The Part 36 offer that was forgotten
Ravenswood Interiors Ltd supplied and installed bespoke shelving for Calder Books Ltd for £72,000. Six months after installation the shelving collapsed, destroying stock worth £18,000 and closing the shop for three weeks. Calder's solicitors issued proceedings claiming the full £72,000. Calder's own expert report, served late, now puts the total recoverable loss at £41,000. Calder has spent £60,000 on costs to date; of that, £20,000 was incurred before the relevant date. Two weeks before trial, Calder's solicitor realises that the defendant served a Part 36 offer of £44,000 four months ago, which was never accepted and has never been withdrawn. The defendant's costs since the offer expired are £28,000. Calder has £10,000 in the bank and no ATE insurance.
1. If Calder proceeds and recovers £41,000 at trial, what costs order will the court make and why?
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Apply CPR 36.17. A claimant who fails to obtain a judgment more advantageous than a defendant's Part 36 offer is liable for the defendant's costs from the date the relevant period (21 days) expired, plus interest on those costs, unless the court considers it unjust to make that order.
Compare like with like: judgment of £41,000 against an unwithdrawn offer of £44,000. Calder has done worse than the offer. The comparison is on the judgment sum, and the court will not normally inflate it by reference to costs already irrecoverable.
Consequences:
- Calder is liable for the defendant's costs of £28,000 incurred since expiry, with interest (the court may award up to base rate + 10% on those costs in an appropriate case).
- Calder's own costs after expiry are irrecoverable; its costs up to expiry (about £20,000) remain recoverable in the ordinary way.
- Calder is at risk on the £18,000 discrepancy between its pleaded case and its expert evidence; the court may order it to pay the costs thrown away by the late report and by any amendment.
Net position: recovery of roughly £41,000 plus £20,000 of costs, against £60,000 already spent and £28,000 payable to the defendant – a substantial loss on a case that could have been settled for £44,000. The offer was not 'unreasonable to refuse' in any sense the court is likely to accept, given the pleaded case was £72,000.
2. Calder wants to go to trial 'on principle' and asks whether the offer can still be accepted. Advise on the options and the practical risks, given Calder's financial position.
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The offer can probably still be accepted. A Part 36 offer is not destroyed by the expiry of the relevant period; a claimant may accept it after expiry provided it has not been withdrawn, although trial has not yet started, and it remains open. The price of late acceptance is that Calder will bear the defendant's costs from the expiry of the relevant period to the date of acceptance (CPR 36.13/36.9 consequences), which are already £28,000 and rising.
Compare the two routes honestly:
- Accept: receive £44,000, recover costs to expiry (c.£20,000), pay the defendant's post-expiry costs. Exposure is capped and stops growing.
- Proceed and win at £41,000: as set out above, plus the risk of an adverse costs order on the amendment. Worse than accepting.
- Proceed and lose: no damages, no costs recovery, and liability for the defendant's costs of the whole action – comfortably over £50,000 against a £10,000 bank balance and no ATE cover. That is insolvency risk for the company and a personal risk for any director who gave a costs undertaking.
Other points to raise with the client: the solicitor's own late service of the expert report and failure to diarise the offer are potential negligence issues; the firm should consider notifying its insurers and advising the client to take independent advice. Security for costs is a live risk if Calder's finances deteriorate. Recommendation: accept now.