Gibbon v Manchester City Council; LG Blower Specialist Bricklayer Ltd v Reeves and another

Civil practice and procedure — CPR 36 — Whether rejection of Part 36 offer to settle proceedings rendering offer incapable of acceptance at later date — Whether implied withdrawal of Part 36 offer possible — Whether later offer superseding earlier offer The joined appeals concerned the CPR 36 provisions for making and accepting offers to settle claims. In the first appeal, the respondent council admitted liability to the appellant on a personal injury claim. The latter made a Part 36 offer to accept £2,500 in settlement of her claim, to which the respondents responded with a lower offer. The appellant rejected that offer and a subsequent one that equalled hers; she did not formally withdraw her offer. The respondents purported formally to accept her offer and sought a court declaration that they were entitled to do so. The appellant argued that her offer was no longer extant since: (i) the respondents’ rejection of that offer had rendered it incapable of acceptance thereafter in accordance with general principles of law; and (ii) her indication that she was no longer willing to accept £2,500, in her refusal of the respondents’ later offer in that sum, was an implied withdrawal of her offer. Those arguments were rejected by a district judge and by a judge on appeal. It was held that the appellant’s offer had not been formally withdrawn and the respondents had been entitled to accept it; under CPR 36, it was for the appellant positively to withdraw an offer that was no longer available. The appellant appealed the costs award. In the second appeal, the appellants made Part 36 offers to settle a claim by a building contractor for moneys due under an invoice, including a May 2007 offer to pay £8,023 inclusive of interest in full and final settlement of the claim, followed by two higher offers in August and November 2007. In January 2008, the appellants withdrew all offers save for that of May 2007. In February 2008, they purported to repeat their August offer, but inclusive of interest and costs. At trial, the district judge awarded the respondent £8,375, with interest and costs, and ordered the appellants to pay half of its costs from January 2008. The appellants appealed, contending that the order was too favourable to the respondent since the judgment was not materially more advantageous than the May 2007 offer. The judge held that this was irrelevant since all earlier offers had been superseded by the February 2008 offer and the respondent had won. The appellants appealed. In both appeals, the central issue was whether CPR 36 embodied a self-contained code or was subject to the general law of offer and acceptance by not expressly providing otherwise. Held: The appeals were dismissed. (1) Parties seeking to settle claims are not bound to use the CPR 36 mechanism, but they must follow its requirements if they want to take advantage of the consequences for costs and other matters that flow from a Part 36 offer. CPR 36 is drafted as a self-contained code, prescribing in detail the way in which an offer may be made and the consequences of accepting or rejecting it. Concepts of offer and acceptance underpin CPR 36, but it should not be understood as incorporating all the rules of law governing the formation of contracts. It was drafted to promote certainty and should be read and understood according to its terms without importing rules from the general law, save where clearly intended. (2) CPR 36 clearly states how a Part 36 offer may be made, varied and withdrawn. It may be accepted at any time unless the offeror has formally withdrawn it by serving notice on the offeree: see CPR 36.9(2). There is no provision for an offer to lapse or to become incapable of acceptance on being rejected by the offeree, as would occur at common law. To import the common law rule into CPR 36 would undermine the scheme. Likewise, there is no room for the concept of implied withdrawal of an offer. CPR 36 requires an express written notice making it clear to the offeree that the offer has been withdrawn: see CPR 36.3(7). In the first appeal, the letter relied on by the appellant, rejecting an offer by the respondents that equalled her own, was not a notice of withdrawal of her own offer of the kind required by the rules. The respondents were entitled to accept that offer. (3) The judge in the second appeal had erred in considering that the May 2007 offer had been superseded by that of February 2008. Whatever the intention of the later offer, it did not constitute a Part 36 offer because it did not comply with the requirements of CPR 36.2(2)(b) or (c). All offers save for that of May 2007 had been formally withdrawn. Thus, at the date of trial, the only offer for consideration was that of May 2007. Per curiam: The better view is that the offer is open for acceptance until the start of the trial or its withdrawal in the way prescribed by CPR 26.3(7) and it is not superseded by a subsequent offer. CPR 36 does not provide that only one offer may be available for acceptance at any one time or that a later offer should be treated as varying or revoking a previous offer. It would be inconsistent with the recognition of CPR 36 as a self-contained code to read such provisions into it. The following cases are referred to in this report. Carver v BAA plc [2008] EWCA Civ 412; [2009] 1 WLR 113; [2008] 3 All ER 911 Multiplex Constructions (UK) Ltd v Cleveland Bridge UK Ltd [2008] EWHC 2280 (TCC) Sampla v Rushmoor Borough Council [2008] EWHC 2616 (TCC) This was the hearing of conjoined appeals by Susan Gibbon, the appellant in the first appeal, from a decision of HH Judge Holman, sitting in Manchester County Court, dismissing an appeal against a costs decision of District Judge Richmond in favour of the respondents, Manchester City Council; and by John and Anne Reeves, the appellants in the second appeal, from a decision of HH Judge Rubery, sitting in Shrewsbury County Court, dismissing an appeal against an order of District Judge Brown in favour of the respondent, LG Blower Specialist Bricklayer Ltd. |page:86| Dr Mark Friston (instructed by Thompsons Solicitors, of Manchester) appeared for the appellant in the first appeal; Dr Timothy Hodgson (instructed by the legal department of Manchester City Council) appeared for the respondents in the first appeal; Thomas Plewman (instructed by Aaron & Partners LLP, of Manchester) appeared for the appellant in the second appeal; Frances Pigott (instructed by Andrews Law, of Bridgnorth) represented the respondents in the second appeal. Giving the first judgment, Moore-Bick LJ said: Issues [1] These appeals have been heard together because they raise similar issues concerning the interpretation and effect of CPR 36 of the Civil Procedure Rules. CPR 36 contains provisions that enable either party to the proceedings to make an offer to settle the dispute that has far-reaching consequences if the case goes to trial and the other party fails to obtain a judgment that is more advantageous to it than the offer. The central question raised on this appeal is whether CPR 36 embodies a self-contained code or is subject to the general law of offer and acceptance in so far as it fails expressly to provide otherwise. Part 36 [2] CPR 36 replaced the provisions of the Rules of the Supreme Court relating to payment into court by way of a formal offer of satisfaction of the claim. It also provided for the first time a means by which a claimant could offer to accept a sum of money less than the amount of its claim with protection in respect of costs comparable to that which had previously been available only to defendants. Its purpose is to encourage settlement and to enable those who make sensible offers to protect themselves against liability for the costs incurred in the continuation of proceedings to no ultimate advantage. [3] The following are the most important provisions of CPR 36 as far as these appeals are concerned: Scope of this Part (1) This Part contains rules about (a) offers to settle; and (b) the consequences where an offer to settle is made in accordance with this Part. … Form and content of a Part 36 offer 36.2 (1) An offer to settle which is made in accordance with this rule is called a Part 36 offer. (2) A Part 36 offer must (a) be in writing; (b) state on its face that it is intended to have the consequences of Section I of Part 36; (c) specify a period of not less than 21 days within which the defendant will be liable for the claimant’s costs in accordance with rule 36.10 if the offer is accepted; (d) 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; and (e) state whether it takes into account any counterclaim. … Part 36 offers general provisions 36.3 … (3) A Part 36 offer which offers to pay or offers to accept a sum of money will be treated as inclusive of all interest until (a) the date on which the period stated under rule 36.2(2)(c) expires; or (b) if rule 36.2(3) applies, a date 21 days after the date the offer was made. … (6) After expiry of the relevant period and provided that the offeree has not previously served notice of acceptance, the offeror may withdraw the offer or change its terms to be less advantageous to the offeree without the permission of the court. (7) The offeror does so by serving written notice of the withdrawal or change of terms on the offeree. Time when a Part 36 offer is made 36.7 (1) A Part 36 offer is made when it is served on the offeree. (2) A change in the terms of a Part 36 offer will be effective when notice of the change is served on the offeree. Acceptance of a Part 36 offer 36.9 (1) A Part 36 offer is accepted by serving written notice of the acceptance on the offeror. (2) … a Part 36 offer may be accepted at any time (whether or not the offeree has subsequently made a different offer) unless the offeror serves notice of withdrawal on the offeree. … Costs consequences following judgment 36.14 (1) This rule applies where upon judgment being entered (a) a claimant fails to obtain a judgment more advantageous than a defendant’s Part 36 offer; or (b) judgment against the defendant is at least as advantageous to the claimant as the proposals contained in a claimant’s Part 36 offer. (2) … where rule 36.14(1)(a) applies, the court will, unless it considers it unjust to do so, order that the defendant is entitled to (a) his costs from the date on which the relevant period expired; and (b) interest on those costs. (3) … where rule 36.14(1)(b) applies, the court will, unless it considers it unjust to do so, order that the claimant is entitled to (a) interest on the whole or part of any sum of money (excluding interest) awarded at a rate not exceeding 10% above base rate for some or all of the period starting with the date on which the relevant period expired; (b) his costs on the indemnity basis from the date on which the relevant period expired; and (c) interest on those costs at a rate not exceeding 10% above base rate. [4] It can be seen from CPR 36 as a whole, as well as from the extracts cited above, that it contains a carefully structured and highly prescriptive set of rules dealing with formal offers to settle proceedings that have specific consequences in respect of costs in those cases where the offer is not accepted and the offeree fails to do better after a trial. In cases where there has been no CPR 36 offer or a CPR 36 offer has been bettered, the judge has a broad discretion in dealing with costs within the framework provided by CPR 44. CPR 44.3(4) provides that when exercising its discretion as to costs, the court will have regard to the general rule that the unsuccessful party should pay the costs of the successful party, but will also have regard to the conduct of the parties and any payment into court or admissible offer to settle made by one or other party that falls outside the terms of CPR 36. In seeking to settle the proceedings, therefore, parties are not bound to make use of the mechanism provided by CPR 36, but if they want to take advantage of the particular consequences for costs and other matters that flow from making a CPR 36 offer, in respect of which the court’s discretion is much more confined, they must follow its requirements. [5] CPR 36 is drafted as a self-contained code. It prescribes in some detail the manner in which an offer may be made and the consequences that flow from accepting or failing to accept it. In some respects, those consequences reflect broadly the approach the court might be expected to take in respect of costs; in others, they do not. For example, CPR 36.14(3) allows the court to award a claimant that has obtained a judgment at least as advantageous as its offer interest on the sum for which it has obtained judgment at an enhanced rate of up to 10% over base rate, costs on the indemnity basis and interest on those costs at an enhanced rate as well. [6] Basic concepts of offer and acceptance clearly underpin CPR 36, but that is inevitable given that it contains a voluntary procedure under which either party may take the initiative to bring about a consensual resolution of the dispute. Such concepts are part of the landscape in which everyone conducts their daily life. It does not follow, however, that CPR 36 should be understood as incorporating all the rules of law governing the formation of contracts, some of which are quite technical in nature. Indeed, it is not desirable that it should do so. Certainty is as much to be commended in procedural as in substantive law, especially perhaps in a procedural code that must be understood and followed by ordinary citizens who wish to conduct their own litigation. In my view, CPR 36 was drafted with these considerations in mind and is to be read |page:87| and understood according to its terms without importing other rules derived from the general law, save where that was clearly intended. [7] With these general observations in mind, I turn to consider the two appeals before us. Gibbon v Manchester City Council [8] In December 2007, Mrs Susan Gibbon was injured when she tripped and fell in a playground for which Manchester City Council were responsible. She brought proceedings against the council, which admitted liability. [9] On 10 November 2008, the council made a CPR 36 offer to Mrs Gibbon of £1,150 in settlement of her claim. She rejected that offer and, on 18 November, made a CPR 36 offer in response, offering to accept £2,500 plus the repayment of any sums recoverable by the compensation recovery unit and costs. [10] On 24 November, the council increased their offer to £1,500. The solicitor acting for Mrs Gibbon rejected that offer, indicating that it expected something more generous. However, it did not withdraw the CPR 36 offer made on her behalf on 18 November. [11] On 7 January 2009, the council increased their offer to £2,500 but, on 18 February, Mrs Gibbon’s solicitor again rejected it. Once again, however, it took no steps to withdraw the offer made on 18 November. [12] On 26 February, the council, mindful of the fact that the offer made on 18 November had not been withdrawn, wrote to Mrs Gibbon’s solicitor formally accepting that offer. On receipt of that letter, the solicitor promptly purported to withdraw the offer and again rejected the council’s offer of £2,500, but the council were determined to stick to their position. They made an application for a declaration that they were entitled to accept the offer made on 18 November and an order for judgment to be entered to reflect the fact that they had done so. [13] The application was heard by District Judge Richmond. He held that, since the offer made on 18 November had not been formally withdrawn, the council were entitled to accept it and gave judgment for Mrs Gibbon in the sum of £2,500. He ordered the council to pay her costs up to the date of the offer and Mrs Gibbon to pay the council’s costs thereafter. [14] Mrs Gibbon’s appeal was heard by HH Judge Holman. He held that CPR 36 is quite explicit and puts the onus on the offeror to take positive steps to withdraw any existing offer if it does not want it to be available for acceptance. He therefore dismissed the appeal. [15] Dr Mark Friston, who appeared on behalf of Mrs Gibbon, submitted that although no formal steps were taken by her solicitor to withdraw the CPR 36 offer made on 18 November, its rejection by the council on 24 November 2008 rendered it incapable of acceptance thereafter in accordance with general principles of law. Alternatively, he submitted that the solicitor’s letter of 18 February rejecting the council’s offer of £2,500 made it quite clear that she was unwilling to accept that amount in settlement of her claim and thus amounted to an implied withdrawal of her CPR 36 offer sufficient to satisfy the requirements of CPR 36.3(7). The offer was therefore no longer open for acceptance. [16] In my view, attractive though these arguments are, they cannot be reconciled with the clear language of CPR 36 or indeed with the scheme that it embodies. CPR 36.9(2) is quite clear: a CPR 36 offer may be accepted at any time unless the offeror has withdrawn the offer by serving notice of withdrawal on the offeree. Moreover, it may be accepted whether or not the offeree has subsequently made a different offer, a provision that is contrary to the general position at common law. The rules state clearly how a CPR 36 offer may be made, how it may be varied and how it may be withdrawn. They do not provide for it to lapse or become incapable of acceptance on being rejected by the offeree. That would be the case at common law, but it is inconsistent with the concepts underlying CPR 36, which proceeds on the footing that the offer is on the table and available for acceptance until the offeror chooses to withdraw it. There are good reasons for that. An offer that appears unattractive when made, and is therefore rejected, may become more attractive as the proceedings progress and the parties reassess the strength of their respective cases. A defendant that chooses to leave its offer on the table may tempt the claimant into accepting it, with the benefit to itself of the consequences for costs of an offer made at an early stage. CPR 36 allows a defendant (or for that matter a claimant) to decide whether to leave its offer open for acceptance or to withdraw it and make another offer later. To import into CPR 36 the common law rule that an offer lapses on rejection by the offeree would undermine this important element of the scheme. It could give rise to disputes concerning whether the offer had been rejected in any given case so as to render it incapable of acceptance. In Sampla v Rushmoor Borough Council [2008] EWHC 2616 (TCC), Coulson J held, largely for these reasons, that the rejection of a CPR 36 offer does not render it incapable of later acceptance. In my view, he was right to do so. [17] Nor do I think that the letter of 18 February 2009 can be read as containing an implied withdrawal of the CPR 36 offer. CPR 36.3(7) provides that an offer is withdrawn by serving written notice on the offeree. In my view, that leaves no room for the concept of implied withdrawal; it requires express notice in writing in terms that bring home to the offeree that the offer has been withdrawn. If justification for that requirement is sought, it can be found once again in the need for clarity and certainty in the operation of the CPR 36 procedure. Although the rule does not prescribe any particular form of notice, in order to avoid uncertainty it should include an express reference to the date of the offer and its terms, together with some words making it clear that it is withdrawn. There may, of course, be cases in which the terms of the notice are less clear than might be wished so that there is room for argument concerning whether the notice fulfils the requirements of the rule. However, that is a different question. The letter of 18 February 2009 did not refer to the CPR 36 offer and did not contain any language that might be construed as a notice of withdrawal. In my view, it was quite incapable of constituting a notice of withdrawal of the kind required by CPR 36.3(7). [18] In some cases, the demands of clarity and certainty in the operation of CPR 36 may appear to produce injustice and I see the force of Dr Friston’s submission that Mrs Gibbon’s solicitor had made it clear that she was not willing to accept £2,500 to settle her claim. Her difficulty, however, is that a CPR 36 offer had been made on her behalf and had not been withdrawn. It remained on the table and was therefore open for acceptance. We are not concerned with whether she has any ground of complaint against the council for accepting her offer despite the fact that she had made her intentions clear, since no suggestion has ever been made that she has a legitimate complaint about that. In those circumstances, I am of the view that the judge below was right and that this appeal must be dismissed. LG Blower Ltd v Reeves [19] In January 2006, the appellants, Mr John and Mrs Anne Reeves, entered into a contract with a building contractor, the respondent, LG Blower Specialist Bricklayer, to carry out improvements to their home, including the construction of a two-storey extension, rewiring and the supply and fitting of replacement windows. During the summer of 2006, disputes arose because Mr and Mrs Reeves were dissatisfied with the quality of some of the respondent’s work. On 20 July 2006, the respondent sent an invoice for the outstanding amount it claimed to be due and, in mid-August 2006, it stopped work altogether, leaving Mr and Mrs Reeves to complete the job using other contractors. [20] Mr and Mrs Reeves sought to set off against the respondent’s final invoice various amounts that they said represented the loss they had suffered as a result of the respondent’s poor workmanship and failure to complete the work. They admitted that part of the money claimed was due and offered to pay the balance. However, the respondent was unwilling to accept that the appellants had any genuine grounds for complaint and was unwilling to accept less than the full amount covered by its invoice. In April 2007, it brought proceedings against Mr and Mrs Reeves in Shrewsbury County Court claiming £15,793.06. They made a counter-claim in the sum of £9,160.60 together with an unquantified claim for damages for breach of contract. |page:88| [21] Mr and Mrs Reeves were reasonable people and had tried to reach a settlement even before the matter got to court. In response to the letter before action dated 2 February 2007 claiming (at that time) £15,003.41, they made an offer on 9 February to pay £8,023.14 and tendered a cheque in that amount. However, that was not acceptable to the respondent. The claim form was issued on 30 March and served on 6 April 2007. On 15 May, Mr and Mrs Reeves made a CPR 36 offer of £8,023.14 inclusive of interest in full and final settlement of the claim. I shall refer to this as “the May offer”. [22] Part of the respondent’s bill related to plumbing work for which it sought payment of £649.36. On 6 August 2007, Mr and Mrs Reeves paid that item in full, thereby reducing the claim against them. [23] On 28 August, Mr and Mrs Reeves made another CPR 36 offer, this time of £8,188.38. I shall refer to it as “the August offer”. The respondent rejected it. [24] On 9 November 2007, Mr and Mrs Reeves made another CPR 36 offer, this time of £9,000, but, on 9 January 2008, they withdrew all their offers apart from the May offer. [25] Further offers, however, followed. On 28 February 2008, Mr and Mrs Reeves “repeated” their offer of £8,188.38, this time inclusive of both interest and costs. There is a dispute concerning whether that was a CPR 36 offer and to what exactly it was intended to refer. [26] Initially, the respondent had adopted a rather intransigent attitude, but, in the latter part of 2007, it made offers of settlement and thereafter various offers were made by both the respondent and by Mr and Mrs Reeves. Regrettably, however, the parties were unable to reach agreement and the matter went to trial. [27] On 9 June 2009, District Judge Brown gave judgment for the respondent in the sum of £8,375.94, together with interest and costs. He ordered Mr and Mrs Reeves to pay half of the respondent’s costs from 8 January 2008. [28] Mr and Mrs Reeves considered that the district judge’s order was far too favourable to the respondent. In their view, he should have awarded them their costs, or at least made no order as to costs. Their appeal against his order was heard by HH Judge Rubery. They argued that the judgment obtained by the respondent was not materially more advantageous to it than the May offer, especially after taking into account the payment that they had made in respect of the plumbing, and that they should therefore have the benefit of CPR 36. However, the judge did not find it necessary to consider that point. He held that both the May offer and the August offer had been superseded by the offer made on 28 February 2008 and that, since the respondent had emerged as the winner, the district judge had not gone seriously wrong in making his order for costs. [29] The first question for consideration is whether the judge was right to hold that Mr and Mrs Reeves’ earlier CPR 36 offers had been superseded by the offer made on 28 February, since, if he was right about that, none of those earlier offers falls to be considered for the purposes of CPR 36. For the reasons given earlier, I think Mr Thomas Plewman, for the appellant, was right in submitting that CPR 36 is a self-contained code that provides expressly for the manner in which offers may be made, modified and withdrawn and that as such it displaces the ordinary rules of common law. Once made, a CPR 36 offer remains open for acceptance without the need for the court’s permission until the start of the trial or its withdrawal in the manner set out in CPR 36.3(7). It follows that I think the judge was wrong to hold that the May and August offers were superseded by the offer made in February 2008. By that letter, Mr and Mrs Reeves repeated their offer of £8,188.38, but they did not expressly withdraw any earlier CPR 36 offer that remained open for acceptance. Accordingly, the May offer was unaffected by it. [30] The position at the end of the trial, therefore, can be summarised as follows. On 9 January 2008, Mr and Mrs Reeves had revoked all existing CPR 36 offers other than the May offer, which accordingly remained for consideration. On 28 February, they had repeated their offer of £8,188.38, inclusive of interest and costs. Mrs Frances Pigott, for the respondents, submitted that that should be understood to be a reference to the May offer, but reading the letter as a whole I do not think that can be right. The reference in an earlier paragraph to an offer of £8,188.38 suggests that the intention was to repeat or reinstate the August offer, but in slightly less advantageous terms, since the sum offered was to include costs. I agree with Mr Plewman, however, that whatever its intention it did not constitute a CPR 36 offer because it did not comply with the requirements of CPR 36.2(2)(b) or (c). The only CPR 36 offer that the district judge had to consider, therefore, was the May offer. [31] That makes it unnecessary to decide whether, under CPR 36, a later offer in different terms automatically varies a previous offer or whether a party can make a number of different offers, all of which are concurrently open for acceptance. However, the point is one of some interest and importance and I shall therefore express my views on it. [32] Although, at first sight, it may seem anomalous that a party should be able to make several offers in different terms, all of which may at any one time be capable of acceptance, that does, in my view, reflect both the language and the purpose of CPR 36. As to the language, CPR 36 is quite clear as to the manner in which offers may be made, varied and withdrawn. It does not provide that only one offer may be available for acceptance at any one time, nor does it provide that a later offer is to be treated as varying or revoking a previous offer and it would be inconsistent with the recognition of CPR 36 as a self-contained code to read provisions of that kind into it. The purpose of CPR 36 is to promote settlement by encouraging sensible offers. As Mr Plewman pointed out, every CPR 36 offer carries with it certain consequences for costs linked to the date on which it is made and the financial implications vary as the proceedings progress. For example, an offer of £10,000 made at an early stage may be more valuable than an offer of £12,000 made at a later stage, depending on the amount of costs that have been incurred in the meantime and prevailing rates of interest. There is no reason why a party should not make more than one offer and leave it to the other to decide which, if any, to accept. Or, if it wishes, it may change the terms of the original offer, which then continues to stand in its varied form as from the date it was originally made. I accept that, in some cases, there could be argument concerning whether a later offer was intended to vary an earlier offer or to stand alongside it. The solution, however, is for parties and their legal advisers to follow the requirements of the rules carefully and to make their intentions clear. If they do so, problems of that kind should not arise. [33] Mr Plewman submitted that the district judge went wrong in this case because he failed to recognise that the effect of Mr and Mrs Reeves paying the plumbing bill was to increase the value of the May offer by £649.36. Once that is recognised, it could not be said that the judgment was more advantageous to the respondent than the May offer. Mrs Pigott, on the other hand, submitted that however one looked at it the respondent had clearly been successful and had obtained a judgment that was worth significantly more than the May offer. Accordingly, the district judge was right to hold that costs were in his discretion and, applying the principles set out in CPR 44, he was entitled to make an order giving the respondent at least part of its costs. [34] In any consideration of the effect on costs of an offer to settle it is necessary to compare the amount of the offer with the amount for which judgment has ultimately been obtained. Offers under CPR 36 are treated as inclusive of interest: see CPR 36.3(3). However, since interest is normally awarded in respect of most or all of the period for which the successful claimant has been kept out of its money, it is usually simpler to concentrate on the principal amount in dispute when deciding whether the claimant has recovered more than was available to it under the offer. Clearly, the longer proceedings go on, the more the successful claimant can expect to recover by way of interest, but the additional amount reflects nothing more than the additional time spent waiting to obtain judgment and any change in interest rates in the meantime. Accordingly, in cases where a sum is offered under CPR 36 or an offer is expressed to be inclusive of interest, in order to evaluate the offer it is necessary to take into account how long the principal sum has been outstanding and the rates of interest likely to be awarded by the court. |page:89| [35] In the course of his judgment, the district judge commented on the offer made by Mr and Mrs Reeves on 9 February 2007 to pay £8,023.14 and observed that it was not quite as close to the eventual judgment as might appear because part of it related to the plumbing bill that they later accepted to be due. He considered the true amount of the offer to be £7,373.78, and it seems clear that he viewed the May offer (which was in the same amount) in the same way. [36] The respondent eventually obtained judgment in the principal sum of £8,375.94 after deducting the various items of the counterclaim, including the sum of £1,000 awarded to Mr and Mrs Reeves by way of damages for the interference with the use and enjoyment of their home. (The latter claim was added by amendment shortly before the trial began.) At the time it was made, the May offer (which included interest) represented a principal sum of £7,789.46, allowing for interest at 4% for nine months. (Although the district judge awarded interest at a rate of 8%, that was, in my view, considerably higher than could have been expected. However, if one were to deduct interest at that rate, the principal sum would be reduced even further.) Viewed in that light, at the time it was made the May offer fell £1,586.48 short of the amount that the respondent was entitled to recover on its final account and £586.48 short of the amount for which it eventually obtained judgment, even after deducting the sum awarded to Mr and Mrs Reeves for interference with the use and enjoyment of their home. [37] Since the plumbing bill was still outstanding when the May offer was made, the district judge was wrong to deduct it when considering the value of that offer. The effect of paying the plumbing bill was to reduce the value of the claim against Mr and Mrs Reeves by £649.36, and to that extent it made the May offer, which they left open for acceptance, more attractive. None the less, the fact remains that, at the end of the day, the respondent recovered £661.38 more than the amount of the enhanced May offer, which, allowing for one year’s interest at 4% (the plumbing bill having been paid in August 2007), represented a principal sum of only £7,714.56. [38] That raises the question of whether the respondent failed to obtain a judgment more advantageous than the enhanced May offer within the meaning of CPR 36.14(1)(a). Mr Plewman submitted that, if one applies the principles set out in Carver v BAA plc [2008] EWCA Civ 412; [2009] 1 WLR 113, it did. [39] In Carver, this court considered the terms of CPR 36.14(1) and concluded that when asking itself whether the judgment was more advantageous to the claimant than the CPR 36 offer the court should take into account all aspects of the case, including emotional stress and financial factors, such as the incurring of unrecoverable costs. It therefore held that the judge below had been right in that case to look at the matter broadly and to take into account that an additional £51 obtained after trial was more than offset by the irrecoverable cost incurred by the claimant in continuing to contest the case for as long as she had. He was also entitled to take into account the added stress to her as she waited for the trial and the stress of the trial process itself. [40] The decision in Carver has been criticised by many commentators, and most recently by Jackson LJ in his Review of Civil Litigation Costs: Final Report, on the ground that it introduces an unwelcome degree of uncertainty into the operation of CPR 36. In my view, there is much force in that criticism. Moreover, I do not think that the decision can be confined to cases in which one party has made a CPR 36 offer that is nearly, but not quite, sufficient and the other has rejected it outright, as Jackson J (as he then was) held in Multiplex Constructions (UK) Ltd v Cleveland Bridge UK Ltd [2008] EWHC 2280 (TCC): see [71]. The decision in Carver is binding on us, but it should be recognised that what may be more important than the factors to be taken into account is the weight that is to be attached to them, and that remains a matter for the judge in each case. Moreover, when deciding how much weight to attach to any particular factor, I think it important to see things from the litigant’s perspective rather than to be too ready to impose the court’s own view of what is and is not to its advantage. That is particularly important when dealing with money claims, both because to recover judgment for more than what was offered is legitimately regarded as success and because a party faced with a CPR 36 offer ought to be entitled to evaluate it by reference to a rational assessment of its own case (including the risk of incurring unrecoverable costs if it presses on). It should not have to make a significant allowance for the court’s view of factors that are inherently difficult to value, such as the amount of unrecoverable costs and (even more so) the stress likely to be generated by pursuing the case to judgment. In a case where the offer has been beaten by a very small amount and there is clear evidence that the successful party has suffered serious adverse consequences as a result of pursuing the case to judgment, those factors may be sufficient to outweigh success in pure financial terms, but, in my view, such cases are likely to be rare. In most cases, obtaining judgment for an amount greater than the offer is likely to outweigh all other factors. [41] In the present case, we do not know on what basis the respondent has funded the litigation, and even if it is to be assumed that it will have incurred some unrecoverable costs, we have no evidence of their amount. Nor is there evidence of any other factors that might be set against the value of success in pure financial terms. In any event, having regard to the size of the claim and counter-claim, the extent to which the judgment exceeded even the enhanced May offer would, in my view, outweigh all but the most powerful factors that might be relied on by way of disadvantage. [42] The district judge proceeded on the basis that the judgment was more advantageous to the respondent than the CPR 36 offer and, for the reasons that I have already given (which differ to some extent from his), I think that he was right to do so. He was therefore faced with the task of exercising his discretion, taking into account the general rules on costs contained in CPR 44. The district judge was clearly exercised by the fact that for part of the period prior to the trial Mr and Mrs Reeves had acted sensibly and responsibly in seeking to settle the claim by making various offers and by the fact that the respondent had failed to respond in kind. However, a turning point came in January 2008, when Mr and Mrs Reeves withdrew all their existing CPR 36 offers other than the May offer. The district judge regarded that as a serious mistake and inferred that, at that point, they had decided that their set-off should at least equal the claim, as indeed was their case at trial. Several offers were made on both sides thereafter on different terms, but none at a level that made the failure to accept it culpable. [43] Quite correctly, the district judge took as his starting point the fact that the respondent had been successful, having recovered a substantial proportion of its claim in the face of a defence that, at the start of the trial, denied that anything was due. However, he considered that the respondent’s conduct during the early stages of the proceedings, in particular its dismissive response to sensible offers of settlement, called both for an expression of the court’s disapproval and for a reward for Mr and Mrs Reeves. None the less, he criticised them for changing their position in January 2008 and deciding to contest the claim in its entirety, which he considered had increased the costs of both parties without any real prospect of success. His solution was to deprive the respondent of its costs for the period up to 8 January 2008 and to order Mr and Mrs Reeves to pay only half of its costs thereafter. [44] Mr Plewman submitted that the judge’s decision fell outside the generous ambit of his discretion on costs. He submitted that he had failed to take into account the fact that the May offer had remained in place after 8 January 2008 and the likelihood that the bulk of the costs had been incurred in the period immediately prior to the trial and at the trial itself. [45] In my view, the judge’s order was well within the ambit of his discretion. For the reasons that I have given, I think that he was right to assess costs in accordance with the principles set out in CPR 44. Once that is accepted, it was for him to assess the conduct of the parties and how to reflect it in his award of costs. His own experience would have told him that the bulk of the costs were likely to have been incurred in the period immediately leading up to and at the trial and it was those costs that, in his view, the claimant had been obliged to incur as a result of the change in attitude on the part of Mr and Mrs Reeves. It is certainly unfortunate that, once again, litigation in respect of a relatively modest claim has led to the parties’ incurring substantial costs, but the |page:90| opportunity to avoid it was there on many occasions if only they had both been willing to grasp it. [46] In my view, there are no grounds for criticising the district judge’s decision and I would therefore dismiss this appeal. Giving the second judgment, Carnwath LJ said: [47] I agree. I add a brief comment on the judgment of this court in Carver v BAA plc [2008] EWCA Civ 412; [2009] 1 WLR 113, having regard to the criticisms to which Moore-Bick LJ has referred. [48] In Multiplex Constructions (UK) Ltd v Cleveland Bridge UK Ltd, Jackson J, in [71], interpreted [28] to [32] of that judgment as setting out: how the court ought to approach the matter in circumstances where: (a) one party has made an offer which was nearly but not quite sufficient; and (b) the other party has rejected that offer outright without any attempt to negotiate. [49] I agree with Moore-Bick LJ that it is not strictly possible to interpret the judgment so narrowly. In giving the leading judgment (with which the other members of the court agreed), Ward LJ treated the matter as one of construction of the new CPR 36. He saw that as intended to put money and non-money claims on the same footing. In the expression “more advantageous” (applied to both categories), the draftsman had used an “open-textured” phrase, which permitted, in para 30: a more wide-ranging review of all the facts and circumstances of the case in deciding whether the judgment, which is the fruit of the litigation, was worth the fight. The rationale lay in the modern approach exemplified in the CPR, under which compromise was encouraged in the interests both of the parties and of the administration of justice, in para 31: Litigation is time-consuming and it comes at a cost, emotional as well as financial. Those are, therefore, appropriate factors to take into account in deciding whether the battle was worth it. Money is not the sole governing criterion. These comments were expressed as an indication of the correct approach in law, which was then applied to the facts of the particular case in the following paragraph: 32. It follows that Judge Knight was correct in looking at the case broadly. He was entitled to take into account that the extra £51 gained was more than offset by the irrecoverable costs incurred by the claimant in continuing to contest the case for as long as she did. He was entitled to take into account the added stress to her as she waited for the trial and the stress of the trial process itself. No reasonable litigant would have embarked upon this campaign for a gain of £51. [50] For my part, with respect, I share the difficulty of some commentators in seeing how the court can sensibly make a judgment of such factors as pre-trial stress or other personal factors, as part of an objective assessment of overall advantage. However, although we are bound to hold that such “emotional” factors may be relevant, the practical application of that approach must be considered in context. The sole issue for the court in Carver was whether the judge had erred in law in taking such factors into account on the particular facts of that case. As I read the decision, it was because the potential gain was so small in that case, that the court felt able to uphold the judge’s approach. [51] Accordingly, the judgment in Carver should not be interpreted as opening the way to a wide ranging investigation of emotional and other factors in every case, even where the financial advantage is significant. I agree with Moore Bick LJ that in most cases success in financial terms will be the governing consideration. Thus, although Jackson J’s interpretation of Carver may not be supportable in strict legal terms, the practical effect of the proper approach to the exercise of the court’s discretion is likely to achieve the same result in most cases. Sir Anthony May P said: [52] I agree that each of these appeals should be dismissed for the reasons given by Moore-Bick LJ. Appeals dismissed.