A costs-inclusive Part 36 Offer is NOT a Part 36 Offer

Knight & Anor v Knight & Ors (Costs) [2019] EWHC 1545 (Ch)

This was another in a line of cases which confirms that a Part 36 Offer cannot contain any provision as to costs. Disagreeing with Hildyard J in Proctor & Gamble Co v Svenska Celluslosa HHJ Paul Matthews held that he was bound by the Court of Appeal decisions in Mitchell v James and French v Groupama, neither of which had been cited to Hildyard J, that no term as to costs should be included in a Part 36 offer, even if to the benefit of the offeree.

“I do not think that I am free simply to follow the decision of Hildyard J, even if it applied on the facts. The decisions of the Court of Appeal in Mitchell v James and French v Groupama, binding on me, that no term as to costs should be included in a Part 36 offer, were not cited to him, and so I do not know how he would have dealt with them. Moreover, the offer made in the present case is materially indistinguishable from the offer made in the latter of the two cases. Accordingly, I hold that this offer is not a Part 36 offer, and therefore does not have the costs consequences of such an offer.”

Although not required to determine the remaining issues given his finding on the status of the offer, HHJ Paul Matthews went on to find that:

  1. It did not matter that the offer, which was made pre proceedings at a time when it was uncertain whether the offerors would be claimants or defendants in any subsequent action, was not categorised as a claimant’s or defendant’s offer.
  2. A decision that a particular asset (here an intangible credit in the conveyancing solicitors’ client account) belongs beneficially to a particular claimant is not a “monetary award” in the context of CPR 36.17.
  3. Had the offer been a Part 36 Offer it would not have been unjust to apply the consequences set out in CPR 36.17(4).

Finally, he held that there was no other reason outside of the Part 36 regime to order that the defendants do pay costs on the indemnity basis following their failure to beat the offer.

KNIGHT & ANOR v KNIGHT & ORS (COSTS) [2019] EWHC 1545 (CH)