Lokhova v Longmuir

Late acceptance of a Part 36 offer ordinarily attracts the costs consequences prescribed by CPR 36.13. The court may nevertheless order indemnity costs where the offeree’s conduct in rejecting and later accepting the offer was wholly or highly unreasonable and fell outside the norm. Late acceptance alone is insufficient. The discretion should be exercised cautiously because Part 36 must remain a clear and predictable settlement mechanism.

Acceptance does not remove the court’s power to determine consequential costs issues. The court may award costs of an application made necessary by the offeree’s conduct, including an application concerning set-off, and may order an interim payment on account where a balance of costs is sufficiently clear.

The claimant brought defamation proceedings concerning publications made by the defendant. The defendant made a Part 36 offer on 23 November 2015, which the claimant accepted on 21 April 2017, after the relevant period had expired.

The court had previously refused the claimant permission to amend her claim and had ordered her to make an interim payment of £105,000 on account of costs. Following acceptance of the offer, disputes arose concerning the basis of assessment of the defendant’s post-expiry costs, the costs of a set-off application, other post-acceptance costs, and an interim payment on account.

1. Part 36 costs. The court was required to make the usual orders under CPR 36.13(5) unless unjust. The claimant was entitled to her costs up to expiry of the relevant period, and the defendant to his costs thereafter until acceptance.
2. Indemnity basis. The ordinary order for post-expiry costs following late acceptance is assessment on the standard basis. Late acceptance itself cannot justify indemnity costs. However, the court retains a cautious discretion to order indemnity costs where the claimant’s conduct in refusing and later accepting the offer is wholly or highly unreasonable and falls outside the norm. The claimant’s decision to reject a plainly reasonable offer and pursue an unsuccessful amendment application was highly unreasonable. Her subsequent failure to pay the interim costs order, provide adequate evidence, or engage properly with the resulting applications was likewise highly unreasonable. The defendant’s Part 36 Costs were therefore to be assessed on the indemnity basis, subject to existing orders.
3. Set-off application. Acceptance of the offer did not deprive the court of jurisdiction to deal with costs. CPR 36.14(5)(b) preserved the court’s power to determine questions of costs. The claimant had forced the defendant to make the set-off application and then conceded its substance. She was therefore liable for its costs, assessed on the indemnity basis.
4. Other costs and interim payment. The claimant was liable for the other post-acceptance costs. Applying CPR 44.2(8), the court was satisfied that a balance would remain due to the defendant after assessment and would determine the appropriate interim payment after hearing submissions.
5. The parties’ agreed amendments to the earlier costs order were approved. The remaining allocation and quantification of costs were to be dealt with after delivery of judgment.