Howell & Ors v Lees- Millais & Ors

An offer expressed to be made under Part 36 may fail to qualify if its terms cannot comply with the rule’s prescribed costs consequences. Nevertheless, where the parties treated it as a Part 36 offer, it may ordinarily be given substantially the same effect when costs are decided. Earlier and later offers should be compared from the offeree’s viewpoint. A later offer may be more attractive because it adds a conditional proposal benefiting a third party. In that event, costs remain discretionary. The court should not ordinarily investigate the merits of a settled dispute, and changes of legal advisers do not, without more, justify depriving a party of costs otherwise due.

Trustees applied in the Chancery Division for permission to pursue trust claims. The judge sanctioned only a negligence claim against solicitors. After a substantial costs dispute, the trustees made an April 2009 offer to Lorna Joicey, expressed as a Part 36 offer. It was accepted in April 2010 after a later offer added a conditional proposal to pay £100,000 towards Fiona Lees-Millais’s costs.

Sir John Lindsay held that the April 2009 letter was not a Part 36 offer, but should be considered when determining costs, and made no further costs order for the relevant period. The trustees sought permission to appeal and, if granted, an appeal against that decision. The central issues were the status and effect of the April 2009 letter, whether the later offer was more attractive, and the proper exercise of the costs discretion.

1. Disposition. Permission to appeal was granted, but the appeal was dismissed. The trustees therefore failed to displace the order that there be no further order as to the costs incurred from the beginning of May 2009 in the costs dispute.
2. The April 2009 letter was not a Part 36 offer because its terms excluded recovery of all the offeree’s costs and therefore could not comply with CPR 36.10(1). The court declined to decide generally whether an offer made after determination of the substantive application could fall within Part 36.
3. The judge’s alternative conclusion based on the supposed time limitation was inconsistent with C v D [2011] EWCA Civ 646. An ambiguous offer purporting to comply with Part 36 should, so far as reasonably possible, be construed accordingly. Language stating that an offer would be open for 21 days could warn of withdrawal after that period rather than necessarily prevent later acceptance. The parties’ own treatment of the April offer as remaining in force reinforced that approach.
4. Although non-compliant, the April offer should ordinarily receive substantially the same effect for costs purposes where it was expressly described as a Part 36 offer, otherwise substantially complied, and could not have been framed to comply with the rule. The later offer was more attractive because it added a conditional proposal to pay Fiona £100,000. Offers should ordinarily be compared at face value from the offeree’s viewpoint, without speculation about family relationships absent special factors.
5. Because the later offer was better, there was no presumption in favour of the trustees under CPR 36.10(4) and (5). Costs after May 2009 were therefore discretionary. The respondents’ lack of unreasonable conduct was not, by itself, a valid reason to deny costs otherwise due. It was normally inappropriate to investigate the underlying merits of a settled dispute. Any costs attributable to changes of legal advisers could have been removed on assessment rather than used to deprive the trustees of costs altogether.
6. The court described the scale and duration of the proceedings as inappropriate and little short of scandalous, and said that such a case should not recur. The appeal was heard in open court and the judgment was not anonymised, but documents referred to on the appeal, including the judgments below, could not be seen, referred to or quoted without permission.

• Court of Appeal (Civil Division): [2011] EWCA Civ 786. Permission to appeal was granted, but the appeal against Sir John Lindsay’s costs decision was dismissed.
• High Court of Justice, Chancery Division: Sir John Lindsay made no further order for costs for the period from May 2009 to April 2010, following the parties’ later settlement.