Dutton & Ors v Minards & Ors

Where a Part 36 offer is accepted after the relevant period, the prescribed costs order remains the starting point. The party seeking a different order bears the persuasive burden of showing that the prescribed order would be unjust, assessed in all the circumstances.

Whether that outcome is unjust is a value judgment for the first-instance judge and any resulting alternative costs order is discretionary. An appellate court should intervene only on established grounds for reviewing such judgments and discretions.

An offer expressly made under Part 36 should, if possible, be interpreted as effective. A provision for reasonable costs is compatible with Part 36 where a reasonable recipient would understand it as replicating the costs regime prescribed by the Rules.

The claimants and defendants had participated in a financial-services joint venture. Following its termination, they disputed the commission payable to the claimants and the defendants advanced a counterclaim. Before proceedings, the defendants offered £25,000 plus the claimants’ reasonable costs under Part 36. The claimants later offered to accept £18,000, and the defendants deliberately accepted that offer one minute after the relevant period expired.

His Honour Judge Armitage QC applied the default costs position under Rule 36.10(5), principally because uncertainty about the net value of the claim had prevented realistic evaluation of the defendants’ earlier offer. The defendants appealed against that costs order. By a respondent’s notice, the claimants contended that the earlier offer was not a valid Part 36 offer.

The central issues were whether the earlier offer was valid and whether the judge had erred in declining to order otherwise than the default costs rule.

1. Appeal dismissed. The judge correctly asked whether application of the default position under Rule 36.10(5) would be unjust. That rule supplied the starting point, and the persuasive burden rested on the party asking the court to order otherwise. The primary focus of the power to disapply the presumption was the costs incurred after expiry of the relevant period: paras 25–26, 41–42.

2. Whether the prescribed outcome was unjust involved a value judgment for the first-instance judge. If injustice were found, selection of another costs order would involve judicial discretion. The appellate question was therefore whether established grounds for interfering with that value judgment or discretion existed, rather than what order the appellate court itself would have made: paras 26–27, 53–54.

3. The defendants’ earlier offer was a valid Part 36 offer. Under C v D [2011] EWCA Civ 646, an offer expressed to be under Part 36 should, where possible, be construed so as to make it effective. The promise to pay the claimants’ reasonable costs was not inconsistent with Part 36. In context, a reasonable reader would understand it as referring to the standard-basis costs regime prescribed by the Rules. Mitchell v James [2002] EWCA Civ 997 and French v Groupama Insurance Company Ltd [2011] EWCA Civ 1119 were distinguishable because the costs terms there were incompatible with Part 36: paras 29–36.

4. The judge was entitled to regard uncertainty about the net value of the claim as decisive. During the acceptance period no counterclaim had been formulated, while the commission claim depended on information which the claimants could not assess independently. The resulting information imbalance impaired realistic evaluation of the offer: paras 44–47.

5. Once the counterclaim was quantified, the claimants had themselves offered £24,000. Criticism of their failure to accept the defendants’ earlier offer was matched by the defendants’ failure to accept that later offer. The judge had also been entitled to consider the defendants’ choice to accept the claimants’ final offer rather than invoke or renew their own offer: paras 48–52.

6. Although another judge might have assigned different weight to the earlier offer, questions of weight belonged to the first-instance decision-maker. The order remained within the permissible ambit of the judge’s discretion. Floyd LJ agreed with Lewison LJ: paras 53–55.

1. Court of Appeal (Civil Division): The defendants’ appeal against the costs order was dismissed. The claimants’ challenge by respondent’s notice to the validity of the earlier Part 36 offer was rejected: [2015] EWCA Civ 984.

2. Manchester District Registry, Queen’s Bench Division: His Honour Judge Armitage QC ordered costs following the defendants’ late acceptance of the claimants’ Part 36 offer. He applied the default costs position because he was not satisfied that it produced injustice.