Costs Consequences of Late Acceptance of Part 36 Offers: recent guidance from the Court of Appeal

It is a common issue: an early Part 36 Offer is made in a case prior to the claimant party being in a position to fully value a case which transpires to be acceptable at a much later date. Should the usual costs consequences of accepting the offer out of time be apply or not?

The Court of Appeal has grappled with this issue in the as yet unreported case of Briggs v CEF Holdings Limited (2017) CA (Civ Div) (Gross LJ, Asplin J) 13/07/2017.

This case concerned an accident at work and a consequent foot injury in January 2010. Proceedings were issued in January 2012 and in September 2012 the Defendant made a Part 36 Offer of £50,000 which was neither accepted nor rejected. In May 2013 a stay was granted as the Claimant underwent surgery. This was lifted in April 2014 and the Claimant increased his claim to seek just under a quarter of a million pounds. The matter was laid down for trial in early 2015 and in the meantime the Claimant’s orthopaedic expert retreated somewhat from his position as to the Claimant’s ability to work in a joint report with the Defendant’s expert.

Before trial the Claimant accepted the 2012 Part 36 Offer and applied successfully pursuant to CPR 36.13(5) for the usual costs consequences, that he should pay the Defendant’s costs from the date of the effluxion of the same, not to apply on the grounds that it would be unjust if they should.

The Defendant appealed on the basis that the court had erred in its approach to the concept on injustice and that the uncertainty as to the Claimant’s prognosis until late 2014 should not have led to the conclusion that it was unjust that the usual Part 36 costs consequences should otherwise apply.

The Court of Appeal allowed the appeal. It was held that it was important not to undermine the salutary purpose of Part 36 offers where the costs risk was shifted to the offeree and that whilst cases were fact specific, the onus was on the offeree to prove it would be unjust for the usual consequences to apply. It was held that there is a distinction between a case where a prognosis was very difficult to predict and one where an alternative would simply constitute a contingency in litigation. The latter would not be unusual and Part 36 Offers were made against the risk of the same.

In the instant case, the Court of Appeal held that the realisation of the risk that prospects may shift following a joint expert report was one of the usual uncertainties and risks of litigation. It was thus held that the judge erred in failing to identify sufficient injustice in applying the conventional, (if in some cases perhaps harsh) Part 36 costs consequences.