Howell and others v Lees-Millais and others [2011] EWCA Civ 786

The Appellant had been unsuccessful in its claims against the Respondents, and following disposal of those claims a costs hearing had been listed. Prior to that hearing, the Appellant sent letters containing what they described as Part 36 offers to two of the Respondents. A proportion or fixed sum was offered in respect of those Respondents’ costs, and the offers were stated to be open for 21 days. No offer was made to the third Respondent, and the other two rejected the offers made.  

Almost a year later, the Appellant indicated that it was willing to offer a sum in respect of the third Respondent’s costs if the other two would now accept the offers previously made. All three Respondents accepted this proposal, but the costs hearing still went ahead. The Appellant argued that it was entitled to its costs from the expiry of the original 21 day period referred to until the time when the offers were accepted.  

At first instance, the judge declined to make the order for costs requested by the Appellant and held that the earlier offers were not Part 36 offers. They had been expressed in terms which implied that they would be withdrawn after 21 days, which was inconsistent with Part 36. The issues for the Court of Appeal to consider where (a) whether the earlier offers were Part 36 offers, (b) if so whether the offer which was later accepted was better or worse than the original offers, and (c) if the later offer was not the same or worse, how the court should exercise its discretion in respect of costs.  

The appeal was dismissed. The Court of Appeal found that the earlier offers were not Part 36 offers, as they explicitly excluded the offerees from recovering all of their costs, and gave them the option of recovering only a proportion or a fixed sum. However those offers should, if possible, be treated as Part 36 offers. This was supported by the fact that all parties treated the offers as having been made under Part 36, and had explicitly stated that the offers were in force well after the expiry of the 21 day period. In such circumstances an offer, expressed to be a Part 36 offer and which largely complies with Part 36, should be given substantially the same effect as a Part 36 offer.

The later offer was different from the earlier ones, as it included an additional provision, namely the offer of a sum in respect of the third Respondent’s costs. That rendered the later offer more attractive to all of the Respondents. As the later offer was better that the earlier ones, the allocation of liability for costs for the period between expiry of the 21 days and acceptance was a matter for the judge’s discretion. Taking in to account all of the circumstances, the judge ordered that each party should bear its own costs from the expiry of the 21 day period.