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Howell Ors v Lees-Millais Ors, Court of Appeal, 6 July 2011

25 July 2011
The issues

Costs – Part 36 offer – successful party – C v D – whether purported offer was a Part 36 offer or not.

The facts

The claim related to two trusts and a dispute between the beneficiaries of the Trusts and the trustees. At the final Hearing the Judge refused to sanction any of the proposed claims, save for the negligence action against a firm of solicitors. There was no Appeal against that decision.

Costs had been incurred on behalf of the trustees. The Judge had made it clear in his Judgment that in his view the trustees had acted in an inappropriately partisan way. Costs were therefore reserved to another Hearing, listed for 10 days.

In the months before the Hearing there were negotiations with a view to settling the costs dispute. An offer was made on the 9th April 2009 to the solicitors for one of the beneficiaries, Fiona, offering her nothing. The second letter was sent to a second beneficiary, Marcus, and offered to limit the costs which the Trustees could recover to £211,215.30. The third letter of the 9th April was to the solicitors acting for a third beneficiary, Lorna, claiming to be a Part 36 offer and saying that it was open for acceptance up to and including 21 days from the date of receipt of the letter. It then went on to put certain offers and proposals.

Negotiations continued and almost a year later the Trustees offered £100,000 in respect of Fiona’s costs if Lorna and Marcus were prepared to accept the earlier Part 36 offers. The beneficiaries accepted, but a costs Hearing took place because the Trustees contended that they were entitled to their costs in respect of the period from the expiry of the 21 days referred to in the earlier offers until the points when the offers had been accepted. The Judge made no Order for costs in respect of that period and took the view that the earlier offer was not a Part 36 offer, pointing out that it was expressed in terms which implied it would be withdrawn after 21 days.

The Trustees Appealed.

The decision

The earlier offer was not a Part 36 offer because it specifically excluded the offerees from recovering all of their costs. It could not therefore comply with Part 36.10(1). The Judge’s other reasoning for holding that it was not a Part 36 offer had now to be seen in the light of the decision in C v D and the Judge’s reasoning was inconsistent with that decision.

The overriding objective and common sense required that whilst the letter was not an offer in the confines of Part 36, it should be given substantially the same effect as a Part 36 offer where all the parties had through correspondence treated the offers as having been made under Part 36 and had continued to do so well after the 21 days referred to therein had passed, and particularly where the offerers could not have framed their offers so as to fall within Part 36. In such cases an offer which otherwise complied with the requirements of Part 36 should, in the absence of good reason to the contrary, be given substantially the same effect as a Part 36 offer when it came to deciding costs issues. Since the offer which had been accepted was a better offer from the point of view of the Trustees, the allocation of liability for costs for the period between the expiry of the 21 days and acceptance was plainly a matter for the Judge’s discretion. He could not be criticised for the decision he had made. The right Order was that each party should bear its own costs from the expiry of the 21 days referred to in the letter and the Appeal would be dismissed.

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