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Trustees of Stokes Pension Fund v Western Power Distribution Company, Court of Appeal, 11 July 2005

18 July 2005
The issues

Costs – Exaggerated Claim – Part 36.10 – Payment In – Whether Court Should Take Account Of Pre Action Offer In Making Order/Or Costs

The facts

The Claimants were Trustees of a pension fund. In October 2000 the Defendant’s contractors trespassed on the Claimant’s land and chopped down about 400 trees growing under the Defendant’s power lines. In February 2002 the Defendant wrote a letter marked without prejudice save as to costs and stating that it was part 36 Offer made in accordance with Rule 36.10 and giving the Claimant 21 days to accept. In the letter the Defendant offered to pay £27,000.00 in respect of re-planting the trees and an additional £8,000.00 as a “good will payment”.

In addition, the Defendant offered to pay the Claimant’s costs. The offer was not accepted. The Claimant issued proceedings in December 2002 and included in the proceedings a Schedule of Loss quantifying the claim at approximately £780,000.00.

After issue no Payment into Court pursuant to CPR 36.10 (3) was made. In June 2003 the Defendant’s solicitors offered to settle without prejudice save as to costs on terms that the Claimants discontinued and the Defendants paid £1,445.40 for a permanent easement over the land and the Claimant paid £18,530.00 in respect of the Defendant’s costs. In July 2003 the Claimant’s solicitors offered to settle on terms that the Defendant paid £42,500.00 plus costs. That offer was rejected. In August the Defendant paid £20,000.00 into Court. The Claimant’s solicitors after the payment in asked the Defendant whether the offer of February 2002 was still open for acceptance and were informed that since it was only open for acceptance within 21 days it had lapsed. The trial began in September 2004 and the Claimant was awarded damages in the sum of £25,600.00. The Judge took the view that the Claimants had beaten the Payment into court and ordered the Defendant to pay a proportion of the Claimant’s costs. The Claimants were not entitled to all their costs because their approach to the litigation in claiming £757,000.00 had been unreasonable.

He held that one half of their costs only should be paid by the Defendant.

He was asked to consider the offer of February and its effect and took the view that the offer afforded the Defendant no protection because it was not followed by a Payment into Court as contemplated by CPR 36.10 and in any event it was later withdrawn. The Judge considered Crouch v Kings Healthcare NHS Trust and took the view that the Defendant had no practical or good reason not to pay into Court and stood in a very different position from a NHS Trust.

Two issues arose on the appeal – firstly whether the Judge was right to take no account of the offer in February 2002 and secondly, whether the Judge was justified in reducing the Claimant’s costs on the grounds that the claim was exaggerated.

The decision

An offer should usually be treated as having the same effect as a Payment into Court provided certain conditions were satisfied. Firstly the offer had to be expressed in clear terms so that there was no doubt as to what was being offered. Secondly, it should state whether it related to the whole of the claim or to part of it or to an issue that arose in it and if so, to which part or issue.

Thirdly, it should state whether it took into account any counter claim and whether it was expressed not to be inclusive of interest giving details relating to interest equivalent to those set out in CPR 36.22 (2).

Fourthly, the offer should be open for acceptance for at least 21 days and otherwise accord with the substance of a Calderbank offer. The offer should be genuine and not sham or non serious.

Finally, the Defendant should clearly have been good for the money at the time when the offer was made.

To the extent that any of these conditions were not satisfied the offer should be given less weight than the payment into court for the purposes of a decision as to costs. Where none of the conditions were satisfied it was likely that the Court would hold that the offer gave the Defendant no cost protection at all.

If all of the conditions were satisfied then there was no reason in principle why the effect of an offer should differ from that of a Payment into Court.

The Effect of the withdrawal of the offer

In a pre CPR authority, Bristol & West Building Society, the Court of Appeal allowed a Defendant’s Calderbank offer subsequently withdrawn to take effect as to costs. The Court of Appeal had stated that the issue was not whether the Calderbank letter was still on the negotiating table at the situation at the time the offer had been made.

Although that case was a pre CPR authority and was not technically binding it was of strong persuasive force. To decide the effect of an offer on costs the Court would look to the date when the offer should have been accepted. If a Claimant should have accepted an offer within 21 days then on the face of it the consequence should be that he is entitled to his costs up to the date when the offer should have been accepted and the Defendant is entitled to his costs thereafter. Usually the mere fact that an offer is withdrawn after the date when it should have been accepted should not lead to a different result.

Comments

On the basis that the Defendant’s Appeal would be allowed on the first issue the Defendant’s liability for the Claimant’s costs if any would be minimal. Accordingly the second issue did not arise or arose only to an insignificant extent.

There was no reason to interfere with the Judge’s assessment of the Claimant’s conduct.

Appeal allowed.

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The content on this page is provided for the purposes of general interest and information. It contains only brief summaries of aspects of the subject matter and does not provide comprehensive statements of the law. It does not constitute legal advice and does not provide a substitute for it.

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