Late acceptance of Part 36 offer does not allow defendant to escape liability for costs

As we have considered previously (‘Acceptance of Part 36 offer after end of relevant period (CPR 36.13(40) – right to detailed assessment’), an automatic liability (deemed order) for costs is only triggered if a Part 36 offer is accepted within the ‘relevant period’ (CRP 36.13(1)).

Where a Part 36 offer is accepted after the end of the ‘relevant period’ there is no deemed order and ‘the liability for costs must be determined by the court unless the parties have agreed the costs’ (CPR 36.13(4)(b)).

If the parties cannot agree, the Court ‘must, unless it considers it unjust to do so, order that the claimant be awarded costs up to the date on which the relevant period expired and the offeree do pay the offeror’s costs for the period from the date of the expiry of the relevant period to the date of acceptance’ (CPR 36.13(5)).

The case

In Pallet v MGN Limited [2021] EWHC 76 (Ch) the Defendant deliberately delayed acceptance of the Claimant’s Part 36 offer until one day after the end of the ‘relevant period’. This was designed to enable the Defendant to escape rule 36.13(1) – that ‘the Claimant will be entitled to the costs of the proceedings’ – and to argue that, under rule 36.13(4)(b), the Claimant should be deprived of (some of) her costs.

Part 36.13(5) sets out the order which the court must make (when a part 36 offer is accepted after expiry of the ‘relevant period’) ‘unless it considers it unjust to do so’.

The Defendant looked to Part 36.17(5) (listing the matters which the court must take into account when considering whether it would be ‘unjust’ to make the ‘usual’ order per Part 36.13(5)) and argued that, in particular, the ‘conduct of the Claimant with regard to the giving of or refusal to give information for the purposes of enabling the offer to be made or evaluated’ should be taken into account.

The Defendant argued that the Claimant was culpable of a ‘serious failure’ to engage with the settlement process. It was submitted the Claimant waited to put forward an offer, wasting the chance of earlier settlement.

The Claimant countered that none of the Defendant’s offers were adequate and that she required disclosure before making her offer.

The Defendant was unsuccessful – the Judge found that the Defendant had failed to discharge ‘the heavy burden … of showing that it would be unjust to apply the normal Part 36 consequences’. The Claimant was awarded her costs of the proceedings.

Comment

The case reveals a potential lacuna in the rules – if a party accepts a Part 36 offer within the relevant period the costs consequences are prescribed and certain (the Claimant will be entitled to the costs of the proceedings), but if that same offer is accepted only one day after the end of the relevant period the Defendant may argue that the Claimant should only recover part of her costs.

The resulting argument will turn on whether it is ‘unjust’ to allow the ‘normal’ part 36 consequences to follow (per CPR 36.13(5)) and the Judge said that establishing this is a ‘heavy burden’. Accordingly, we consider, in the vast majority of cases (as in the Pallet decision) the ‘normal’ Part 36 consequences will follow.

However, the rules, as drafted, do provide a route to a perverse position – that the offeror could be in a worse position by the offeree accepting a Part 36 offer deliberately late. It is very likely that we will see this tactic used again (the Judge made it plain that the case has turned on its own facts’), in situations where a party wishes to run an argument that its opponent’s conduct should enable the court to depart from the usual costs order.

Leave a Reply

Your email address will not be published. Required fields are marked *

%d bloggers like this: