The Court of Appeal has recently reconfirmed that there is no “near miss” rule in relation to Part 36 Offers anymore.

The helpful clarification was given in the case of Sugar Hut v AJ Insurance.

In short, the Sugar Hut was a well known nightclub which had to be closed due to a fire in 2009. Sugar Hut was unable to claim under its insurance due to material non-disclosure and so Sugar Hut turned its attention to its broker, AJ Insurance. The parties agreed liability at 65% and agreed a number of other aspects. However, the parties were unable to agree the quantum of the loss accrued for business interruption.

The outcome was that AJ Insurance had to pay an additional £277,000 on top of the previous interim payments. Part 36 offers had been exchanged in advance of the quantum trial, but neither party made any successful offers. Sugar Hut’s expectations had been too high and AJ Insurance Part 36 Offer dated May 2014 in the sum of £250,000 had been too low. However, the judge in the first instance held that Sugar Hut had been unreasonable in their denial of offers and his order on costs was as follows:

  1. up to and including 13 June 2014: AJ Insurance to pay 70% of Sugar Hut’s costs;
  2. after 13 June 2014: Sugar Hut to pay AJ Insurance’s costs.

Unsurprisingly, Sugar Hut appealed that order and the Court of Appeal commented that there was no basis upon which to deprive Sugar Hut of their costs after 13 June 2014. The Court commented that the fact that Sugar Hut had not been successful on all their claims was reflected by depriving them of 30% of their costs. Accordingly, the Court ruled that the costs order be amended by deletion of the words “up to and including 13 June 2014” leaving the costs order as follows:

“the Defendant shall pay 70% of the Claimants’ costs of the assessment of damages on the standard basis, to be assessed if not agreed”.