In Fitzpatrick Contractors Ltd v Tyco Fire & Integrated Solutions (Uk) Ltd (formerly Wormald Ansul (Uk) Ltd) (No.3) – Lawtel 3.3.09 the court determined costs where one party had made a CPR part.36 offer that was not accepted within the relevant time period for acceptance but was subsequently accepted prior to the trial.

The Claimant had made a CPR part 36 offer to settle litigation between the parties. The relevant period for acceptance expired and there was a trial of preliminary issues on which the Claimant was substantially successful. When the Defendant later accepted the Part 36 offer, the Claimant contended that had there been a trial and damages were recovered in the same amount as the part 36 offer it would have been entitled to indemnity costs, unless the court concluded that it was unjust to make such an order, because of the express words of r.36.14.

The TCC held that as there had been a valid acceptance of a valid part 36 offer the starting point was r.36.10. There was no reference in r.36.10(4) and (5) to a presumption that, unless it was unjust to do so, the court would order a late-accepting defendant to pay a claimant's costs on an indemnity basis. The usual basis for the assessment of costs was the standard basis and if there was an entitlement to seek indemnity costs then that was expressly spelled out in the CPR. A party could seek indemnity costs in one of two ways, either because there was a presumption that such costs would apply, for example under r.36.14 or because it could demonstrate the necessary evidence of conduct under r.44.3. There was no basis under the CPR which would allow the court to order indemnity costs for any other reason or on any other basis. Accordingly, the Claimant's claim for indemnity costs failed as a matter of principle. An indemnity costs presumption should not be imported into r.36.10. There was a right to claim recovery of indemnity costs but no rebuttable presumption that such costs would be recovered. Whilst the case was complex, the parties' approach to it was generally reasonable on both sides and a settlement three months before trial, at a figure that represented about half of the Claimant's claim, was an unexceptional result. It was impossible to say that there was any basis on which the Claimant could be entitled to have its costs assessed on an indemnity basis under r.44.3.

The Claimant made a reasonable Pt.36 offer and it took the Defendant almost a year to conclude that the offer should be taken. During that period the Claimant incurred considerable further costs. In all the circumstances this was a case where it was appropriate to order interests on costs at one per cent over base rate. The Claimant was also entitled to an interim payment of costs.