In two recent decisions, the courts have refused to treat offers which fell outside the Part 36 regime as favourably as a Part 36 offer. In Patience v Tanner [2016] EWCA Civ 158 the defendant's offer was not a Part 36 offer because it did not offer to pay the claimant's costs if the offer was accepted within the relevant offer period, as a Part 36 offer must do. In Burrell v Clifford [2016] EWHC 578 (Ch) the offer fell outside Part 36 because the amount offered in respect of costs was fixed at a specified sum, which is not permitted under Part 36. In both cases, the courts declined to award the costs consequences that almost certainly would have followed if the offers had been made under Part 36.

There may in some cases be good reasons for a defendant to make a "without prejudice save as to costs" or Calderbank offer, rather than an offer under Part 36 – perhaps because the defendant wants to make a costs-inclusive offer or to set a limit on the amount offered in respect of costs. And in some cases the courts may be prepared to give effect to such offers; in Walker Construction v Quayside Homes [2014] EWCA Civ 93, for example, the Court of Appeal gave effect to an offer which put forward a reasonable costs-inclusive figure (see post). In that case the Court of Appeal was critical of the first instance judge because he did not give appropriate consideration to the fact that the losing party could not realistically have made a Part 36 offer, in circumstances where the claim was exaggerated, because it would have been liable for the claimant's costs on acceptance.

However, as the recent cases demonstrate, each case will turn on its facts and the only sure way to obtain the costs advantages of Part 36 is to make an offer in strict compliance with its provisions and to leave the offer on the table until judgment is given.

Patience v Tanner

Simplifying the facts slightly, on 8 May 2014 the defendant made an offer to settle the claimant's claim for specific performance in respect of the grant of certain easements. The offer was open for acceptance for 21 days only, after which it would lapse, and it said nothing as to the costs consequences of accepting the offer. The claimant queried the position as to costs, but the defendant did not provide clarification.

On 3 November 2014, about a week before trial was due to begin, the defendant repeated the terms of the May offer. The claimant accepted the renewed offer. The judge at first instance ordered that the claimant was entitled to his costs up to 29 May 2014, when he could and should have accepted the defendant's offer, and that the defendant was entitled to costs from that point on. Although the May offer was not a Part 36 offer because it did not accept that the claimant would be entitled to costs up to the date of acceptance, it was still to be taken into account in exercising the court's discretion on costs.

The Court of Appeal allowed the claimant's appeal in part (Gross LJ giving the lead judgment). The judge was amply justified in holding that the claimant should not have his costs after 29 May 2014, as the November offer which he accepted was in identical terms to the May offer and so there was no good reason not to have accepted the earlier offer. However, there was equally no good reason for the respondents to have withdrawn the May offer rather than letting it stand. The conduct of both parties contributed substantially to the failure to reach an earlier settlement. The judge's order did not take into account the failings of the defendant, which were a relevant consideration.

In addition, the fact that the judge had awarded costs up to 29 May meant the claimant had "beat" the May offer (which did not include an offer to pay costs). That fortified the Court of Appeal in its conclusion that in depriving the claimant of the post-29 May costs the judge gave sufficient effect to the May offer, and that he was neither entitled nor obliged to go further and order the claimant to pay the defendant's costs thereafter.

The Court of Appeal therefore substituted its own view, which was that each party should bear its own costs from 29 May onward.

Burrell v Clifford

The claimant was awarded damages of £5,000 in his privacy claim against the defendant. Despite the fact that the claimant had succeeded in its claim, the defendant argued that the claimant should be ordered to pay part of the defendant's costs. That was because the claimant had failed to beat the defendant's "without prejudice save as to costs" offer to pay £5,000 in damages plus the defendant's reasonable costs up to £5,000 inclusive of VAT.

The court (Mr R Spearman QC sitting as a deputy High Court judge) held that the claimant should be entitled to his reasonable costs in spite of the offer made. In the judge's view, it was "absolutely inevitable" that at the time the offer was made the claimant's costs were well in excess of the sum offered in respect of costs. That meant the offer was inadequate. To obtain costs protection the defendant should have offered to pay the claimant's costs subject to detailed assessment in the usual way – as the defendant would have had to do if the offer was made under Part 36.

The judge referred to Walker Construction v Quayside Home, and said that he obviously paid careful regard to that case, but did not find it persuasive in the present case. He added:

"To my mind, somebody making an offer of this sort who includes an offer for the costs to date has all the protection they could reasonably expect by reason of the assessment regime which will have regard to reasonableness of costs and proportionality."

The judge also referred to the defendant's submission that the claim was exaggerated, in terms of value, saying:

"Well, maybe. [The claimant] put forward greater value claims … but the fact is his claim had a value and he succeeded on it, and it could have been met by protection by [the defendant] by an appropriate part 36 offer."