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CPR Part 36 underwent significant changes on 6 April 2015, and one of those was the introduction of CPR 36.17 (5) (e) which added “whether the offer was a genuine attempt to settle the proceedings” to the list of circumstances which the court must take into account in determining whether to depart from the costs consequences of a Part 36 offer following judgment.
Guidance on this issue has recently been given, in Jockey Club Racecourse Limited v Willmott Dixon Construction Limited  EWHC 167 (TCC). The Claimant had engaged the Defendant to design and construct a covered grandstand at Epsom Race Course. The roof was damaged in winds which were high, but not unexpectedly so, leading to the Claimant being put to the costs of repair.
During the course of the proceedings, the Claimant made an offer to settle liability on the basis that the Defendant would “accept liability to pay 95% of [the Claimant’s] claim for damages to be assessed.” Liability was subsequently accepted by the Defendant in full.
The Claimant sought the costs of establishing liability on the indemnity basis. The Defendant sought to resist this on the basis that the offer was not a genuine attempt to settle the proceedings. The argument was that liability was always going to be all or nothing, and that as a 95:5 decision on liability was not even open to the court, it could not be said to be a genuine offer to settle.
The court referred to Huck v Robson  1 WLR 1340, an RTA claim in which two cars had been involved in a head-on collision. The Claimant had claimed that the Defendant was entirely at fault, and had made a 95:5 Part 36 offer; the Defendant had averred that the parties were equally at fault and had sought a 50:50 liability split. The Claimant succeeded in full at trial. The judge had considered the 95:5 offer in Huck to be derisory, not least because it was an outcome that was theoretically permissible but practically unlikely as the only realistic outcomes on liability were 100:0 or 50:50. That decision had been overturned on appeal. In Huck, the Court of Appeal had stated that:
[A] claimant with a strong case will often be prepared to accept a discount from the full value of the claim to reflect the uncertainties of litigation. Such offers are not usually based on the likely apportionment of liability but merely reflect the reality that most claimants prefer certainty to the ordeal of a trial and uncertainty about its outcome. If such a discount is offered and rejected there is nothing unjust in allowing the claimant to receive the incentives to which he or she is entitled under the Rules…
[I]f it was self-evident that the offer made was merely a tactical step designed to secure the benefit of the incentives provided by the rule (e g an offer to settle for 99.9% of the full value of the claim) … the judge would have a discretion to refuse indemnity costs.
In Jockey Club it was held that the same reasoning could apply, notwithstanding the outcome not being one available to any trial judge. The Defendant sought to distinguish Huck on the basis of the new CPR 36.17 (5) (e). The argument was rejected because the Court of Appeal’s guidance on mere tactical offers in Huck was directed at the same mischief as CPR 36.17 (5) (e).
However, indemnity costs were not awarded from 21 days after the offers were made, owing to deficiencies in the Claimant’s pleading.
(NB technically CPR 36.17(5)(e) should not have been in issue in this case at all, because the transitional provisions of the relevant Statutory Instrument provide that it only applies to offers made after 6 April 2015, but that is a point that seems to have been overlooked by both parties and the court).
This ruling is unsurprising – at the time that the offer was made, the claim was pleaded at £400,000. The Claimant was effectively offering to give up £20,000, which can hardly be said not to be a genuine attempt to settle.
The Defendant’s stance would, if successful, have introduced greater uncertainty into litigation by making it harder to predict whether Part 36 offers would be accepted as genuine, and inevitably led to satellite litigation. Worse, it would mean that parties with strong cases would have no means of pressuring their opponents into dropping weak cases without giving up excessive amounts of the damages to which they would otherwise be entitled. Such an outcome would not be conducive to early settlement of claims – therefore placing even more strain on an already overburdened court system.
CPR 36.17(5)(e) is designed to prevent cynical attempts to obtain the benefits of Part 36, where the offeror demands close to total capitulation. If anything it was the offeree here who was cynically trying to escape the consequences of their own failure to accept an offer which would have been beneficial to both parties.