Stokes Pension Fund v Western Power Distribution (South West) Plc

A defendant's written pre-action offer to settle a money claim does not automatically attract the costs consequences of a payment into court. The court nevertheless has a discretion under the Civil Procedure Rules to give it equivalent effect.

That will usually be appropriate where the offer is clear, open for at least 21 days, genuine, and made by a defendant who was plainly able to pay it. A later withdrawal will usually not alter the costs result if the claimant should reasonably have accepted the offer during the acceptance period. The court must still consider all the circumstances; the consequences are not automatic.

The claimants were trustees of a pension fund whose land was trespassed on by contractors employed by the defendant power distributor. The defendant made a pre-action written offer of £35,000 plus costs. The claimants rejected it, later issued a substantially larger claim, and recovered £25,600 at trial.

His Honour Judge Roach in the Bristol County Court held that the offer gave the defendant no costs protection because it had not been followed by a payment into court and had later been withdrawn. He nevertheless reduced the claimants' recoverable costs by half because their claim had been unreasonably exaggerated.

The defendant appealed. The central issue was whether a withdrawn pre-action money offer, not followed by a payment into court, should nevertheless affect costs under the Civil Procedure Rules.

1. Appeal allowed. Lord Justice Dyson, with whom Lord Justice Auld agreed, held that a defendant's offer to settle a money claim which is not backed by a payment into court cannot automatically have the consequences prescribed by Part 36. However, rules 36.1(2) and 44.3(4)(c) preserve a discretion to give such an offer the same costs effect.

2. An offer should usually be treated as equivalent to a payment into court if: its terms are clear as to the claim, any counterclaim and interest; it remains open for at least 21 days and otherwise has the substance of a Calderbank offer; it is genuine; and the defendant was clearly good for the money. Failure to meet a condition reduces the offer's weight and may deprive it of costs effect.

3. The judge erred in treating a practical reason for not paying money into court, or ignorance of procedural rules, as a necessary condition. The substance and reliability of the offer mattered. This offer met all four conditions.

4. Withdrawal did not prevent the offer being considered. The relevant question was when it should have been accepted, not whether it remained open when costs were decided. Withdrawal may matter where a claimant reasonably declined the offer during the acceptance period and it was withdrawn before reasonable acceptance became due. It did not matter here.

5. The claimants should have accepted the offer within 21 days. They were therefore liable for the defendant's costs incurred after that period; the defendant was liable only for any claimants' costs incurred before it. The issue of a further reduction for exaggeration was accordingly insignificant, although the judge's assessment under rule 44.3(5)(d) disclosed no error.

• Court of Appeal (Civil Division) — allowed the defendant's appeal in Stokes Pension Fund v Western Power Distribution (South West) Plc, [2005] EWCA Civ 854, and substituted the applicable costs consequences.
• Bristol County Court — His Honour Judge Roach ordered the defendant to pay one half of the claimants' costs on 21 December 2004.