Whether an offer was a claimant or defendant Part 36 offer
CPR r36.2(3) provides that a Part 36 offer can be made in respect of a counterclaim and refers to CPR r20 which in turn provides that counterclaims are treated as claims. CPR r36.5 further provides that an offer must state whether it takes into account any counterclaim. The issue of whether a Part 36 offer made by a counterclaiming defendant is to be treated as a claimant or defendant offer is important because claimant offers which are not beaten entitle the offeror to better costs consequences than defendant offers.
In this case, the defendant had made a Part 36 offer to settle the claim against it and the offer was said to take account of any counterclaim which the defendant might have (although no separate, stand-alone counterclaim had been made by the defendant at the time of the offer). The defendant went on to get a better result at trial and argued that it was entitled to the enhanced costs consequences available to claimant Part 36 offers.
Coulson J held that the offer had been a defendant's offer. He stressed that it is vital that a party making a Part 36 offer spells out, in unequivocal terms, the nature of the offer being made and the consequences which will flow from non-acceptance: "the recipient needs to be in no doubt as to what may happen if the offer is turned down". Furthermore, an offer from a counterclaiming defendant will not automatically be treated as a claimant's offer – it is necessary to look at its terms. He also referred to the earlier decision of AF v BG (2010) – in which the Court of Appeal had held that an offer made by the defendant was to be construed as a claimant's offer – and drew various distinctions with the position in that case:
- The offer was not expressly stated to be a claimant's offer.
- There was no offer to accept an amount in settlement of both the claim and counterclaim – instead it just offered to pay an amount to the claimant.
- The offer had offered to pay the other side's costs.
- It did not spell out the enhanced consequences of non-acceptance of a claimant's offer.
Furthermore, even if this had have been a claimant's offer, the judge would only have imposed interest of 2.5% (even though up to 10% could have been awarded), because of the current low interest rates.
The judge went on to find that the defendant was entitled to indemnity interest because the claimant should have realised that its claim was hopeless from the outset. However, amounts paid by the defendant to claims consultants were excluded from the order for indemnity costs. That was because the consultants had not acted in any formal proceedings for the defendant and their involvement in the disclosure exercise was "somewhat surprising".