In Lokhova v Longmuir [2017] EWHC 3152 (QB) Mr Justice Warby considered the court’s discretion when a claimant accepted a defendant’s Part 36 offer late.


  • A court had jurisdiction to vary the normal order for costs when a claimant accepted a Part 36 offer late.
  • On the facts of this case it was appropriate to vary the order so that the claimant paid the defendant’s costs on an indemnity basis for the period after the offer expired to the date of acceptance.


In a defamation action the claimant accepted a Part 36 offer late. The offer was made in November 2015, it was accepted on the 21st April 2017.  The offer was for £75,500. In the interim period the claimant had been the subject of a costs order failing a failed application to amend. That order was in the sum of £105,000.

The defendant made an application to vary the order as to costs.

  • So that the £75,500 could be set off against the costs liability of £105,000 (this was belatedly accepted by the claimant).
  • The claimant pay the costs between expiry of the offer and date of acceptance on an indemnity basis.


The defendant sought indemnity costs for the period between the date the offer expired and the eventual date of acceptance.

  1. The application is concerned with the defendant’s costs incurred in the period between the Expiry Date and the Acceptance Date, other than his costs of the amendment application. The issue is, in the end, quite a narrow one. It is this: did the claimant, in that period, behave in a way that went outside the norm, so as to justify an order for assessment on the indemnity basis?

  2. The phrase “outside the norm” is derived of course from the decision of the Court of Appeal in Excelsior Commercial and Industrial Holdings Ltd v Salisbury Hammer Aspden and Johnson [2002] EWCA Civ 879. The Court there held that costs are awarded on the indemnity basis rather than the standard basis only where there is something in the conduct of the action or the circumstances of the case in general which takes it outside the norm, in a way that justifies a non-standard order of this kind.

  3. The normal order in respect of what can be called “post-expiry costs”, when a Part 36 Offer is accepted late, is for the offeror to recover his costs assessed on the standard basis. The mere fact of late acceptance “cannot be a basis on which to award costs on the indemnity basis”Optical Express v Associated Newspapers Ltd [2017] EWHC 2707 (QB) [51]. That of course does not preclude an order for indemnity costs in respect of this period. The Court retains a discretion. I accept the submission of Mr Lewis that the Court should be cautious in the exercise of that discretion. There are strong policy reasons for adhering to the default principles of the Part 36 regime. It is important that Part 36 should remain a clear and simple mechanism by which the parties can resolve their dispute. That aim is undermined if the Court is too ready to depart from the ordinary rules that apply in this context. Speaking generally, it is desirable for claimants to have confidence that acceptance of an offer will bring a close to matters, on the usual terms.

  4. In my judgment, however, it is also of importance that the Court should be willing to examine the conduct of those who first refuse and then accept a Part 36 offer. If a claimant’s conduct in this respect is wholly or highly unreasonable, the Court should be prepared to contemplate an indemnity costs order. A readiness to do so should provide a proper incentive for the timely acceptance of fair and reasonable offers.

  5. The cases show that a failure by the claimant to offer any explanation for the belated acceptance of a Part 36 offer can be a proper basis for inferring such unreasonable conduct, at least if the failure is itself inadequately explained: see Jordan v MGN Ltd [2017] EWHC 1937 (Ch) [72] (Mann J) and Optical Express (above) at [51]. In the present case, however, the claimant has provided an explanation, which can be evaluated. It is not wholly satisfactory for the explanation to be provided only by the claimant’s current solicitors, and then only in a letter, without the reassurance of verification by the claimant. I also need to tread carefully because the explanation involves events before Seddons were involved, and criticism of third parties who are not represented before the court, and have not had an opportunity to answer the criticism, at least not in the present context. I am nonetheless satisfied that I can reach a conclusion on the claimant’s conduct which is safe, fair and reasonable.

  6. My conclusion is that the claimant’s behaviour in pressing on with her claims after the Expiry Date, and at all times up to the Acceptance Date, was highly unreasonable, and deserving of an order that she pay the costs at issue on the indemnity basis.



The judge rejected further arguments for the claimant. Firstly the claimant argued that the court had no jurisdiction to make any costs order in respect of the application.

The Set-Off Application

    1. Mr Lewis submits that I have no jurisdiction to make a costs order in respect of this application. He argues that acceptance of a Part 36 offer settles, indeed freezes, the costs position between the parties. Further and alternatively, he says that if there is no determination of an application then there can be no costs order. If the parties reach agreement and a consent order is made, then the opportunity to seek costs is lost.

    2. These points are intuitively unattractive and I do not see any merit in any of them. First, there are the provisions of CPR 36.14. That rule makes provision for the “Other effects of acceptance of a Part 36 offer”. This would seem to mean effects “other” than those prescribed by r 36.13. The rule provides, among other things, as follows:

“(1) If a Part 36 offer is accepted, the claim will be stayed.

(2) In the case of acceptance of a Part 36 offer which relates to the whole claim, the stay will be upon the terms of the offer.

(5) Any stay arising under this rule will not affect the power of the court—

(a) to enforce the terms of a Part 36 offer; or

(b) to deal with any question of costs (including interest on costs) relating to the proceedings….”

The effect of r 36.14(5)(b) seems to be to ensure that the court has full power over the costs of the proceedings, save to the extent that costs orders are prescribed by r 36.13.

    1. Mr Lewis’s other submissions fail on the facts. The order I made by consent on the Set-Off Application expressly provided that the costs should be reserved. The effect of that form of order is explained in 44PD 4.2: “The decision about costs is deferred to a later occasion, but if no later order is made the costs will be costs in the case.” This hearing is the “later occasion” to which the decision on costs has been deferred.

    2. As to the merits, the claimant has in my judgment no answer to the submission that she should be ordered to pay the costs of the Set-Off Application. She forced the defendant to make it, then conceded it. She was the unsuccessful party. That leaves the question of whether those costs should be assessed on the indemnity basis. I have no doubt that they should. Mr Hurst’s Annex G sets out the sequence of relevant events on and between 25 April and 2 May. It does so in what I am satisfied is an objective and suitably concise way. It covers three pages of single-spaced text. I remember much of it, as I had to devote quite a lot of time to reading and dealing with the claimant’s communications with the court. It would unnecessarily lengthen this judgment to recount much of this part of the history. It is enough to record that for the reasons summarised below, the claimant’s behaviour was in my judgment unreasonable to a very high degree, and unquestionably resulted in a considerable increase in the time and costs that had to be devoted to what in the end was a relatively simple issue, the merits of which were fairly obvious.

    3. She complained, unjustifiably, of “bombardment” by the defendant’s solicitors, whom she falsely accused of “abusing” and “bullying” her. She claimed that her partner, Mr North, would be seeking an injunction to restrain “harassment” of him by the defendant’s solicitors. She repeatedly demanded that the hearing date be put off, when that would clearly defeat its plainly expressed objective. She complained that she was “unwell”, but never gave any detail. Whilst claiming to be unable to address the application she was able to write lengthy emails to the court, one of them some 700 words long.

Other post-acceptance costs

    1. Other than the jurisdiction point with which I have dealt already, Mr Lewis really has no answer to this part of the defendant’s application. I shall have to deal with the costs of this application. Costs of the assessment process will fall to be dealt with as part of that process. It does seem clear to me that the other post-acceptance costs should be paid by the claimant. Review of the correspondence between the parties since the Acceptance Date reveals a significant failure by the claimant to engage with the complicated costs situation that, on any view, resulted from the belated acceptance of the Part 36 offer. It is just that, between the parties, the costs of this exercise should be met by the claimant. This is particularly so in view of my conclusions on the next issue.

Interim payment

    1. The defendant’s application notice seeks an order “pursuant to CPR 44.2(8) that the claimant shall pay the defendant a reasonable sum on account of the above costs within 14 days.” The claimant’s response to this aspect of the application is indicated by the passage cited above, from Seddons’ letter of 22 November 2017. Mr Lewis argues that there should be no interim payment as it cannot yet be known whether there will be a balance in favour of the defendant, once the parties’ bills are assessed. I disagree. In the light of my conclusions, and the sums presented on behalf of the parties so far, I can be confident that there will be a balance owing to the defendant.

    2. The costs position is conveniently summarised in Mr Hurst’s Annex A. There are three categories of sums due to the claimant: (1) the damages of £70,500; (2) the costs of an application dated 21 April 2016, awarded but yet to be assessed, which are said to be £3,651.20; and (3) the Claimant’s [other] Part 36 Costs. The claimant has not produced any bill for this last category, but I do have her costs budget from November 2016, signed by a partner in her solicitors. At that stage, the claimant’s incurred costs were said to be £210,742.90. A significant proportion of this will be irrecoverable. The largest single figure is for “Issue/pleadings”, for which £140,000 is claimed. It is obvious that a large proportion of that must relate to the failed amendment application and the costs of preparing the Reply, which was served shortly after the hearing. It is possible to discount a further £50,000, representing the costs of ADR in August 2016, over 8 months after the Expiry Date. A figure of £120,000 would represent if anything a generous assessment of the recoverable amount by way of Claimant’s Part 36 Costs. In round terms, for the purposes of assessing whether there should be any interim payment, I would allow the claimant £200,000 for costs and damages. There may be some interest to be allowed for, of course.

    3. On the defendant’s side, there is the crystallised liability for £105,000 under the Interim Payment Order. He claims a further £95,000 as the costs of the amendment application. Even if I assume that none of that will be recoverable, the sum total of the amounts claimed as Defendant’s Part 36 Costs, costs of the hearing on 8 December 2016, and costs of the Set-Off Application is some £285,954. It may be that these costs will be much reduced on assessment. But in order for the balance to end up in the claimant’s favour, they would have to be cut by as much as £190,000, or 66%. I cannot imagine that scenario, or anything close to it.

    4. Quite what the appropriate sum may be, by way of interim payment, is another matter on which I will hear argument.

Costs of this application

  1. Mr Lewis relied heavily on a submission that the defendant’s costs of this application, as set out in the statement of costs filed pursuant to the Practice Direction, are or may be wholly disproportionate to what is really at stake on the application. The costs are stated to be £60,000. Mr Lewis’s first point was that a sum of this order is wholly disproportionate to what is at stake on the application. There may or may not be merit in that argument but, as I have indicated, I cannot regard it as a basis on which to dismiss the application, or any part of it. I will hear argument on the allocation and quantum of costs after delivery of this judgment.