Gulati & OrS v MGN Ltd

Where a claimant’s settlement offer has been withdrawn, it no longer attracts the automatic costs consequences of Civil Procedure Rules 1998 Part 36. The court should not ordinarily recreate those consequences through its general costs discretion merely because the claimant later beats the offer.

A withdrawn Part 36 offer may remain relevant to the overall assessment of conduct under Part 44, but it cannot be treated as equivalent to a subsisting Part 36 offer without circumstances justifying that approach. Indemnity costs require conduct sufficiently unreasonable and outside the ordinary range of litigation conduct, assessed cumulatively where appropriate. Procedural failures, unsuccessful disclosure resistance, unattractive advocacy and refusal to accept an offer do not, individually or collectively, meet that threshold without more.

Ms Frost and Mr Ashworth had succeeded in claims against MGN Ltd and were entitled to their costs on at least the standard basis. Each sought indemnity costs from the date of a settlement offer which had been bettered by the eventual awards.

Ms Frost’s offer had initially been made under Part 36 but was withdrawn after the relevant acceptance period. Mr Ashworth’s offer was a Calderbank offer and had never been a Part 36 offer. Both claimants relied additionally on alleged unreasonable conduct in the litigation. The central questions were whether the offers could attract Part 36-type consequences through the general costs discretion and whether the defendant’s conduct justified indemnity costs.

1. Both applications for indemnity costs were dismissed. The claimants were entitled to costs on at least the standard basis.

2. Part 36 consequences depended on compliance with the rules. Under Civil Procedure Rules 1998 rule 36.17, a withdrawn offer no longer attracted the automatic consequences of the rule. The court declined to award indemnity costs merely because Ms Frost had beaten an offer which had ceased to have Part 36 status.

3. The Trustees of Stokes Pension Fund v Western Power Distribution (South West) plc [2005] EWCA 854; [2005] 1 WLR 3595 did not justify treating the withdrawn offer as a subsisting Part 36 offer. That decision concerned an earlier procedural regime and a missing payment into court. The subsequent reasoning in French v Groupama Insurance Company Ltd [2011] EWCA Civ 1119 counselled caution in applying Stokes after the rules had been amended.

4. A non-Part 36 offer, including a withdrawn offer, could be considered under the general costs discretion in Part 44. It could contribute to the assessment of reasonableness, but it did not carry the special indemnity-costs consequences of Part 36.

5. Indemnity costs required conduct sufficiently serious and unreasonable to take the case outside the ordinary range of litigation conduct. The disclosure disputes, pleading and amendment issues, failure to respond to schedules, assistance on figures, and the conduct of cross-examination were individually of limited weight. Their cumulative effect did not meet the required threshold. Mr Ashworth’s additional complaints did not produce a stronger case.