Carillion JM Ltd v Phi Group Ltd

Costs under the Civil Procedure Rules remain subject to the court’s broad discretion. The court must consider all material circumstances, including party conduct, resources spent on unsuccessful issues, and settlement offers. Liability apportionment does not automatically determine the proportion of the claimant’s costs payable by a third party.

Part 36 is a prescriptive procedural code. An offer must clearly satisfy its requirements, including specifying a period of at least 21 days. A compliant offer remains open until expressly withdrawn in writing. Rejection, silence, conduct, or contractual rules of lapse do not withdraw it. A non-compliant offer may nevertheless operate as a contractual offer and may be withdrawn by inconsistent later conduct.

The judgment concerned costs following earlier liability and quantum decisions in two related contribution proceedings arising from remedial works at the Wembley LMD project. Carillion had settled its claim against Phi, while contribution claims between Phi and Robert West Consulting Ltd remained for determination.

The issues were whether Phi should contribute to Carillion’s costs, whether Phi should pay RWC’s costs of its contribution proceedings, and whether RWC should pay Phi’s corresponding costs. Phi relied principally on a February 2010 letter said to be a Part 36 offer. RWC had not accepted it, and later settlement offers were made in November 2010.

1. Costs discretion. The court ordered Phi to pay 20% of Carillion’s costs which RWC had agreed to pay. The apportionment of liability between Phi and RWC did not automatically determine the apportionment of Carillion’s costs. The court retained an overall discretion under the Civil Procedure Rules, taking account of conduct, the time and resources spent on issues lost, and settlement offers.
2. Part 36. Part 36 was a prescriptive and self-contained code, as explained in Susan Gibbon v Manchester City Council [2010] EWCA 726. The February letter was not a compliant Part 36 offer because it failed to specify a period of at least 21 days within which the offeree would be liable for costs under rule 36.10. A statement that the offer was intended to have Part 36 consequences did not cure that defect.
3. The letter was nevertheless a contractual offer. The principle in Sampla v Rushmoor Borough Council [2008] EWHC 2616 (TCC), approved in the reasoning, supported the conclusion that a genuine Part 36 offer remains open despite rejection or silence until withdrawn in writing. That principle did not apply to the February letter because it was not a valid Part 36 offer. The later November offers, which changed the basis from a percentage contribution to a cash contribution, impliedly withdrew the contractual offer by conduct.
4. The February offer related only to the 2009 proceedings. It did not bind or compromise the separate 2010 contribution proceedings. RWC had therefore obtained more than the November offers proposed. The court ordered Phi to pay 30% of RWC’s costs of its contribution proceedings against Phi, with no order as to costs for Phi’s contribution proceedings against RWC.
5. Permission to appeal was refused in substance because there was no realistic prospect of success on the Part 36 issue or the exercise of the costs discretion.

First-instance costs judgment following earlier liability and quantum decisions in the related proceedings. Permission to appeal was not considered to have a realistic prospect of success.