Costs – Indemnity basis – Settlement – Claimant offering to settle issue of liability on basis that defendant pay 95% of damages – Defendant failing to accept offer – Offer not reflecting available outcome of litigation – Whether offer within meaning of CPR Part 36 – Whether offer being genuine attempt to settle liability – Whether unjust to award costs on indemnity basis – Claim allowed
The defendant was engaged by the claimant to design and construct a new grandstand at the Epsom Race Course. Problems arose with the roof when it was damaged in high winds, after which the claimant had to carry out repairs. The roof was a proprietary system and was in effect a sealed structure. Accordingly, the details of its internal construction could only be seen if it was opened up. The claimant brought proceedings against the defendant to recover the cost of repairs. The claimant made an offer to settle liability for losses arising out of the defects in the roof on the basis that the defendant pay 95% of the damages to be assessed. The defendant did not respond to that offer but the issue of liability was subsequently resolved by consent in the claimant’s favour.
At a case management hearing, the claimant made an application for indemnity costs. It contended that it was entitled to the benefits that CPR Part 36 conferred on a claimant who had bettered its own Part 36 offer, including costs on the indemnity basis. The defendant contended that the claimant had not made a valid Part 36 offer, since it was either liable for the full extent of the claimant’s damages, as assessed or agreed, or it was not. Accordingly, a decision that the defendant pay 95% of the claimant’s damage did not reflect an available outcome of the litigation.
Held: The claim was allowed
Although the concept of an offer to settle was not defined in Part 36, it had to contain some genuine element of concession on the part of the claimant, to which a significant value could be attached in the context of the litigation. The fact that the claimant’s Part 36 offer did not reflect an available outcome of the litigation did not affect its validity. Cases were frequently settled on the basis of an assessment of risk which combined both the risk of failure and the uncertainty as to the true value of the claim. Although hardly generous, the offer contained some element of concession on the part of the claimant to which a significant value could be attached. The offer was therefore a valid and genuine offer to settle.
Having regard to CPR 36.17(5)(c) in particular, it would be unjust to award indemnity costs from 21 days after the date of the offer, given that at that stage the defendant had only just ben made aware for the first time that the claim against it had been increased. However, in the circumstances, it was just to award the claimant indemnity costs from the earliest date after that by which the defendant could reasonably have made an informed assessment of the strength of the claim on liability, which was four months from the date of the offer: Huck v Robson [2003] 1 WLR 1340 and AB v CD [2011] EWHC 602 (Ch) applied.
Geoffrey Brown (instructed by DAC Beachcroft LLP) appeared for the claimants; Anna Lacey (instructed by Kennedys Law LLP) appeared for the defendant.
Eileen O’Grady, barrister
Click here to read the transcript of Jockey Club Racecourse Ltd v Willmott Dixon Construction Ltd
