Nulty & Anor v Milton Keynes Borough Council

Where a claimant’s Part 36 offer is withdrawn before trial, the automatic consequences under CPR 36.14 do not apply. The offer may nevertheless be a powerful factor in the court’s general costs discretion under CPR 44.3, particularly where permission to accept the offer after trial began would probably have been refused. The court must consider all the circumstances, including the parties’ conduct, the issues on which each party succeeded, and the timing and terms of any admissible offer. Unreasonable conduct in defending or pursuing issues may justify indemnity costs for an appropriate period.

The applications concerned costs following a judgment arising from two linked actions about fires at a recycling plant. The first claimant succeeded in establishing liability for the first fire and its consequences. National Insurance & Guarantee Corporation Limited succeeded to the limited extent of establishing a 15 per cent reduction in indemnity for prejudice caused by late notification.

A Part 36 offer made by the claimants in December 2010 was withdrawn on the day before trial. The court had to decide the appropriate allocation and basis of costs, the effect of the withdrawn offer, interest on costs, and whether the parties’ conduct justified a different order.

1. Costs discretion. The general rule under CPR 44.3 is that the unsuccessful party pays the successful party’s costs, but the court retains a broad discretion and must consider all the circumstances, including partial success, conduct, and admissible settlement offers.
2. Withdrawn Part 36 offer. Because the December 2010 offer had been withdrawn, CPR 36.14 did not apply directly. It remained highly relevant under CPR 44.3. The offer came close to attracting the effect of CPR 36.14 because, had it remained open, acceptance after the start of trial would have required permission under CPR 36.9.
3. Acceptance after trial begins. A Part 36 offer concerns the contingency of the trial outcome. Once trial has begun, developments in the evidence or the judge’s provisional views ordinarily do not justify permission to accept the offer. Permission might be granted where there has been a material change of circumstances unconnected with the conduct of the trial, such as late disclosure of damaging evidence. Noorani v Calver [2009] EWHC 592 illustrated how a case may collapse during evidence.
4. Conduct. NIG was entitled to contest liability and late notification, but its attempts to avoid liability on unsustainable grounds, unsupported allegations against recycling-centre employees, unrealistic valuation of the lost chance, and irrelevant contributory-negligence allegations materially affected the costs exercise. The claimants’ delay was difficult to explain but was not unreasonable conduct warranting a costs penalty.
5. Orders. The claimants received the liability-action costs to 31 December 2010 on the standard basis. NIG received 50 per cent of the coverage-action costs to that date, subject to a 1 November 2009 cut-off. From 1 January to 18 July 2011, the claimants received their costs of both actions on the indemnity basis; thereafter, on the standard basis. Interest was awarded as specified in the order. Permission to appeal was refused.

not stated in the judgment.