9 June 2022

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Putting settlement in form of part 36 offer did not displace costs agreement

Circuit judge says there is no impediment to parties agreeing that the operation of the CPR be modified to achieve a specific result

A circuit judge has overturned a costs judge’s ruling that the acceptance of a part 36 offer displaced an earlier agreement that the defendant would only pay the claimant’s fixed costs.

His Honour Judge Luba QC, sitting in London with Costs Judge Rowley, said that, despite the “meticulous” provisions of the CPR, parties were free to contract out of their precise effect in any given case.

“In my judgment, there is no bar on contracting out of the fixed costs regime or on contracting into it,” he said. “If the latter, there is no impediment to the parties agreeing that its operation shall be modified to achieve a particular specified result.”

The case, Soares v Wilson, was a personal injury claim that began in the road traffic claim portal but fell out because the defendant did not admit liability. It was then allocated to the multi-track, with the value stated to be more than £100,000, before being transferred back to the fast-track and settled for £9,000.

The offer, made ‘without prejudice save as to costs’, included paying the claimant’s fixed costs and reasonable disbursements. The claimant’s solicitors accepted this and asked for it to be made in the form of a part 36 offer which they would accept.

This was done but the claimant’s solicitors then served a bill that sought costs on the standard basis up to the date of the re-allocation to the fast-track and fixed costs thereafter.

Despite the defendant’s objections, Deputy Costs Judge Campbell agreed, finding that CPR 46.13 applied when the claim was re-allocated and that the correspondence prior to the part 36 offer did not amount to a concluded agreement.

On appeal, HHJ Luba held that the judge was wrong on the latter point. “I am satisfied that the only properly available construction of the correspondence is that the defendant was offering settlement on the basis that only fixed costs would be payable and the claimant was accepting that offer.”

He gave multiple reasons for this, including that the original offer letter was explicitly on the basis of only paying fixed costs – it was not, and was not stated to be, a part 36 offer, which might have triggered the special provisions of that part that would have allowed recovery of costs while the case was allocated to the multi-track. Further, the acceptance was unqualified.

The parties could have given effect to the agreement by lodging a consent order or a draft Tomlin order, but “they would have had the disadvantage of delay, a need for a court fee, and the requirement of a decision of a judge or judicial officer”.

Using part 36 overcame all of these problems and “in no way detracts from the fact that compromise on the fixed costs basis had been agreed” – the defendant was not making a new offer.

HHJ Luba continued: “I accept the case advanced by the defendant that the claimant invited the defendant to make a part 36 offer simply so as to finalise the proceedings…

“In my judgment, the judge was wrong to hold that the framing of the later correspondence as a part 36 offer in some way trumped or displaced the agreement already made or represented some resiling from it or a repudiation of it.”

Shannon Eastwood appeared on behalf of the claimant, Roger Mallalieu QC on behalf of the defendant