Withdrawn part 36 offer was not relevant in deciding costs, High Court rules

A circuit judge was wrong to order a claimant who failed to beat a second part 36 offer to pay the defendant’s costs from the expiry of the first offer, the High Court has ruled.

Mr Justice Foskett said that His Honour Judge Simpkiss in Brighton did not pay enough attention to the terms of the second part 36 offer, which indicated that the defendant would not seek its costs from the time of the first offer.

Ballard v Sussex Partnership NHS Foundation Trust [2018] EWHC 370 (QB) was an appeal concerning the costs of a quantum-only trial in an employer’s liability claim.

He awarded £17,000 general damages and £5,488 special damages which, together with interest, totalled £23,315. The case pre-dated the introduction of qualified one-way costs-shifting.

In January 2016 – 14 months before the trial – the defendant’s part 36 offer of £50,000 was rejected. At some stage thereafter, the claimant made a part 36 offer to accept £72,000.

More than a year later, and four weeks ahead of trial, the defendant withdrew its original offer, rejected the claimant’s offer, and made a new part 36 offer of £30,000. The last paragraph of the offer said: “For the avoidance of doubt, if the claimant fails to obtain a judgment more advantageous than the offer made in this letter, then the defendant will seek an order that the claimant should pay both parties’ costs from 01.03.17.”

Before Foskett J, it was not in issue that the claimant would have to pay the defendant’s costs after 1 March – in other words, the costs of the trial – nor that the claimant was entitled to her costs up until the expiry of the first offer. The issue was who should be responsible for the costs in between.

The claimant argued that that last paragraph, and the silence on the costs after the first offer expired, meant that her costs until the expiry of the second offer would be met even if she failed to better the offer.

HHJ Simpkiss ruled: “I cannot see the second offer has any relevance. The withdrawal of the first offer is relevant only to the extent that the automatic provisions of part 36 no longer apply but, if an offer had been made without prejudice save as to costs which was not expected to be part 36 and had been made for example before the proceedings had been issued, then that would be an important factor that the court could take into account.

“Although tactically the claimant may well have been right not to accept the original offer and to hold out for more, that tactic unfortunately, with the benefit of hindsight, has not succeeded and the consequences, in my judgment, must follow… The correct exercise of my discretion is to award the defendant the costs from the date that the original part 36 offer expired… and the claimant to have her costs up until that time.”

On appeal, Foskett J identified “a tension” between the proposition that an offeror who withdraws a part 36 offer cannot reap the benefits of rule 36.17 and the proposition that such an offer is still relevant on the issue of costs.

Foskett J concluded: “I do not consider that it is fair to the claimant to send a detailed letter to her solicitors, apparently spelling out the consequences of failing to beat the part 36 offer and then to argue that something different was intended, particularly where, as here, the consequence of the additional argument would probably diminish the claimant’s net return from the litigation very considerably.

“The judge was obviously very heavily influenced by the fact that the claimant could have saved a great deal of expense by accepting the first offer. It is undoubtedly true that such expense would have been saved, but I do not consider it was right to regard the second offer as ‘irrelevant’ with the consequence, if the judge so treated it, that the precise terms of the offer were also regarded as irrelevant.

“In my judgment, the defendant cannot escape from the precise terms of the final paragraph of the second offer and as a result it is really the first offer that becomes irrelevant.

“Whilst I differ from an experienced judge in this field with some hesitation, I am satisfied that he misdirected himself about the relevance of the second offer and that, accordingly, he paid less attention to its precise terms than should have been paid.”

He allowed the appeal and ruled that the claimant was entitled to her costs up to and including 1 March 2017, but that she should pay the defendant’s costs of the trial.

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Costs News
Published date
08 Mar 2018

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