Neave v Neave

Where a claimant makes an effective Part 36 offer which the defendant does not accept and then obtains a more advantageous judgment, the court should ordinarily award the prescribed enhanced costs consequences unless satisfied that doing so would be unjust.

The court must address that question expressly. A general costs assessment under CPR 44.3 cannot replace the distinct exercise required by CPR 36.21. An immaterial technical defect in an intended Part 36 offer may be cured under CPR 36.1(2), particularly where its meaning and intended effect would have been clear to a reasonable recipient.

The claimant recovered six historic vehicles and £3,000 damages for trespass in proceedings against her son. Holland J nevertheless ordered the defendant to pay only one-third of her costs on the standard basis. The claimant appealed that costs order with permission limited to whether an order should have been made under CPR 36.21.

Before trial, and again after the trial had been adjourned part heard, the claimant had offered under Part 36 to settle the proceedings through an agreed division of the vehicles. The principal issues were whether those letters constituted effective Part 36 offers, whether the judgment was more advantageous than their proposals, and whether the prescribed costs consequences would be unjust.

1. Appeal allowed unanimously. Lord Justice Chadwick held that the costs discretion had been exercised on a flawed basis. Where a claimant has made a Part 36 offer, the court must determine whether the judgment was more advantageous and, if so, whether the prescribed order would be unjust. Consideration of settlement offers under CPR 44.3 did not dispense with that distinct exercise. The point had been squarely raised in the claimant’s written submissions.
2. The letters were effective Part 36 offers. They made clear that the proposals would conclude the whole claim and remained open for 21 days. The words “21 days from today” were to be understood as referring to receipt when read by a reasonable recipient who knew the letter’s purpose and the relevant rule. Any resulting defect was in any event an appropriate case for relief under CPR 36.1(2).
3. The first letter did fail expressly to state the restriction on acceptance after 21 days required by CPR 36.5(6)(b). That technical non-compliance caused no prejudice and was of no material significance. The court exercised its power under CPR 36.1(2) to give the offer the consequences prescribed by Part 36. Stating that the defendant would pay costs upon acceptance merely reflected CPR 36.14 and did not take the offer outside Part 36.
4. The judgment was more advantageous than the offer. Comparing the parties’ values in the Scott schedule, the two additional vehicles recovered under the judgment were worth at most £500 less than the motorcycle sought under the offer but not recovered. The additional £3,000 damages therefore left the judgment at least £2,500 more advantageous. The parties were held to their trial valuations rather than permitted to create satellite costs litigation through new valuation evidence.
5. It was not unjust to impose the rule’s consequences. CPR 36.21 encourages settlement by giving a claimant who beats an unaccepted offer the expected costs benefit. Criticism that the litigation should never have continued strengthened, rather than displaced, the importance of rewarding a reasonable attempt to end it.
6. The claimant was awarded indemnity costs from 17 May 2001, with interest on those costs at four per cent above base rate. The earlier costs order was left undisturbed. Lord Justice Tuckey agreed and emphasised the deliberately stringent consequences of ignoring a reasonable offer. Lord Justice Potter agreed that CPR 36.5(6)(b) had not been complied with, but concurred that CPR 36.1(2) cured the immaterial defect.

• Court of Appeal (Civil Division): The claimant’s costs appeal was allowed unanimously. The costs order was varied by awarding indemnity costs from 17 May 2001 with interest at four per cent above base rate. Permission for a further appeal was refused: [2003] EWCA Civ 325.
• High Court, Queen’s Bench Division: Holland J ordered the return of six vehicles, awarded the claimant £3,000 damages for trespass, and subsequently ordered the defendant to pay one-third of her costs on the standard basis. No citation is stated.
• County Court: The original trial was adjourned part heard and, after a further adjournment, the proceedings were transferred to the High Court for retrial.