Part 36 v Part 45 – Which is winning Round 2?

The cost consequences on judgment of a Claimant beating a Part 36 offer in a fixed recoverable cost case have been tolerably clear since the Court of Appeal’s decision in Broadhurst v Tan [2016] EWCA Civ 94. In a nutshell, rule 36.14(A) (now rule 36.21) prevailed over rule 45.29(B).

But what about when a Defendant accepts a Claimant’s Part 36 offer out of time. Which of Part 36 or Part 45 prevails?

That is a question with as yet no authoritative answer. There is, however, helpful guidance in District Judge Besford’s recent decision in Whalley v Advantage Insurance Co Ltd (5 October 2017). Following a thorough exposition of a series of conflicting first instance decisions (which is well worthwhile reading in full), he rejected the Claimant’s application for assessed or indemnity costs for the period from the expiry of her split liability offer to the acceptance thereof. In doing so he expressly disavowed parts of, and the conclusion in, his own ex tempore judgment in Sutherland v Khan (21 April 2016).

The Claimant in Whalley made three submissions. The first was that she was entitled to judgment that liability was apportioned 85/15 and that the entry of that judgment would entitle her to the additional benefits of rule 36.17(4) (which include indemnity costs as interpreted in Broadhurst). This argument was given relatively short shrift, being in direct contradiction to rule 36.14 which on acceptance of a Part 36 offer automatically stays the claim or such part of it as the offer relates to (here liability). There was no justification or legal basis for entering judgment.

The Claimant’s second submission was that rule 36.13(4) provides that liability for costs must be determined by the court in the absence of agreement. Because those costs flow from the acceptance of an offer they are not governed by the fixed cost regime but by the self-contained regime of Part 36. They are therefore at large and in the discretion of the court. Only costs on the standard basis were sought, but the Claimant argued that assessed costs, whether on the standard or indemnity basis, were conceptually different from fixed costs. The judge preferred the Defendant’s analysis that Part 36 provides no clear sign-posting to the basis of assessment nor to the question of whether costs should be assessed or fixed on late acceptance. In those circumstances the specific rules at rule Section IIIA of Part 45 take precedence over the general rules in Part 36. District Judge Besford accepted that the omission of such signposting was deliberate and that the intention was that costs would fall for determination under rule 45.29B, except where Part 36 contained a specific exclusion or modification of a general rule (as in Broadhurst).

Finally, the Claimant argued (somewhat half-heartedly it seems) that the Defendant’s late acceptance constituted “exceptional circumstances” within the meaning of rule 45.29J. The judge did not find the delay of just under one month exceptional.

While this is a useful decision, clarification from higher authority is needed. One of the decisions referred to by District Judge Benson, Hislop v Perde appears to be awaiting a decision on paper for permission to appeal to the Court of Appeal. In that case, HHJ Walden-Smith found the Claimant should recover fixed costs and thereafter standard costs. Hopefully Round 2 will be decided soon.

EDIT 21 November 2017 – The Court of Appeal gave permission in Hislop v Perde on 15 November and it is due to be heard by 29 November 2018.