Capital Bank Plc v Stickland

After the 21-day period for unfettered acceptance of a Part 36 offer has expired, acceptance requires permission unless the parties agree liability for costs. The court has a broad discretion, directed by the overriding objective. It is not confined to cases involving a substantial change of circumstances and does not depend on the offeror first withdrawing or reducing the offer. Relevant considerations include the timing of the application, the practical availability of money or security, changed circumstances, the value of the offer and pre-trial conduct. New evidence materially altering the case may justify refusal. If late acceptance is refused and the claimant obtains a judgment more advantageous than the offer, the usual Part 36 costs consequences may follow, subject to the court’s discretion to avoid injustice.

Capital Bank Plc, mortgagee of the vessel CATABATIC, claimed delivery up of the vessel or its value from Peter Stickland. The Bank made a Part 36 offer of £85,000 on 10 June 2003 and repeated it. Two days before trial, Mr Stickland purported to accept the offer out of time, after inspection evidence had undermined his defence.

The trial judge refused permission, tried the claim, ordered delivery up or payment of £97,088.80 with interest, and awarded indemnity costs and interest on costs. The appeal concerned whether late acceptance should have been permitted and whether the resulting costs order was correct.

1. Disposition. Longmore LJ delivered the leading judgment. Keene LJ agreed, and Mance LJ agreed with the conclusions and reasoning. The appeal was unanimously dismissed.
2. Under Civil Procedure Rules Part 36, a defendant’s late acceptance of a claimant’s offer requires permission unless liability for costs is agreed. The discretion is not conditional on the claimant withdrawing or reducing the offer. Nor is it confined to cases involving a substantial change of circumstances. The distinction between claimant offers and payments into court does not narrow the discretion. The court should exercise it as widely as necessary to advance the overriding objective. The pre-CPR authorities Garner v Cleggs [1983] 1 WLR 862 and Black v Doncaster Metropolitan Borough Council [1999] 1 WLR 53 supported that conclusion. Cumper v Pothecary [1941] 2 KB 58, recognised in Flynn v Scougall [2004] EWCA Civ 873 as consistent with the overriding objective, provided a useful analogy.
3. Relevant considerations included the lateness of the application, the effect on the court’s ability to manage its trial list and encourage settlements, the substantiality and practical security of the proposed payment, any change of circumstances, and the applicant’s pre-trial conduct. Here, the application was made on the morning of trial, Mr Stickland offered only a promise to pay, and he had persistently failed to comply with inspection orders.
4. The Bank’s surveyor had obtained genuinely new evidence from inspecting the vessel. That evidence materially undermined the principal defence. This differed from Flynn v Scougall, where reliance on a further review of information already available did not justify reducing a payment into court. The judge was entitled to refuse late acceptance.
5. Since the Bank obtained a judgment more advantageous than its offer, the judge had discretion to impose the usual Part 36 costs consequences, including indemnity costs and interest under Part 36.21(3). Mance LJ noted that the court might have considered the period after the Bank received the surveyor’s report when deciding whether a full indemnity costs order was unjust under Part 36.21(4), but that point had not been raised below. The costs discretion was therefore not disturbed.
6. The order dismissing the appeal was upheld. The appellant was ordered to pay the respondent’s appeal costs, assessed on the standard basis to 1 October 2004 and on the indemnity basis thereafter.

1. Court of Appeal (Civil Division): On 10 December 2004, the court dismissed the appeal and upheld the trial judge’s refusal to permit late acceptance of the Part 36 offer and his costs order. The appeal was heard by Mance, Keene and Longmore LJJ under [2004] EWCA Civ 1677.
2. High Court of Justice, Queen’s Bench Division, Manchester District Registry, Mercantile Court: His Honour Judge Kershaw QC refused permission to accept the Bank’s offer out of time, refused an application for recusal, tried the claim, ordered delivery up of the vessel or payment of its value, and awarded indemnity costs and interest on costs.