French v Groupama Insurance Company Ltd

A settlement offer which does not comply with CPR Part 36 does not automatically attract Part 36 costs consequences. Its effect falls to be assessed under the general Part 44 discretion, whose essence is fairness in all the circumstances.

A pre-action offer could not be treated as a quasi-Part 36 offer under the former rules where it was privileged rather than without prejudice save as to costs and purported to include costs. Relevant factors under Part 44 include the offer’s clarity, duration and continuing availability, the claims it covered, the offeree’s status as a litigant in person, the parties’ conduct and the availability of a formal Part 36 offer.

The claimant obtained judgment against an insurer for £132,247.41, including interest, on a contractual claim concerning the reinstatement of her home. Before proceedings, the insurer had offered £115,000 in full and final settlement of all claims. The offer was available for 21 days and was later agreed by the parties to have been privileged but admissible after judgment in relation to costs.

His Honour Judge Seymour QC treated the offer as a quasi-Part 36 offer under Trustees of Stokes Pension Fund v Western Power Distribution (South West) plc [2005] EWCA Civ 854. He ordered the successful claimant to pay all the insurer’s costs because accepting the earlier offer would have left her financially better off.

The claimant appealed against that costs order. The central issues were the agreed status of the offer, whether it qualified for treatment equivalent to a Part 36 offer, and the proper exercise of the general CPR Part 44 costs discretion.

1. Appeal allowed. The order requiring the claimant to pay all the insurer’s costs was quashed. The Court of Appeal unanimously substituted no order as to costs, save that the insurer was to pay any costs to which the claimant was entitled down to 8 March 2007.

2. The parties’ solicitors had made a binding compromise about the offer letters. They agreed that the letters were privileged, excluded from the trial bundle and admissible after judgment, including in relation to costs. The judge was not entitled to go behind that agreement or to treat the letters as having been open when written. Whether the letters originally attracted privilege therefore did not require decision.

3. The offer did not satisfy the conditions identified in Trustees of Stokes Pension Fund v Western Power Distribution (South West) plc [2005] EWCA Civ 854 for treatment as a quasi-Part 36 offer under the former regime. Throughout its 21-day life it was privileged, rather than without prejudice save as to costs. If, as the insurer maintained, it also included costs, that was a further departure from the necessary form of a quasi-Part 36 offer.

4. The amended CPR Part 36 carefully distinguishes compliant Part 36 offers from other settlement offers. Non-compliant but admissible offers remain relevant under Part 44, although they do not carry Part 36 consequences. Rix LJ left open whether Stokes retained broader application under the amended regime, because this offer failed its requirements in any event.

5. The Part 44 discretion had to be exercised afresh according to fairness in all the circumstances. The offer was genuine, financially better than the eventual recovery and capable of avoiding the litigation. Against that, the claimant was then a litigant in person; the offer expired after 21 days; it was neither identified as a Part 36 offer nor maintained on the table; it covered abandoned claims and possibly costs; and the insurer could have made a formal Part 36 offer after proceedings began but did not. The claimant also succeeded on a claim complicated by the insurer’s extensive defence and counterclaim. Those competing considerations justified the substituted costs order.

1. Court of Appeal (Civil Division): The appeal was allowed unanimously. The order requiring the claimant to pay all the insurer’s costs was quashed and a limited costs order was substituted.
2. High Court, Queen’s Bench Division: His Honour Judge Seymour QC awarded the claimant £132,247.41, including interest, but subsequently ordered her to pay all the insurer’s costs by treating its pre-action offer as equivalent to a Part 36 offer. No citation for that decision is stated.