Whether withdrawn Part 36 offer, which claimant beats, entitles the claimant to indemnity costs


The claimant made a Part 36 offer which provided that "after 21 days, this offer is withdrawn". Following the recent change to the Part 36 rules, that had the effect of an automatic withdrawal of the offer. She went on to better the offer at trial and sought her costs on an indemnity basis. Although the Part 36 costs consequences are not available where a Part 36 offer has been withdrawn, the withdrawn offer can be taken into account under CPR r44 (which gives the court a general discretion as to costs). 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.

Mann J held that other factors relating to the defendant's conduct in this case would not have justified an award of indemnity costs. As for the Part 36 offer, the claimant's argument would introduce the possibility of an award for indemnity costs for behaviour which was not necessarily unreasonable or unreasonable to a sufficient extent beyond the norm and that would be "novel": "of itself a failure to accept an offer has generally not been treated as the sort of undesirable behaviour justifying indemnity costs". Stokes did not help the claimant as it was decided under a former Part 36 regime. Nor did it matter that the claimant was not seeking all the costs consequences under Part 36 – the award of indemnity costs is a "very significant" consequence.

As a result the withdrawn Part 36 offer "loses much of its significance" and indemnity costs were not awarded.

COMMENT: Although indemnity costs were not awarded in this case, it is not impossible that such an award can be made where a Part 36 offer has been withdrawn. In Community Gateway Association v Beha (see Weekly Update 45/11), indemnity costs were awarded to a defendant. The judge's decision was based in part on the withdrawn Part 36 offer and in part on what should have been a growing perception by the claimant that its case was weak. He considered that the Part 36 offer allowed the court to not only make a costs award in favour of the defendant but also to take it into account when considering whether to do so on the indemnity basis.