COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
London, WC2A 2LL
B e f o r e :
LORD JUSTICE POTTER
SIR MURRAY STUART-SMITH
| MITCHELL AND OTHERS||Appellants|
- and -
JAMES AND OTHERS
Smith Bernal Reporting Limited, 190 Fleet Street
London EC4A 2AG
Tel No: 020 7421 4040, Fax No: 020 7831 8838
Official Shorthand Writers to the Court)
Mr. Neil Mendoza (instructed by Messrs Ward Hardaway of Newcastle upon Tyne) for the Respondents
AS APPROVED BY THE COURT
Crown Copyright ©
Lord Justice Peter Gibson:
“1. The Claimants are prepared to compromise this action in respect of the whole of their claim, inclusive of interest, on the following terms:
(i) Payment by the Third Defendant to the Claimants of the sum of £91,410. 00;
(ii) The Counterclaim be dismissed;
(viii) Each party to bear his own costs (including for the avoidance of doubt, costs in the Third Party proceedings);
(ix) Each party to bear 50% of the Third Party's costs.
2. This offer will remain open for acceptance for 21 days from the date of this notice.”
By para. 1(iii) to (vii) the assets of the Third Defendant other than bank deposits were to be sold, and the proceeds and the bank deposits were to be divided 50/50 between the Claimants and Mr. and Mrs. James.
“I am not sufficiently satisfied that the outcome of this case for the Claimants will be such that they have clearly beaten their Part 36 offer. It is possible that they will have done so, but in terms of the assets of the company (ignoring the point on costs), on balance it seems unlikely that a 50% shareholding in the company as it is today is worth more than £91,410. That would be so even making the assumption which has been adopted in the correspondence that a 50% shareholding can be valued at 50% of the value of the entire assets of the company. I think all of us know that that assumption is regarded as incorrect for tax valuations: for example, a 50% shareholding will invariably be valued at considerably less than a 50% aliquot share of the entire net asset value of the company.
The other element which is relied on by the Claimants in support of their argument for indemnity costs is that under their Part 36 offer they, the Claimants, would have been liable to pay their own costs up to that point. In the event, the offer having been turned down and the Claimants having won, they will recover the costs of the action from the Defendants.
On balance Mr Brunner may be right, that that costs recovery will mean that the Claimants are better off than they would have been had that Part 36 offer been accepted. However, that point is far from certain, and I do feel uncomfortable about the whole principle of taking into account, in the exercise required by the Civil Procedure Rules of comparing a judgment with a Part 36 offer, the costs which are in the event incurred by the trial and dealt with by the judgment.
In all those circumstances, while freely acknowledging that I do not feel confident about this, I have come to the view that the conditions of Part 36.21 of the Civil Procedure Rules are not present. On that basis, I would not be given power by Part 36.21 to order indemnity costs. I would only add that if I did have the power, then even with Rule 36.21.(4) (which certainly gives the court a steer towards ordering indemnity costs where the power exists), I would still regard the matter as so marginal that I would be disinclined to order indemnity costs in this case. I add the observation (in case it is of assistance) that the scope of Civil Procedure Rule 36.21 and in particular the impact on it of terms as to costs in a Part 36 offer is a matter which could very helpfully be considered at some stage by the Court of Appeal.
For all those reasons (good or bad), I will direct costs to be assessed on the standard basis. I do not have huge confidence in the correctness of that conclusion, but, on balance, I believe it is more likely to be the correct conclusion than the reverse.”
“Two different questions arose. (1) Costs apart, did the decision (C[laimant]s are owners of 50% of the Company) beat the C[laimant]s' Part 36 offer (D[efendant]s were left with 100% of the company, but would pay C[laimant]s £91,400). (2) One of the elements of the Part 36 offer was that each side paid its own costs. So if it had been accepted the C[laimant]s would have paid their own costs. In the event, the offer not having been accepted the C[laimant]s having won, the D[efendant]s are ordered to pay the C[laimant]s' costs. Can this be taken into account in deciding (under CPR 36.21(1)(b)) whether the judgment is more advantageous to the C[laimant]s than the Part 36 offer?”
“(1) This Part contains rules about—
(a) offers to settle and payments into court; and
(b) the consequences where an offer to settle or payment into court is made in accordance with this Part.
(2) Nothing in this Part prevents a party making an offer to settle in whatever way he chooses, but if that offer is not made in accordance with this Part, it will only have the consequences specified in this Part if the court so orders.”
"(1) A Part 36 offer must be in writing.
(2) A Part 36 offer may relate to the whole claim or to part of it or to any issue that arises in it.
(3) A Part 36 offer must—
(a) state whether it relates to the whole of the claim or to part of it or to an issue that arises in it and if so to which part or issue;
(b) state whether it takes into account any counterclaim; and
(c) if it is expressed not to be inclusive of interest, give the details relating to interest set out in rule 36.22(2).
(6) A Part 36 offer made not less than 21 days before the start of the trial must—
(a) be expressed to remain open for acceptance for 21 days from the date it is made; and
(b) provide that after 21 days the offeree may only accept it if—
(i) the parties agree the liability for costs; or
(ii) the court gives permission."
"Where a claimant's Part 36 offer is accepted without needing the permission of the court the claimant will be entitled to his costs of the proceedings up to the date upon which the defendant serves notice of acceptance."
" (1) This rule applies where at trial—
(a) a defendant is held liable for more; or
(b) the judgment against a defendant is more advantageous to the claimant,
than the proposals contained in a claimant's Part 36 offer.
(2) The court may order interest on the whole or part of any sum of money (excluding interest) awarded to the claimant at a rate not exceeding 10% above base rate for some or all of the period starting with the latest date on which the defendant could have accepted the offer without needing the permission of the court.
(3) The court may also order that the claimant is entitled to—
(a) his costs on the indemnity basis from the latest date when the defendant could have accepted the offer without needing the permission of the court; and
(b) interest on those costs at a rate not exceeding 10% above base rate.
(4) Where this rule applies, the court will make the orders referred to in paragraphs (2) and (3) unless it considers it unjust to do so.
(5) In considering whether it would be unjust to make the orders referred to in (2) and (3) above, the court will take into account all the circumstances of the case including—
(a) the terms of any Part 36 offer;
(b) the stage in the proceedings when any Part 36 offer .... was made;
(c) the information available to the parties at the time when the Part 36 offer .... was made; and
(d) the conduct of the parties with regard to the giving or refusing to give information for the purposes of enabling the offer or payment into court to be made or evaluated.
(6) Where the court awards interest under this rule and also awards interest on the same sum and for the same period under any other power, the total rate of interest may not exceed 10% above base rate."
“5.1 A Part 36 offer .... must
(1) state that it is a Part 36 offer ...., and
(2) be signed by the offeror or his legal representative.
5.2 The contents of a Part 36 offer must also comply with the requirements of rule 36.5(3), (5) and (6).”
“The general rule is that a Part 36 offer made more than 21 days before the start of the trial may be accepted within 21 days after it was made without the permission of the court. The costs consequences set out in rule .... 36.14 will then come into effect.”
“A Part 36 offer .... made less than 21 days before the start of the trial cannot be accepted without the permission of the court unless the parties agree what the costs consequences of acceptance will be.”
“If the court gives permission it will make an order dealing with costs and may order that, in the circumstances, the costs consequences set out in rule .... 36.14 will apply.”
(1) Was the offer of 2 March 2000 a Part 36 offer?
(2) If so, was the judgment more advantageous to the Claimants than their offer?
(3) If so, should the court interfere with the exercise of discretion by the judge?
(1) Part 36 offer
Issues (2) and (3)
Sir Murray Stuart-Smith: