Pankhurst v White

Under the former Part 36 regime, an offer which was no longer available for acceptance was not necessarily withdrawn. Where the offeror had not unilaterally withdrawn it while acceptance remained possible, it could retain its costs potency after rejection, lapse or the conclusion of an earlier trial.

The court should determine Part 36 consequences in stages: whether the rule is engaged, whether making the enhanced consequences order would be unjust, and the appropriate extent of the order. Enhanced interest should generally reflect the interest ordinarily available on the relevant damages. It should not be awarded on future losses where ordinary interest would not have been payable.

The claimant brought a personal injury claim against the defendants. Liability had been established at an earlier trial, with no reduction for contributory negligence. Following a later quantum trial, the claimant recovered damages with an equivalent capital value of approximately £6.1 million.

The parties disputed the costs and interest consequences of a claimant’s Part 36 offer made in May 2006. The offer had been rejected, and the claimant later stated that it was no longer open for acceptance, but relied on it for costs. The central issues were whether the offer had been withdrawn within the meaning of the applicable rule and, if not, what enhanced consequences should follow.

1. Part 36 engaged. The court held that the May 2006 offer had not been withdrawn within the meaning of the former rule 36.5(8), now reflected in the new rule 36.14. It had become unavailable for acceptance after the liability trial, but it retained its costs potency. The result was the same whether the offer had first been rejected or had simply remained unaccepted until the change in circumstances. A withdrawal occurs where the offeror unilaterally withdraws the offer at a time when the offeree could still accept it.
2. Three-stage approach. First, the court must decide whether the enhanced-consequences provisions are engaged. Secondly, it must decide whether making an order would be unjust, having regard to all the circumstances. Thirdly, it must determine the appropriate form and extent of the order, including the rate and period of enhanced interest and the basis and period of costs.
3. The claimant’s offer was a genuine attempt to settle the whole claim at an early stage, taking account of liability risks and uncertainty about quantum. It would be unjust to deprive the claimant of its benefits. The defendant could have protected its position after the liability trial by making a realistic fresh offer.
4. Enhanced interest was awarded on past losses, but not on future losses or future expenditure, because ordinary interest would not have been payable on those damages. The enhanced interest had to be proportionate and compensatory rather than penal. The appropriate starting point was the ordinary rate applicable to the relevant head of loss, increased by a modest amount.
5. The claimant received an additional £17,000 interest. Costs were awarded on the standard basis until 21 days after the May 2006 offer, on the indemnity basis thereafter until 21 days after the May 2008 offer, and to the defendant on the standard basis thereafter. No enhanced interest was awarded on the indemnity costs.