Hertel & v Saunders & Anor

Part 36 is a highly prescriptive and self-contained code. An offer must satisfy its mandatory requirements; the court cannot add an analogous provision merely because the offer was intended to operate under Part 36. An offer relating to a proposed amendment does not relate to part of an existing claim where the amendment has not yet taken effect. A letter expressing no opposition to an amendment, while contemplating a future application for permission, is not written consent to amend. Where Part 36 does not apply, costs fall to be determined under Civil Procedure Rules 1998, r. 44.2, without the Part 36 presumption. The court must identify the successful parties separately, including individual and corporate defendants, and make costs orders reflecting the relief actually obtained.

The defendants appealed against costs orders made by Deputy Master Lloyd following acceptance of a settlement offer. The offer concerned a claim which the claimants proposed to introduce by amendment. The Deputy Master treated it as a Part 36 offer and ordered the defendants to pay the claimants’ costs under the former r. 36.10(2).

On appeal, the defendants argued that the offer did not comply with the mandatory requirements of Part 36. The central issues were whether the proposed amended claim was part of the claim when the offer was made, whether the defendants’ earlier letter amounted to written consent to amendment, and what costs order should follow if Part 36 did not apply.

1. The appeal was allowed in relation to the costs orders. The orders requiring the defendants to pay the claimants’ costs and to make a payment on account were set aside.

2. Under the former Civil Procedure Rules 1998, r. 17.1(2), amendment without court permission requires written consent from all other parties. A letter stating that the defendants saw no value in opposing proposed amendments, while referring to the claimants moving the amendment before the court on a future occasion, conveyed an intention not to oppose a later application. It did not amount to written consent.

3. The proposed amended claim was therefore not part of the claim when the offer was made. The offer did not comply with the mandatory requirement in former r. 36.2(2)(d) to state whether it related to the whole claim, part of it, or an issue arising in it. The possibility under former r. 36.3(2) of making an offer before proceedings did not justify extending Part 36 by analogy to this case.

4. The offer complied, narrowly, with former r. 36.2(2)(c). It specified a 21-day period and referred to the consequences of Section I of Part 36. Its failure to comply with r. 36.2(2)(d) was nevertheless sufficient to prevent it being a Part 36 offer.

5. The settlement remained effective. The claimants could not contend that the claim had remained unsettled merely because the offer was not a valid Part 36 offer. The applicable costs regime was former r. 44.2, which contains no presumption equivalent to that in r. 36.10(2).

6. Applying r. 44.2, Mr Saunders was a successful defendant because no relief was obtained against him. The claimants were ordered to pay his costs. Liquid was also successful on the original claim because the settlement reflected Liquid’s pleaded account of the arrangement, rather than the claimants’ original partnership, joint venture or trust case. The claimants were therefore ordered to pay Liquid’s costs, subject to the defendants’ agreement to pay the costs relating to the claim introduced by amendment.

7. The judge added that, even if Part 36 had applied, the Deputy Master would have been wrong in principle not to distinguish between the individual and corporate parties when exercising the costs discretion.

• High Court (Chancery Division): Appeal from costs orders made by Deputy Master Lloyd on 8 May 2015. The orders were set aside and costs orders were made in favour of the defendants.