Case Alert - [2018] EWHC 370 (QB)

The defendant made a Part 36 offer which it subsequently withdrew and then a second, lower Part 36 offer which it beat at trial. Where a defendant beats its offer at trial, the usual costs consequence is that the court will order the claimant to pay the defendant’s costs from the date on which the "relevant period"("RP") in the offer expired and interest on those costs. In this case, the second Part 36 offer expressly provided that "For the avoidance of doubt, if the Claimant fails to obtain a Judgment more advantageous than the offer made in this letter then the Defendant will seek an Order that the Claimant should pay both Parties' costs from [the end of the RP of the second offer]".

The issue in this case was whether the claimant had to pay the defendant's costs from the end of the RP of the first or the second offer. The county court judge held from the date of the first offer, but that ruling has now been overturned by Foskett J.

After reviewing prior caselaw, the judge recognised that there is "tension between the proposition that an offeror who withdraws a Part 36 offer cannot "reap the benefits" of what is now r.36.17 …. and the proposition that such an offer is still "relevant" on the issue of costs". Although, with hindsight, the claimant should have accepted the first, higher, Part 36 offer, the sentence starting "Fort the avoidance of doubt" in the second offer meant that the defendant could no longer claim to be entitled to costs from the end of the RP of the first offer: "I do not consider that it is fair to the Claimant to send a detailed letter to her solicitors, apparently spelling out the consequences of failing to beat the Part 36 offer and then to argue that something different was intended, particularly where, as here, the consequence of the additional argument would probably diminish the Claimant's net return from the litigation very considerably".

COMMENT: It is possible to vary, rather than withdraw, a Part 36 offer. In the case of Burrett v Mencap, it was held that where an offer is changed, the relevant period did not start to run again and so the defendant was entitled to its costs from the end of the RP of the original offer. Although CPR r36.9(5) (introduced after Burrett) now provides that where a better offer for the offeree is made, that will amount to a new Part 36 offer, the rules are silent on the situation where a lower offer is made and so in this case it appears that the defendant would have been entitled to its costs from the end of the RP of the first offer if the offer had been changed rather than withdrawn.