Winning at what cost?

Where are we now when it comes to costs awards following Pt 36 offers, especially those that are almost or only just beaten? The Court of Appeal re-visited Carver v BAA [2008] EWCA Civ 412, [2008] All ER (D) 295 for the first time, in two appeals heard together: Gibbon v Manchester City Council and LG Blower v Reeves [2010] EWCA Civ 726, [2010] All ER (D) 218 (Jun).
Although still binding, Carver did not come out of the judgment well. Only Gibbon was a personal injury claim but both cases have useful lessons to teach us.

Part 36 means what it says: follow the rules

Although CPR Pt 36 is an entirely optional method of resolving disputes, it is a self-contained code that must be followed if parties want the benefits it confers. While it draws plenty of inspiration from common law contract rules, it does not incorporate those rules.

The Court of Appeal said you should not have to be a lawyer to apply CPR Pt 36, it should be there for all to read as a complete code for its operation. Therefore, if parties want to use it, they should abide by it.

No implied withdrawal

This leads to the issue that arose in Gibbon. There, the claimant made an offer of £2,500 to settle her injury claim. The defendants made a number of lower offers, all of which were rejected. They then offered £2,500 which, despite that being the same as the outstanding offer from the claimant, was also rejected. The defendant then purported to accept the outstanding offer of £2,500 which only then did the claimant’s solicitors expressly say was no longer open for acceptance.

Can a party impliedly withdraw an offer by way of subsequent conduct? A firm no, said the Court of Appeal. CPR 36.3(7) clearly states that withdrawal or change of terms must be effected by service of a written notice to the offeree. This is a potential pitfall for practitioners, with a risk of negligence claims.
 If you act for a party that has made a Pt 36 offer and subsequent evidence means that your offer has become over-generous, immediate withdrawal must be considered. After all, there is nothing to stop your opponent reading the fresh evidence and immediately writing to accept the offer, even if it was made years ago.

There is nothing wrong with multiple offers

It follows that a party can make as many offers as it chooses and sit back and let its opponent pick and choose. The fact that some may be obsolete if they are less favourable than more recent offers is irrelevant. There is no concept of an offer being superseded by a more favourable one.

Money is king when it comes to picking winners

Although conduct issues are relevant, where a Pt 36 offer comes into play, the most important issue to be looked at is whether the offer was beaten.
The Court of Appeal held that it is better to look at the issue of “winning” from the litigant’s viewpoint, rather than a court imposed view. Despite that, the court refused to interpret Carver as saying that a judge should weigh the emotional reality of litigation against the additional sum recovered.

It held that in most cases, if the Pt 36 offer is beaten, costs should follow. Only in rare cases should that be over-ridden and that would involve modest sums, like the £51 that Miss Carver’s litigation gleaned. In LG Blower itself, a difference of £661 was thought to be a comfortable margin to beat the offer by, in the context of a modest dispute over domestic building works.

...but costs are in the discretion of the court

Interestingly, in LG Blower, the trial judge had not given the claimant everything. Instead, to show disapproval of the claimant’s initial intransigent behaviour, he ordered the defendants to pay 50% of the costs since they withdrew a number of offers, but with no order beforehand.

The Court of Appeal clearly had no problem with such an order, so conduct can still come into play and make a different order than costs simply following the event. CPR Pt 44 makes the position clear that costs are in the discretion of the court and, as ever, an appeal court will be reluctant to interfere with that discretion.

So, in its efforts to make costs more certain, has the Court of Appeal made the position more uncertain? After all, Carver is still there as good law to be cited and it seems unlikely that the Supreme Court will overturn it soon, yet litigants who beat Pt 36 offers by small margins will want to cite these cases instead.
 

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