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Part 36 – late acceptance

If a Part 36 offer is accepted out of time (ie outside the 21 day period) in a low value protocol case, then what are the costs consequences? In particular, does late acceptance mean a liability to pay standard (or indemnity) costs – rather than fixed costs – from the 21 day period through to the date of acceptance? The CA has confirmed that it does not; fixed costs still apply.

The case was a straightforward RTA. The claimant made a Part 36 offer (£1,500) in November, but the defendant did not accept it until the following June (the week before the case was due to come to court). Not surprisingly, the claimant argued that he should recover fixed costs for the initial period (up until expiry of the 21 day period for acceptance), and thereafter receive standard (or indemnity) costs until the date of acceptance. The CA disagreed. It pointed out that under the CPR there are only two exceptions to the rule that a claimant should recover fixed costs: (1) if the Part 36 offer is beaten at trial, or (2) if there are ‘exceptional circumstances’. The CA took the view that the claimant could not argue that seven months’ delay, even with no apparent justification, amounted to ‘exceptional circumstances’. Thus, fixed costs applied.

If the position is reversed, and there is late acceptance by a claimant of a defendant’s Part 36 offer, similar principles apply: the defendant pays the claimant’s fixed costs up to the expiry of the 21 day period, and the claimant pays the defendant’s fixed costs until the date of late acceptance (or trial).

There are many who disagree with this approach. In simple terms, it encourages defendants to delay acceptance until the final moment, and game the system. Undoubtedly, the decision undermines the tactical impact of the claimant making an early Part 36 offer.

One final point made in the Gazette is that the courts should, at the least, consider adding interest on the settlement offer to take account of the delay in it being accepted. While that is hardly likely to make a significant difference it would at least be a gesture in the right direction. See commentary on Hislop v Perde [2018] EWCA Civ 1726 (this case report is available in full at www.bailii.org). Source: [2018] LSG 30 July.

 

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