Epsom College v Pierse Contracting Southern Ltd

A withdrawn Part 36 offer cannot support the prescribed costs consequences under rule 36.14. A continuing, unwithdrawn offer may nevertheless attract those consequences from a later date when newly disclosed information materially improves the offeror’s case and enables the offeree properly to evaluate the offer.

An offer stated to remain open for 21 days is not necessarily an invalid time-limited offer. Language referring to the expiry of that period may denote the Part 36 relevant period. Any ambiguity in an offer purporting to comply with Part 36 should, so far as reasonably possible, be resolved in favour of compliance.

When deciding whether the prescribed consequences would be unjust, the court must consider all the circumstances, including the offer’s terms, timing, available information and the parties’ conduct concerning information.

The claimant school recovered damages from a contractor after a nail driven into heating pipework caused flooding. Before trial, the school made two offers purporting to comply with Part 36. The second was later withdrawn after the damaged pipe was found and disclosed. The pipe undermined the contractor’s corrosion theory and materially strengthened the school’s case.

The trial judge awarded the school all its costs and imposed indemnity costs and enhanced interest from May 2010 by reference to the withdrawn second offer. The contractor appealed against those orders and sought a reduction to 60% of the school’s costs. The school contended that the orders could instead rest on its first, unwithdrawn offer or the court’s general costs discretion.

The central issues were whether the first offer was valid, whether either offer could support Part 36 consequences, when those consequences should begin, and whether the school’s handling of the evidence justified a further costs reduction.

1. Disposition. The appeal was allowed only to the extent that the commencement of indemnity costs and enhanced interest was moved from May to 1 November 2010. The remaining grounds were dismissed. Rix LJ gave the judgment, with which Tomlinson LJ and Sir Mark Waller agreed.
2. A withdrawn Part 36 offer cannot support the prescribed consequences under rule 36.14. The judge had therefore erred by relying on the second offer after its withdrawal. That order could not be recharacterised as an exercise of the general discretion under Part 44. The argument under Part 44 had not been made below, and the enhanced interest awarded by the judge demonstrated that he had exercised Part 36 powers.
3. The first offer was a valid and continuing Part 36 offer. Its statements that it would remain open for 21 days and that the period would expire on a specified date referred to the Part 36 relevant period. They did not make the offer time-limited. Applying C v D [2011] EWCA Civ 646, ambiguity in an offer purporting to comply with Part 36 should, so far as reasonably possible, be resolved in favour of compliance.
4. The trial judge was entitled to conclude that applying the first offer’s consequences before disclosure of the pipe would have been unjust. The school’s failure to retain or locate important evidence had impeded evaluation of the claim. Rule 36.14 required consideration of all the circumstances, including the offer’s terms, timing, available information and the parties’ conduct concerning information.
5. The position changed when the contractor’s expert inspected the pipe. The pipe was uncorroded, and it became common ground that a nail or screw had made the hole. The contractor could then have accepted the continuing first offer and sought a discretionary costs adjustment for the school’s earlier failure. Indemnity costs and enhanced interest at 6% on the judgment sum and costs were therefore ordered from 1 November 2010.
6. No reduction to 60% of the school’s costs was justified. The corrosion defence was speculative, while the school’s pleaded case remained consistent. Postponing the enhanced consequences adequately reflected the school’s negligence. The costs of the late amendment and site-inspection applications also properly remained costs in the case.

1. Court of Appeal (Civil Division): In [2011] EWCA Civ 1449, allowed the appeal only by postponing the Part 36 costs consequences until 1 November 2010. It otherwise dismissed the appeal.
2. Queen’s Bench Division, Manchester District Registry: His Honour Judge Stephen Davies awarded the school damages, all its costs, indemnity costs from May 2010 and enhanced interest at 6%. No citation for that decision is stated.