Part 36 Offers Trump Fixed Costs

Retail Article

02 March, 2016

After a number of conflicting decisions on this issue, the Court of Appeal has determined whether fixed costs apply if a claimant beats its own Part 36 offer under CPR 45 Section IIIA.

In the appeals of Broadhurst v Tan and Taylor v Smith [2016] EWCA Civ 94, the respective RTA claims had fallen out of the portal into the fixed costs regime, the claimants had made Part 36 offers to settle the claims which were rejected by the defendants; and the claimants subsequently obtained judgments for sums in excess of their Part 36 offers. In both cases the circuit judges decided that Part 36 applied, allowing indemnity costs to be recovered. However, in the case of Broadhurst v Tan, the Judge had found there was no difference between fixed costs under r.45.29 and indemnity costs, maintaining that fixed costs still applied.

The Master of Rolls found that there is no doubt as to the true meaning of the rules, where a claimant makes a successful Part 36 offer, he is entitled to costs assessed on the indemnity basis.

Forbes Comment

So where does this leave defendants? The Master of Rolls accepted that his judgement would result in a "generous outcome for claimants".

Where a RTA, EL or PL claim falls out of the portal into the fixed costs regime and the Claimant makes a Part 36 offer, which s/he then goes on to beat at trial, then Part 36 will prevail and the Claimant will be awarded fixed costs to the last staging point provided by rule 45.29 and Table 6B/C. S/he will then be awarded costs to be assessed on the indemnity basis in addition from the date that the offer became effective.

It is inevitable that going forward, Claimants will be making early reasonable Part 36 offers in an attempt to benefit from this ruling. Defendants will be incentivised to consider such offers to avoid the punitive indemnity provisions.

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