Court of Appeal rules that claimant entitled to her costs after accepting Part 36 offer, even though she withheld material information about her claim

Where a Part 36 offer is accepted within the relevant period, the claimant will get its costs from the defendant, as of right. However, where the offer is accepted outside the relevant period, the court will order that the defendant pays the claimant's costs of the proceedings up to the expiry date of the relevant period and the offeree pays the offeror's costs from the expiry date of the relevant period to the date of acceptance on the standard basis, "unless it considers it unjust to do so".

In this case, the claimant accepted the defendant's Part 36 offer outside of the relevant period and the judge at first instance ordered her to pay the claimant's costs from the date when she had begun to mislead the defendant about her claim. The defendant's claim was for personal injury and she sought damages on the basis that she would never work again, but she failed to disclose that she had begun to run playgroups almost 4 years after the accident. The defendant had made its Part 36 offer after it learnt of the claimant's playgroup activity.

The Court of Appeal has now held that it would not be unjust for the claimant to receive her costs up to the end of the relevant period. It held that her attempts to run a playgroup were material but did not mean that her disability was fabricated. Furthermore, "the Defendant's insurers, through their very experienced solicitors, made the unconditional Part 36 offer in full knowledge of the Claimant's material non-disclosure, and knowing that acceptance within 21 days would … give the Claimant her costs to date as of right". Referring to the Supreme Court decision of Summers v Fairclough, the Court of Appeal said that it had been open to the defendant and its insurers to make a Calderbank offer if it did not want to have to pay the claimant's costs if the offer is accepted.

The Court of Appeal also noted that a defendant faces a "formidable obstacle" in showing that it would be unjust for the claimant to get its costs up to the end of the relevant period.

COMMENT: Although there have been a number of recent cases in which the court has held that it would be unjust to award a claimant its costs up to the end of the relevant period where it accepted a defendant's offer outside the relevant period, in this case the Court of Appeal has re-affirmed that the "formidable obstacle" test applies. Accordingly, if defendants or their insurers wish to make an offer without having to pay the claimant's costs (perhaps in circumstances where they suspect, but cannot prove a fraudulent claim), a Calderbank offer should be considered instead.