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Part 36 battles galore

Part 36 never ceases to throw up disputes. Recently, “issue of the month” has been what happens when a defendant accepts a Part 36 offer late.

In Sutherland v Khan, District Judge Bedford held that late acceptance of a Part 36 offer could lead to the imposition of indemnity costs in favour of a claimant after the latest date for acceptance. That decision caused quite a stir, but it seems that orthodoxy may have been resumed by His Honour Judge Hughes QC sitting in the County Court at Winchester on an appeal in Whiting v Carillionamey (Housing Prime) Limited on 10 October 2016. He held that the mere fact of a defendant’s late acceptance of a Part 36 offer could not, of itself, lead to an award of indemnity costs, basing himself on what the Court of Appeal said in Excelsior Industrial and Commercial Holdings v Salisbury Hammer Aspden and Johnson.

He, therefore, allowed the defendant’s appeal from the award of indemnity costs after the last date for acceptance of the Part 36 offer. (We are grateful to Andrew Hogan, who acted for the appellant, for informing us of this decision).

What, though, if the tables are turned? In the two cases referred to above, it was the claimant who was seeking to say that in circumstances where the defendant accepts a Part 36 offer late, the court should use its powers under CPR 36.13(5) to make an order other than that prescribed by that subparagraph, namely an order for standard costs in favour of the claimant from the date of expiry of the relevant period to the date of acceptance. The order that the claimant sought in each case was, of course, indemnity costs.

In a case in which I was involved for the claimant in the County Court at Birmingham (Fatta v Alam), on 6 October 2016, District Judge Lumb handed down a judgment of District Judge Griffith (the latter being indisposed). The case concerned the assessment of costs.

Simplifying matters, the claimant won an action against the defendants and was awarded indemnity costs. Costs could not be agreed and the claimant started assessment proceedings. Not long after that, the defendants made a series of offers on the bill, all of which were rejected. Very late in the day (the eve of the detailed assessment hearing) the defendants sought to argue that the claimant could recover no costs because the retainer had been signed at the claimant’s home and she had not been given notice of her cancellation rights; therefore, the retainer was unenforceable against her pursuant to the late and unlamented Cancellation of Contracts made in a Consumer’s Home or Place of Work etc. Regulations 2008.

District Judge Griffith adjourned the assessment to allow the defendants to take this new point. Thereafter, the defendants made no further offers on the bill. Eventually, the claimant made a Part 36 offer in a sum substantially less than the defendants had offered before they decided to take the cancellation point.

The relevant 21 day period expired on a Friday and the defendants accepted the offer on the Monday. They went to the lengths of delivering the acceptance letter in person.

The defendants asserted that the proper order for costs should be that the claimant should have her costs up to the expiry of the earliest of the defendants’ offers and that she should pay their costs thereafter. The effect of that would have been that the claimant paid virtually all the costs of the detailed assessment.

The matter went back before District Judge Griffith. He considered CPR 36.13(5), which provides that in the relevant circumstances where the parties could not agree liability for costs where a party had accepted the offer late, 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.”

He also considered subparagraph (6), which directs that when considering whether it would be unjust to make the order, the court must take into account all the circumstances of the case including the matters listed in CPR 36.17(5).

The result was that he, broadly speaking, ordered the defendants to pay the claimant’s costs up to the last date for the acceptance of the last of the defendants’ offers and that the claimant should pay the defendants’ costs thereafter. He did so, ostensibly on the basis that to order otherwise would lead to an injustice.

The claimant’s appeal against this decision is to be heard on 20 December 2016, and the purpose of this blog is not so much to analyse the rights and wrongs of the decision but to draw attention to the fact that rather than promoting settlements, Part 36 has, all too often, led to more disputes.

39 Essex Chambers Simon Edwards

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