Court considers the costs consequences of withdrawing a Part 36 offer

In October 2013, the claimant offered to accept £700,000 in a Part 36 offer. In January 2014, it offered to accept £310,000 in a further Part 36 offer. That offer was subsequently withdrawn. The claimant was eventually awarded just over £400,000. An issue then arose as to the weight to be given to the January 2014 offer.

The CPR provides that a withdrawn Part 36 offer ceases to attract the Part 36 costs consequences, but can be taken into account when the court exercises its discretion under CPR r44.3. The claimant sought to rely on Stokes Pension Fund v Western Power [2005], in which the Court of Appeal held that a defendant who had made an offer which did not comply with Part 36 was nonetheless still entitled to the same costs consequences as if it had been a valid Part 36 offer.

Edwards-Stuart J referred to conflicting prior cases on this point and concluded that the claimant's withdrawn offer should not be treated as if it was the equivalent of a Part 36 offer: "I say this for two reasons. First, the rules specifically provide that offers that are withdrawn are not to be so treated. Second, the January 2014 offer was replaced by an offer which was far less favourable to [the defendant], thereby indicating that the [the claimant] was no longer prepared to accept the lower sum - so why should [the claimant] be treated as if the January 2014 offer was somehow still in place? I see no reason why it should". Accordingly, the claimant was not entitled to its costs on the indemnity basis.

COMMENT: The conclusion in this case is the same as that reached by the judge in Gulati v MGN Ltd, where it was held that Stokes did not help the claimant as it was decided under a former Part 36 regime and nor did it matter that the claimant was not seeking all the costs consequences under Part 36 – the award of indemnity costs was said to be a "very significant" consequence.