An offer made under Part 36 of the Civil Procedure Rules (CPR) before proceedings are commenced must specify that if it is accepted pre-proceedings, the costs incurred pre-proceedings will be recoverable. If it doesn't, they won't be.
This was the finding of the Supreme Court Costs Office in Udogaranya v Nwagw. The defendant had made a compliant Part 36 offer before proceedings had been commenced. The offer contained the provision that the defendant would be responsible for the claimant's costs in accordance with CPR 36.10 if the offer was accepted within the relevant period (as defined). The claimant accepted the offer subject to its reasonable costs and disbursements being assessed if not agreed. A dispute as to the entitlement to costs then arose.
CPR 36.10 provides that where the Part 36 offer is accepted within the relevant period the claimant will be entitled to the costs of the proceedings up until the date when notice of acceptance was served.
The court held that Part 36 is a self-contained code. The rules of Part 36 must be complied with to the letter for the costs consequences of Part 36 to be engaged. Part 36.10 makes clear reference to the costs of proceedings. Proceedings were never started here. The claimant was not entitled to its costs under Part 36.
Things to consider
When making an offer pre-proceedings, it is suggested that the offeror should expressly state that the offer is made on the basis that in the event of acceptance before the commencement of proceedings, the costs provisions of Part 36 will apply. This will thereby bind those terms into any settlement contract.