalty whatsoever on a late accepting defendant; they would have to pay the costs anyway on the standard basis whether or not any offer had been made.
Public policy considerations only go one way here – a court giving purposive construction to the will of Parliament and applying public policy considerations is bound to award a claimant costs on the indemnity basis for the period from expiry of the relevant period to late acceptance by a defendant, unless it is unjust to do so.
It seems to me now to be beyond doubt and claimants should never now agree to accept costs on the standard basis where a defendant accepts late.
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