A DEFENDANT MAKES A PART 36 OFFER BUT IT CAN BE A “CLAIMANT’S” PART 36 OFFER WITH ALL THE USUAL CONSEQUENCES: A CASE ABOUT MISSING CASES

The judgment of HHJ Pearce (sitting as a High Court Judge) in The Huntsworth Wine Company Ltd v London City Bond Ltd [2022] EWHC 98 (comm) contains a detailed consideration of several aspects of the law of costs.  It is a case that requires consideration over several posts. Here we look at the judge’s decision in relation to an offer made, pre-action, by a party who brought a successful counterclaim. The judge held that the offer in question was a “claimant’s” offer and had the normal consequences of such an offer followed.

THE CASE

The claimant brought an action following losses following the theft of wine from warehouses owned by the defendant.  The claimant claimed the full costs of the wine at over £125,000. At trial the judge gave judgment for the claimant for £1,000 plus interest and judgment for the defendant for £3,622.34 plus interest. There was a net sum due from the claimant (Huntsworth) to the Defendant (LCB) of £2,837.53.

THE DEFENDANT’S PART 36 OFFER

There was a considerable debate as to whether the offer the defendant made was a valid Part 36 offer and whether it took effect as a “claimant’s” offer or a “defendant’s” offer.  On the facts of this case it was held to be a “claimant’s” offer.  Further the offer was a valid one, although it referred to proposed proceedings that did not take place, the claimant issuing proceedings and the defendant counterclaiming instead.

A.     THE ALLEGED PART 36 OFFER
20.               The offer upon which LCB seeks to rely as having effect under Part 36 is contained in a letter of 20 August 2019 at D4/90, which states:
We enclose with this letter our client’s Part 36 Offer to settle (1) its claim against your client for £3,662.34 in excise duty paid on behalf of your client for which it is entitled to be reimbursed, and (2) also all aspects of your client’s counterclaim against ours arising from or in connection with the theft of its wine from our client’s possession; under the terms of the contract between our clients, the maximum liability on the part of our client (if it exists) is limited to £1,000. The offer is to accept a net payment of £2,000 by your client to ours in settlement of all these matters.”
21.               The Part 36 offer itself is in Form N242A (the standard court form for a Part 36 offer) and is stated to relate to proceedings in the County Court in Aldershot. The claimant is named as LCB and the defendant as Huntsworth. It is stated to be a claimant’s Part 36 offer made by LCB to settle the whole of the claim and counterclaim, on terms that “London City Bond Ltd will accept the sum of £2,000.00 in aggregate settlement of (1) its claim for reimbursement of excise duty paid by it and (2) all aspects of Huntsworth Wine Company Ltd’s counterclaim for damages arising from loss of its wine from London City Bond Ltd’s possession” and is said to take into account all of “Huntsworth Wine Company Ltd’s claims as set out in Keystone’s letter of 13 June 2019 and draft particulars of claim enclosed with Keystone’s letter of 12 July 2019.”
22.               Prior to the making of this offer, Huntsworth had:
22.1           by letter dated 19 March 2019, intimated a claim relating to the theft of the wine:
22.2           served draft Particulars of Claim, describing itself as claimant and LCB as defendant on 12 July 2019;
22.3           served a Claimant’s Part 36 offer on 24 July 2019.
23.               Huntsworth contends that the result of this was that it was no open to LCB to make a Part 36 offer as if it were a claimant because it was not in fact the claimant. This is of significance because a claimant’s Part 36 offer has a different consequence than a defendant’s Part 36 offer:
23.1           If the court is considering the question of the consequences upon an offer having not been accepted but thereafter been beaten by a sum awarded on judgment, a defendant’s Part 36 offer will usually result in the offeror who obtains a judgment that is at least as advantageous to it as the offer being entitled to its costs on the standard basis from the expiry of the relevant period, whereas a claimant’s Part 36 offer will usually result in the offeror who obtains a judgment more advantageous than the offer being entitled to its costs on the indemnity basis, with additional sums by way of interest and an uplift on the judgment itself;
23.2           On the other hand, when looked at from the consequences of the offer being accepted, the acceptance of a defendant’s Part 36 offer will usually lead to the offeree being entitled to its cost up to the date of acceptance, whereas the acceptance of a claimant’s Part 36 offer will lead to the offeror being entitled to its costs on the standard basis up to the date of acceptance.
24.               CPR36.7 makes clear that a Part 36 offer may be made at any time, including before the commencement of proceedings. This opens the possibility that, as here, there may be a dispute as to whether a party is entitled to avail itself of the benefits of a claimant’s Part 36 offer since at the time of the offer being made there may be no clarity about who is the claimant.
25.               Let us consider hypothetical circumstances, not far removed from those of this case, to examine the implications of the parties’ submissions. X and Y are in a contractual relationship in which each deliver services to the other. Liabilities to pay for those services are constantly arising between the parties and it is common ground that each is entitled to set off the other’s indebtedness to it against any claim by the other. The parties reach a position where X contends that Y owes it £80,000, whereas Y concedes that it owes £50,000. On the other hand, Y contends that X owes it £90,000, whereas X contends that its indebtedness is only £25,000. The net effect of this is that, if X is right in both respects, the balance due from Y to it is £55,000 (£80,000 less £25,000), whereas if Y is right in both respects, the balance due from X to it is £40,000 (£90,000 less £50,000). X makes a claimant’s part 36 offer to settle the cross claims pursuant to which Y is required to pay £55,000. Various possibilities then arise:
25.1           Y accepts that offer. It is obliged to pay £55,000 plus X’s costs up to the date on which notice of acceptance is served.
25.2           Y does not accept the offer, the matter goes to trial and the judge finds for X on the amounts due. Y would be obliged to pay £55,000, together with such of the costs consequences of CPR 36.17 as were applied, which unless the court considered it unjust to do so would include costs on the indemnity basis from the date on which the period for accepting the offer applied, interest at a rate not exceeding 10% above base rate on some or all of the judgment sum and the indemnity costs from the date on which the period for accepting the offer applied and an additional amount of £5,500;
25.3           Y does not accept the offer, the matter goes to the trial and the judge finds that a net sum is due to X but less than that of its offer. All things being equal (and absent any other Part 36 or admissible offers) X would be likely to be ordered to pay Y’s costs on the standard basis.
25.4           Y does not accept the offer, the matter goes to trial and the judge finds that a net sum is due to Y. All things being equal (and again absent any other Part 36 or admissible offers), Y would expect to recover its costs on the standard basis.
26.               Let us now assume that Y had confidence in its case as to the sums due and wished to do its best to force settlement. It could make an offer to settle. If however the fact that X had already made a claimant’s offer to settle meant that Y could not equally do that, X would be limited either to making a defendant’s offer to settle or to making some other offer that it sought to pray in aid on a costs argument, broadly speaking what is usually called a Calderbank offer. It is however not easy to see that any such offer could give anything like the comfort that a claimant’s Part 36 offer made by Y could, nor the incentive to X to settle the claim. A defendant’s Part 36 offer does not in any circumstances give a presumptive right to indemnity costs. Whilst an appropriately worded offer other than under Part 36 might have that effect, it is difficult to see how such an offer could give the other benefits of CPR36.17.
27.               Thus, on Huntsworth’s argument, by being the first to make its Part 36 offer, X has gained the potential advantage of the application of CPR 36.17, whilst simultaneously depriving Y of that advantage. If the consequence of X making such an offer is that Y cannot do so, X could choose tactically to make an early Part 36 offer requiring payment by Y of a sum of money then later, if that offer were not accepted, make a further offer to pay a sum to Y, at all times being confident that Y could not take advantage of making a claimant’s Part 36 offer.
28.               Alternatively, if the ability to make a claimant’s Part 36 offer is dependent on being the party named as the claimant in proceedings (whether issued before or after the making of the offer), it might be a matter of chance who was entitled to take advantage of the features of a claimant’s Part 36 offer. As Lloyd LJ pointed out in AF v BG [2009] EWCA Civ, referred to further below, it would be odd if the nominal defendant could only make a claimant’s Part 36 offer by bringing separate proceedings for what in fact it claimed by way of counterclaim.
29.               In my judgment, it would be a most unfortunate interpretation of the rules if the question as to who could make a claimant’s Part 36 offer was determined simply by who made the first such offer or who issued proceedings where a counterclaim was probable. It is from this starting point that I examine Huntworth’s arguments.
30.               Huntworth’s first point is that the proceedings in which LCB purported to make a Part 36 offer were “fictional”. The offer assumed a claim for excise duty by LCB issued in the County Court at Aldershot with Huntsworth counterclaiming for losses as a result of the theft.
31.               I find it puzzling to say that the offer was made in “fictional proceedings”. It is true that the Part 36 offer contained details of a claim in the County Court at Aldershot that was never made. Presumably LCB contemplated that, if a claim were made, it would be suited to the County Court (which is clerly correct given the amounts in issue on LCB’s case) and it would appear that Aldershot was named as the Court purely because it was the first in an alphabetic drop down menu. Equally, it seems that Huntsworth, by its draft Particulars of Claim stated to be in the London Circuit Commercial Court, had intimated a claim to be brought when it made its Part 36 offer. But that claim was no less “fictional” than the claim intimated by LCB in the sense that it had not yet been brought. The only difference is that Huntworth’s claim in the London Circuit Commercial Court came to pass whereas LCB’s in the County Court did not. Given the amounts in issue on LCB’s analysis of the case, it is hardly surprising that they did not in fact issue proceedings before making a Part 36 offer and even then contemplated issuing in the County Court, but I do not see that this detracts from the point that, on their case, they were owed a net sum and were entitled to bring a claim.
32.               Second, Huntsworth draws attention to the comment of Flaux J as he then was in SuperGroup plc v JustEnough Software Corp [2014] EWHC 3620 (Comm) that “Part 36 offers are made in respect of proceedings which are extant.” That comment was made in the particular context of proceedings where notice of discontinuance had been served in respect of a claim. It could not properly be interpreted as meaning that there must be proceedings under way for a Part 36 offer to be made – if so, it would contradict the terms of CPR36.7.
33.               Third, CPR36.4(1) states that a Part 36 offer shall have the consequences set out “only in relation to the costs of the proceedings in respect of which it is made…” Since there never were proceedings in the County Court at Aldershot in which LCB was claimant and Huntsworth was defendant, Huntsworth contends that the offer could not encompass the costs of the subsequent proceedings in the London Circuit Commercial Court in which Huntsworth was claimant and LCB was defendant. However, CPR36.4 is expressed to relate to the application of Part 36 to appeals, not its application more generally, and CPR36.4(1) goes on after the passage relied on by Huntsworth to say “….and not in relation to the costs of any appeal from a decision in those proceedings.” If it is to be taken to mean that all Part 36 offers apply only once proceedings are under way, CPR36.7 would be of no effect because an offer could not be made in proceedings which were not yet under way. In my judgment, CPR36.4 has no relevance to the situation such as this where the court is not concerned with an appeal.
34.               Fourth, Huntsworth says that it cannot simply be a matter for the offeror to declare whether an offer is in fact a Claimant’s Part 36 offer. As Lloyd LJ said in AF v BG at paragraph 16, “Whether [a part 36 offer] is properly to be regarded as a claimant’s offer depends on the construction of the offer as a whole, not just on the statement by the offeror…” The author of Friston on Costs points out that the decision of Hildyard J in Procter & Gamble v Svenska Cellulosa Aktiebolget SCA [2012] EWHC 2839 appears to be to different effect, since at paragraph 55 of the judgment Hildyard J stated, “I do not think it is either required or permissible to go behind the formal status of the parties for the purposes of determining compliance with Part 36 and the prima facie effect of a compliant offer: it seems to me that for those purposes the description in the record is conclusive.” However, it is not apparent that the decision in AF v BG was considered by Hildyard J. He was not concerned with the particular circumstance here, namely whether a party who is named as a defendant in proceedings can make a claimant’s Part 36 offer but rather the situation where it I contended that a nominal claimant who has made a Part 36 offer is in fact in reality the defendant. In rejecting the argument that someone who was nominally the claimant could not make a Part 36 offer, Hildyard J was not it seems to me departing from the principle stated by Lloyd LJ AF v BG at paragraph 16. If he were doing so, I would view Procter & Gamble v Svenska Cellulosa Aktiebolget SCA as decided per incuriam and would not follow it.
35.               It is this last point that leads to the proper examination of the issues in the case. In AF v BG, the Court of Appeal considered an offer made by a defendant who, at the time of the offer, had not brought a counterclaim within the proceedings. Nevertheless, the offer asserted that he had a counterclaim which he intended to bring by way of amendment and offered to settle both the existing claim and the intended counterclaim by the defendant accepting payment of a sum of money in full and final settlement of both claims. The offer stated that it was intended to have the consequences of a claimant’s Part 36 offer and that in particular, if accepted, the offeree would be liable for the defendant’s costs up to the date of settlement and that, if the defendant subsequently obtained a judgment at least as advantageous to him as the offer, he would seek costs on the indemnity basis and interest on damages at 10% above base rate.
36.               The Court of Appeal held:
36.1           The offer stated that it was intended to have the consequences of a Part 36 as required by the terms of what was then CPR 36.2(2)(b) (now CPR36.5(1)(b)).
36.2           The offer clearly dealt with the potential consequences of the defendant obtaining a judgment more advantageous than the offer, in terms that were consistent only with it being a claimant’s Part 36 offer.
36.3           The offer expressly related both to the claim and the proposed counterclaim;
36.4           The proposed counterclaim was a genuine claim whose nature was clear and which was for a stated amount, “albeit a relatively modest amount compared to the um that was at stake on the claim.”
36.5           The offer stated that acceptance would constitute full and final acceptance both of the whole of the claim and the counterclaim.
37.               In my judgment, all of these are features are necessary or at least desirable for an offer to be interpreted as a claimant’s Part 36 offer. Indeed the first would be a requirement of any effective Part 36 offer. But it is notable that the Court of Appeal was not deterred from a finding that the offer was a claimant’s Part 36 offer, even though the offeror was not merely anticipated to be a defendant in due course (Huntsworth’s argument as to LCB’s position on the facts here) but actually was the defendant in the litigation and had not even made a counterclaim at the time of the offer. This demonstrates that the emphasis is to be laid not on a particular party’s title within the litigation but rather on their role in making the offer – in that case a party who said that, when his counterclaim was before the court, he would recover a greater sum than the party named as claimant in the action was claiming.
38.               The author of Friston on Costs at paragraph 17.38 postulates a list of features that may be relevant to whether an offer is in truth a claimant’s Part 36 offer:
·         “The relevant facts of the litigation and, in particular, the perceived status of the offeror given the way in which the competing claims were presented at the time that the offer was made”:
·         “The label attached to the offer (either expressly, or by necessary implication), and whether any clarification was made about its effect (such as ‘for the avoidance of doubt…’)”;
·         “Whether the offer is to pay a net amount of damages or debt or to receive a net amount”;
·         “Whether the offer makes reference to paying or receiving costs in the event of it being accepted.”
·         “Whether the offer refers to the costs consequences of non-acceptance in terms that have the hallmarks of being a defendant’s offer or a claimant’s offer and, in particular, whether it makes mention of any of the claimant-only benefits of making a Part offer…”
·         “Whether the offer, by its terms is incompatible with it being either a claimant’s offer or a defendant’s offer.”
39.               This list contains many of the same points made Lloyd LJ in AF v BG as well as the judgment of Coulson J as he then was in Van Oord Ltd v Allseas UK Ltd [2015] EWHC 3385 (TCC). It represents a useful list of factors for the court to have in mind so long as the emphasis in the first bullet point is the perceived status of the offeror in making the offer, not the offeror’s perceived status more generally in the litigation, for example whether the offeror is named as claimant or defendant.
40.               Here, most of these factors points towards this being treated as claimant’s Part 36 offer:
40.1           At the time that the offer was made, LCB expressed its case to be that it was entitled to £3,662.34 by ways of excise duty from Huntsworth and that its maximum liability to Huntsworth for the theft was £1,000. These were the two claims that were subsequently made in the litigation. LCB asserting (rightly in the event) that there was a net sum due and owing from Huntsworth to it;
40.2           The offer is said to be a claimant’s Part 36 offer and names LCB as claimant and Huntsworth as defendant;
40.3           The offer was to receive a net sum, namely £2,000;
40.4           The offer refers to a liability on Huntsworth, as the defendant in the notice of offer, to pay the costs of LCB, as claimant, if the offer is accepted within 21 days of service of the notice;
40.5           The offer is incompatible with it being a defendant’s offer since, if it were, the statement that “if the offer is accepted within 21 days of service of this notice, the defendant will be liable for the claimant’s costs in accordance with rule 36.1” would not make sense given the definition of LCB as the claimant and Huntsworth as the defendant.
41.               The factors against that interpretation are far weaker:
41.1           Huntsworth had itself already made a claimant’s Part 36 offer. However, this cannot in my judgment bear much weight, given the problems identified above if parties are simply able to assert their status as claimant for all purposes by being the first to make such an offer.
41.2           The offer does not deal with consequences of non acceptance. A statement such as that made by Huntsworth in its offer of 24 July 2019, to the effect that, if the offer were not accepted and Huntsworth obtained a judgment which was equal to or more advantageous than the offer, Huntsworth would seek to rely on CPR 36.17 to recover costs on the indemnity basis, with enhanced interest and an enhanced award of damages, would certainly have put the nature of LCB’s offer beyond dispute. However, I do not see it absence as being fatal to the interpretation of the offer as a claimant’s Part 36 offer where, as here, the offer is only consistent with being such an offer. No one looking at this offer could consider it to be intended to be anything other than a claimant’s Part 36 offer, given that it involved a net sum being payable to LCB and referred to Huntsworth paying LCB’s cost if it were accepted.
42.               In its solicitors’ letter of 3 September 2019, Huntsworth argues, on similar lines to the points advance now, that the offer was not a valid Part 36 offer at all. The letter accuses LCB of misdescribing the claim and abusing the process of the court. It also asserts that there is no genuine dispute relating to the claim for excise duty. However, in my judgment the letter is wrong in all of these respects:
42.1           For reasons identified above, it was open to LCB to make a claimant’s Part 36 offer;
42.2           The assertion that it was not open to LCB to describe itself as claimant and Huntsworth as defendant is simply wrong and involves misunderstanding of the relevant law, as is apparent from the judgment of the Court of Appeal in AF v BG, given that the party who was constituted as the defendant in ongoing proceedings was entitled to make a claimant’s Part 36 offer.
42.3           The correspondence passing between the parties shows that there as a genuine dispute about the liability for Huntsworth to reimburse LCB for excise duty, an issue that was pleaded and determined in the trial.
43.               I note the assertion by Huntsworth at paragraph 7 of its submissions that
Condoning D’s approach would impermissibly and incoherently contort the Part 36 regime: (a) it would permit a defendant to avoid paying costs that are properly due to a claimant upon acceptance of a Part 36 offer; (b) worse still, it would permit a defendant to obtain costs benefits which properly belong to a claimant upon acceptance of a Part 36 offer; and (c) it would enable a defendant to effectively select whichever costs consequences it preferred following judgment, irrespective of its status in the litigation.
All three points are wrong:
43.1           If in fact the balance of monies due between the parties led to a net sum being due and owing to LCB prior to the issue of proceedings (the result of my findings in this case), there is nothing remotely wrong in permitting LCB to recover its costs of recovering that net balance.
43.2           To suggest that this would permit a defendant to take advantage of a benefit that should only belong to a clamant is to confuse what a party is called (whether by themselves or the opposing party) with who the true claimant in the case is.
43.3           The result is not to enable a defendant to select the costs consequences it prefers. LCB chose to make an offer that it said reflected the true situation namely that money was due and owing to it in the event, it was proved right. in being permitted to make a costs offer which properly reflects what ought to be the burden of costs in such a situation cannot be described as permitting it to choose the costs consequences it prefers.
44.               I also note the citation by Huntsworth of two other pieces of material:
44.1           A passage from Zukerman on Civil Procedure, Principle of Practice:
“…Where the dispute concerns a number of distinct matters (such as claims and counterclaims), the offer must clearly identify the matters to which it relates. As long as these basic requirements are complied with, the offer will be valid as a CPR 36 offer, even if the offeree considers that it contains insufficient information for them to make an informed commercial decision as to whether to accept it.”
44.2           Note 3 to the guidance to Form 242A:
1.       This form may be used to settle the whole or part of any issue that arises in a claim, counter claim, other additional claim, appeal or cross appeal.
3.       When used to make a Part 36 offer in respect of a counterclaim or other additional claim or a cross-appeal in certain appeal proceedings:
§  the party bringing the counterclaim, additional claim or cross-appeal can make (a) a claimant’s offer on such counterclaim, additional claim or cross-appeal; or (b) a defendant’s offer on the claim or appeal; and
§  the party bringing the original claim or appeal can make (a) a claimant’s offer on such claim or appeal; or (b) a defendant’s offer on the counterclaim or cross-appeal.
In any case the offeror should make plain whether the offer takes into account any adverse claim. For example, when making an offer on a claim, state whether it takes into account the counterclaim. Equally when making an offer on a counterclaim, state whether it takes into account the claim.(See rules 36.2(3), 20.2 & 20.3 in respect of counterclaims and other additional claims. See rules 36.2(3) and 36.4 in respect of cross-appeals.)
45.               The passage from Zuckerman supports the proposition that the key to the making of Part 36 offers is clarity as to what the effect of the offer is. The Notes to Form 242A support the conclusion that, so long as there is sufficient clarity, a defendant bringing a counterclaim can make a claimant’s offer on the counterclaim, provided that such offer makes clear whether it takes into account the adverse claim. LCB says that this requirement is met here because it is quite apparent that it was making a Part 36 offer based on its claim for duty, giving credit for Huntsworth’s claim for damages arising from the loss of the wine.
46.               For these reasons, I am satisfied that:
46.1           It was open to LCB to make a claimant’s Part offer in circumstances in which it contended that Huntsworth’s liability to it exceeded any liability it may have to Huntsworth;
46.2           The offer made by LCB on 20 August 2019 was a valid claimant’s Part 36 offer within the meaning of CPR Part 36.
47.               The “relevant period” for acceptance of that offer is said to have expired on 13 September 2019, that is to say 24 days later than the date of the offer. That date has not been disputed and I shall for the remainder of this judgment use the phrase “relevant period” to mean the period up until 13 September 2019.
48.               It is clear that LCB has obtained a judgment that is more favourable than the offer that it made since, even without considering the issue of interest, the net sum payable to it under the judgment exceeds £2,000. It follows that CPR36.17(1)(b) applies (treating LCB as the claimant and Huntsworth as the defendant for these purposes) and, pursuant to CPR37.17(4), the court must make the various orders there specified unless it considers it unjust to do so.
49.               Huntsworth draws attention to the fact that the fact that a party has obtained a judgment more advantageous to it than a Part 36 offer it made is not in and of itself a bar to the court making an issues based costs order. This is apparent from paragraph 38 of the judgment of Stanley Burnton LJ in Webb v Liverpool Women’s NHS Foundation Trust [2016] EWCA Civ 365. LCB notes the wording of CPR 36.1(1) which states “This Part contains a self-contained procedural coder about offers to settle made pursuant to the procedure set out in this Part…” Relying on this rule, LCB asserts in its submissions that “issue based costs can therefore only apply prior to the relevant period.” I do not accept this to be correct. The amendment to CPR 36 introducing this wording had come into force prior to the Court of Appeal giving judgment in Webb v Liverpool. Whilst that court was concerned with the previous wording of the rule, Stanley Burnton LJ referred to this very principle at the beginning of paragraph 38 in which he said that “Part 36 does not preclude the making of an issue-based or proportionate costs order.” I can see no basis for concluding that his statement of principle about the power of the court to make such orders does not apply with equal force since as before the 2015 amendment that introduced the current wording of CPR36.1(1).
50.               However as Stanley Burnton LJ went on to state in paragraph 38 of his judgment in Webb v Liverpool:
“a successful claimant is to be deprived of all or part of her costs only if the court considers that would be unjust for her to be awarded all or that part of her costs. That decision falls to be made having regard to “all the circumstances of the case”. In exercising its discretion, the Court must take into account that the unsuccessful defendant could have avoided the costs of the trial if it had accepted the claimant’s Part 36 offer, as it could and should have done.”
Thereafter Stanley Burnton LJ cited with approval the judgment of Briggs J as he then was in Smith v Trafford Housing Trust [2012] EWHC 3320 (CH):
“13. … For present purposes, the principles which I derive from the authorities are as follows:
a) The question is not whether it was reasonable for the claimant to refuse the offer. Rather, the question is whether, having regard to all the circumstances and looking at the matter as it affects both parties, an order that the claimant should pay the costs would be unjust: see Matthews v Metal Improvements Co. Inc [2007] EWCA Civ 215, per Stanley Burnton J (sitting as an additional judge of the Court of Appeal) at paragraph 32.
b) Each case will turn on its own circumstances, but the court should be trying to assess “who in reality is the unsuccessful party and who has been responsible for the fact that costs have been incurred which should not have been”: see Factortame v Secretary of State [2002] EWCA Civ 22, per Walker LJ at paragraph 27.
c) The court is not constrained by the list of potentially relevant factors in Part 36.14(4) to have regard only to the circumstances of the making of the offer or the provision or otherwise of relevant information in relation to it. There is no limit to the types of circumstances which may, in a particular case, make it unjust that the ordinary consequences set out in Part 36.14 should follow: see Lilleyman v Lilleyman (judgment on costs) [2012] EWHC 1056 (Ch) at paragraph 16.
d) Nonetheless, the court does not have an unfettered discretion to depart from the ordinary cost consequences set out in Part 36.14. The burden on a claimant who has failed to beat the defendant’s Part 36 offer to show injustice is a formidable obstacle to the obtaining of a different costs order. If that were not so, then the salutary purpose of Part 36, in promoting compromise and the avoidance of unnecessary expenditure of costs and court time, would be undermined.”
51.               The question then is whether it would be “unjust” to make the orders specified by CPR 36.17. In considering the argument that it would be unjust to make such an order in respect of the offeror’s costs, but that rather the court should consider making an issue based costs order, I bear in mind Lord Woolf MR’s comment in AEI Rediffusion Music Ltd v Phonographic Performance Limited [1999] 1 WLR 1507 at pp1522-1523:
“The most significant change of emphasis of the new Rules (sc relating to costs) is to require courts to be more ready to make separate orders which reflect the outcome of different issues. In doing this the new Rules are reflecting a change of practice which has already started. It is now clear that too robust an application of the “follow the event principle” encourages litigants to increase the costs of litigation, since it discourages litigants from being selective as to the points they take. If you recover all your costs as long as you win, you are encouraged to leave no stone unturned in your effort to do so.”
52.               In F & C Alternative Investment (Holdings) Ltd v Barthelemy (No. 3) [2013] 1 WLR 548, Davies LJ made the point that, where a party chooses to pursue to trial issues on which it is ultimately unsuccessful at considerable expense, it may well be that the unsuccessful party should expect to have to pay the costs of that issue. That however was in the context of an offer that Davies LJ held was not a Part 36 offer. For that reason, he was not concerned with the point made by Briggs J at paragraph 13(d) of his judgment in Smith v Trafford Housing Trust as to the effect of a Part 36 and the “formidable obstacle” to a party who has failed to beat an opponent’s Part 36 offer being able to show such injustice.
53.               It is of course true that Huntsworth succeeded on some of the issues in the case. I agree that it was the successful party on issues 2, 3 and 5. (LCB is correct in its responsive costs submissions to say that issue 5 was not identified in the agreed list of issues between the parties; however by its closing submissions at paragraph 77.2, LCB put in issue whether in fact the exclusion of liability clause applied.) Further, it is correct that I was persuaded by Huntsworth’s evidence on issue 10, the value of the wine and that it can be said to have succeeded on that issue. It is questionable that it can be said to have won on issue 9. LCB was found able to invoke the limitation of liability clause in respect of the liability that Huntsworth was able to demonstrate. A separate issue (which I did not have to determine) was whether, if LCB had been found vicariously liable of its employees who were complicit in the theft, the limitation of liability clause would have applied. As is apparent from paragraph 224 of the judgment, I declined to determine this issue on the ground that it as entirely academic given my other findings. At footnote 3 of its submissions, Huntsworth said that LCB only succeeded on Issue 9 parasitic on Issue 4, Huntsworth otherwise succeeding on the issue. It would be more accurate to say that LCB succeed on issue 9 parasitic to issue 4, but that if it had not done so, the issue was otherwise unresolved.
54.               Equally however there is some force in LCB’s criticism of Huntsworth for taking several issues on which it was not successful, in particular in the causes of action of fraudulent misrepresent-ation/misstatement.
55.               In any event, the overall picture here is that LCB correctly identified in its first letter prior to making its Part 36 offer that its liability could not exceed £1,000 on the facts of the case (see letter from LCB’s solicitors dated 21 March 2019). Whilst it is true that LCB disputed whether it was liable at all, it could not be unjust to order Huntsworth to pay the costs of the action (or to suffer any of the other adverse consequences of an effective claimant’s Part 36 offer) merely because, in reaching the conclusion that Huntworth’s position was right on the issues of excise duty and the limitation of liability, the court considered a variety of other issues, some of which were determined favourably to LCB and some of which were not. LCB’s offer exactly reflected my determination of the case. LCB is clearly the successful party in having that offer vindicated. If the opposite question is asked, who was responsible for costs being incurred after that offer was made, the answer is obvious: Huntsworth was responsible because it did not accept an offer that in fact properly reflected the liabilities between the parties.
56.               To depart readily from the proposition that the party who makes an effective Part 36 offer should have the benefits of the provisions of Part 36 risks undermining the “salutary purpose” of that provision referred to in Smith v Trafford Housing Trust. Huntsworth could and should have accepted LCB’s Part 36 offer. In my judgment, it would not be unjust for Part 36 to have its normal consequences simply on the ground that LCB was not successful on all of the issues at trial.
57.               I deal below with other relevant aspects of the discretion as to costs, in particular the failure of LCB to engage in mediation at an early stage in the litigation. None of these factors lead me to the conclusion that it would be unjust to depart from the usual order where a party has done better than a claimant’s Part 36 offer.

WHO WAS THE SUCCESSFUL PARTY?

The judge then considered the question of who was the successful party. It was held to be the defendant.

B.      WHO WAS THE SUCCESSFUL PARTY?
58.               Given my findings relating to the Part 36 offer, the issue as to who was the successful party is one that arises solely in respect of costs incurred up to and including 12 September 2019. The claim brought by Huntsworth was stated in the Claim Form to be for in excess of £175,000. The claim comprised the alleged value of the wine stolen (in the region of £125,000) together with unquantified damages for loss of profits arising from the loss of the wine, damages for loss of reputation, damages suffered as a result of the cancelation of a business trip and additional VAT. The valuation, inclusive of the consequential losses, was stated in Huntsworth’s skeleton argument of to 16 March 2021 to be estimated at £206,408.25 and LCB take the value of the claim to be around £200,000. The majority of the claim for unquantified losses was struck out by His Honour Judge Bird on 17 March 2021, and at trial only the claim for the value of the wine stolen and the claim for VAT were extant. Nevertheless, the sum of £1,000 awarded on the claim was well less than 1% of the value of the claim as originally brought by Huntsworth and less than 0.5% of the high point of Huntsworth’s valuation of the claim.
59.               LCB is able to contend that it is in substance the successful party because it is Holdsworth who have had to “write the cheque” (in the language of some of the authorities). Even in so far as Holdsworth was successful in its claim, it recovered only a small percentage of the sum that it sought. In such cases, as Sir Thomas Bingham MR put it in Roache v News Group Newspapers Ltd [1998] EMLR 161 at pp168-169, “The judge must look closely at the facts of the particular case before him and ask: who, as a matter of substance and reality, has won? Has the plaintiff won anything of value which he could not have won without fighting the action through to a finish? Has the defendant substantially denied the plaintiff the prize which the plaintiff fought the action to win?”
60.               Moreover, the only Part 36 offer made by Huntsworth was in the sum of £120,500 plus costs. This appears to support the conclusion that Huntsworth was always fighting the action with a view to winning the prize of the value of the stolen wine.
61.               The case is similar to Pepe’s Piri Ltd v Jinuaid [2019] EWHC 2097 and [2019] EWHC 2769 (judgment on costs) in which a claimant who had claimed in excess of £500,000 at trial received £2,523.07. The trial Judge, Mr Mathew Gullick sitting as a Deputy High Court Judge said of this that “…it is difficult to conceive that a claim for the sum ultimately recovered – which is well below the threshold for the small claims track, in which only very limited costs are recoverable (see CPR 27.14 ) – would ever have been advanced by a reasonable litigant in the position of the Claimants.” The same applies with equal if not greater force in circumstances where, ignoring a counterclaim, Huntsworth sought around £125,000 at trial and recovered £1,000, but where, bringing the counterclaim into the equation, the net sum due from Huntsworth to LCB exceeded even that modest sum.
62.               In my judgment, it is clear that, for the purposes of CPR Part 44, LCB was the winning party in this trial, given that it defeated a claim for just short of £125,000 and succeeded on its counter-claim.