COST BITES 366: DEFENDANT LOCAL AUTHORITY LANDLORD TO PAY COSTS TO BE ASSESSED FOLLOWING TENANT’S ACCEPTANCE OF A PART 36 OFFER

March 20, 2026 · by · in Uncategorized

This is an interesting case both for landlord and tenant lawyers and for those interested in civil procedure.  The claimant brings an action for housing disrepair.  The defendant made a Part 36 offer of £1,000 for the claimant’s general damages. That offer indicated “The Defendant will pay the Claimant’s reasonable legal cots, to be assessed if not agreed”. The claimant then accepted that offer.  The defendant then argued that it should not be paying reasonable costs because the matter would have been allocated to the Small Claims Track. As we shall see, the Costs Judge, was not impressed…

 

“The conduct of the Defendant in this matter is such that, if permitted, future agreements would likely be imperilled due to a lack of trust between parties or otherwise result in the undesirable practice of horse-trading offers which either by pennies or a few pounds exceed the threshold to escape ‘would-be’ allocation to the Small Claims Track. … Further, the overriding objective is not best served by an approach to litigation which, in effect, requires Claimants to issue proceedings in order to achieve certainty as to costs recovery.”

 

KEY PRACTICE POINTS

It may be difficult to make a Part 36 offer which states that reasonable costs will be paid and then argue that Small Claims Track costs should apply. Not least Part 36 does not apply in the Small Claims Track.  Further, as this judgment shows, there are a number of reasons why the settlement sum may not be indicative of the true value of the case.

THE CASE

Smith v Wigan Borough Council [2026] EWHC 660 (SCCO), Costs Judge Nagalingam.

THE FACTS

The claimant is a tenant of the defendant. She brought an action for disrepair. It was agreed that the repairs would be carried out.   The defendant made a Part 36 offer of £1,000 for general damages and the claimant accepted that offer.  There was a provisional assessment of the claimant’s costs. The defendant applied to set aside that assessment on the grounds that the matter would have been referred to the Small Claims Track and payment should take place on that basis.

WHAT HAPPENED IN A NUTSHELL

The judge rejected the defendant’s argument.  The Part 36 offer clearly gave the impression that the defendant would be paying costs. Further it was unlikely that the matter would have been referred to the Small Claims Track in any event.

THE DEFENDANT’S OFFERS

 

52. 31/01/2025 – The Defendant advanced a Part 36 offer (Form N242A dated 30/01/2025) of £1,000 plus repairs and that “The Defendant will pay the Claimants reasonable legal costs, to be assessed if not agreed.” That offer was advanced in terms that it was a “a final offer and there will be no further offers forthcoming”.

 

53. 04/02/2025 – An e-mail from the Claimant to the Defendant which states “Thank you for clarifying in our phone call today that the offer you have made is for The defendant to pay the Claimants reasonable legal costs on a standard basis to be assessed if not agreed. I can confirm that my client has accepted your offer”.

 

  • 54. There is no doubt that the Defendant’s developing choice of words likely led to the Claimant assuming that no form of fixed costs argument would be advanced at the detailed assessment stage.

 

55. In all three formal Part 36 offers advanced, the Defendant used the language of “to be assessed if not agreed” regarding costs. Further, CPR 27.2(1)(g) provides that “Part 36 (offers to settle)… do not apply to small claims”.

 

56.The fact that the Defendant made three Part 36 offers, and made specific references to costs to be assessed if not agreed each time, might reasonably lead one to conclude that the Defendant acknowledged the likelihood of this case being allocated to the Fast Track had it been issued. That is certainly the conclusion the Claimant drew.

 

THE DEFENDANT’S OBJECTION TO COSTS

    1. Notwithstanding the phrasing of the Defendant’s offers, the points of dispute now plead CPR 46.13(3), which provides:

 

“Where the court is assessing costs on the standard basis of a claim which concluded without being allocated to a track, it may restrict those costs to costs that would have been allowed on the track to which the claim would have been allocated if allocation had taken place.”

THE JUDGE’S DECISION

 

  1. One firstly observes that the rule is discretionary, not mandatory. Secondly, the rule is not framed in terms which require that the settlement sum only be taken into account, but rather invites a retrospective hypothetical analysis using the language of “would have” and “if”. That analysis necessarily engages consideration of CPR 26.9(1)(b).
  1. CPR 26.9(1)(b) provides that “The small claims track is the normal track for –

(b) any claim which includes a claim by a tenant of residential premises against a landlord where—

(i) the tenant is seeking an order requiring the landlord to carry out repairs or other work to the premises (whether or not the tenant is also seeking some other remedy);

(ii) the cost of the repairs or other work to the premises is estimated to be not more than £1,000; and

(iii) the value of any other claim for damages is not more than £1,000″

  1. Mr Poole has helpfully indicated that the Claimant does not intend to pursue any form of argument that the cost of repairs or other work would have been in excess of £1,000.
  2. However, and notwithstanding the settlement sum, he contends that the value of the Claimant’s damages claim was more than £1,000.
  3. In support of this he relies on the correspondence passing between the parties, within which I observe the following.
  4. On 4 October 2024 submissions were made in writing citing the Claimant’s age and vulnerability. Reference was made to existing conditions including asthma, diabetes, depression and anxiety. The Claimant’s mobility was also cited, exacerbated by recent shoulder surgery.
  5. On 22 October 2024 the Defendant acknowledged that the Claimant was a “vulnerable tenant” and set out repair proposals which they accepted would take longer overall but provide better long-term outcomes. In doing so, one is bound to recognise that also meant a longer period of time until the issues complained of would be resolved.
  6. In a response of the same date, the Claimant cited the absence of any proposed start date for the suggested schedule of works. This is the context in which the Claimant’s proposal of £1,400 was advanced.
  7. On 21 November 2024, and in response to proposals dated 7 November 2024, the Claimant catalogued the additional inconvenience she had been put to in attempting to secure a start date for the proposed schedule of works. The Claimant also repeated her frustration, and made an improved offer of £1,200.
  8. The Defendant’s first Part 36 offer was in monetary terms but did not address the concerns about by which date the works would be completed. In response, the Claimant raised concerns that the Defendant appeared to be relying on a document which suggested the repairs and been carried out, when in fact that had not.
  9. In that regard, the initial offer of £750 could not reasonably be considered because the cause of action was still ongoing with no end date in sight. The Claimant set out an original date of notice of 4 December 2023 and calculated that the property would be in a state of disrepair for 70.57 weeks (having calculated what the time would be from 120 days after acceptance of any repair proposals).
  10. In this regard, I observe that a settlement of £1,000 to cover 70.57 weeks of disrepair would equate to compensation of £14.17 per week for every week endured in a state of disrepair, during which time undiscounted rent payments would still fall due.
  11. On 19 December 2024 the Defendant made their increased offer of £850, which if accepted included an agreement for the works to be completed within 120 days. This offer was rejected.
  12. In a detailed response dated 6 January 2025, the Claimant set out the Defendant’s conduct to date. In particular, the adequacy of the inspection carried out was challenged, as well as concerns as to conduct in terms of the Claimant feeling pressured to sign off on a report which she did not feel adequately reflected the state of her rental property.
  13. Accounting for the 120 day period in which to complete the repairs, the Claimant calculated the Defendant’s proposal covered a period of 74.14 weeks of sub-standard living conditions over which time rent of £5,931.20 was payable. The Claimant set out the argument that:

“Taking into account the 20% rent diminution we believe it would be very easy to argue in court considering the vulnerabilities of our client and events that have thusly occurred, and in the application of the Castle v Simmons uplift, that a total damages calculation of £1,304.86 would suffice”.

  1. Instead, proposals advanced were based on a reduced percentage diminution, thus the Claimant’s offer of £1,100. I also observe that offer was made at a time when the Defendant had still yet to either commence the repairs or confirm a commencement date.
  2. On 30 January 2025 the Defendant’s final Part 36 offer was advanced, which allowed the usual 21 days for acceptance and set out terms for the repair works to be completed within 56 days of acceptance (in contrast to earlier proposals of 120 days).
  3. As outlined above, that offer was accepted.
  4. One cannot fail to observe that from the moment the Claimant first raised her concerns to the time by which a schedule of works had not only been agreed but was properly timetabled to commence, the Claimant’s cause of action remained.
  5. The Claimant’s damages claim was at all times linked to the period from when her cause of action arose to when the repairs/improvements would be carried out.
  6. If one takes a starting point of 4 December 2023 to 56 days after 4 February 2025, it equates to 483 days or 69 weeks. That equates to compensation of £14.49 per week during the period of disrepair (out of the £80 per week the Claimant was liable to pay in rent during that period), i.e. a diminution of around 18%.
  7. What is not clear from any of the correspondence I have seen, nor from the points of dispute or any other documents the Defendant has filed, is a cogent explanation as to why I should accept that this is a claim which “would have” been allocated the Small Claims Track, save for the settlement sum agreed.
  8. CPR 46.13 is a rule which is specifically constructed to invite retrospective consideration. There is no reference to the settlement sum within the rule, and one observes that such a provision would likely have been included by the legislature were the settlement sum intended to be a definitive measure of retrospective allocation.
  9. Equally, CPR 46.13 does not reference “value” but in exercising my discretion, I am satisfied that I should not give the settlement sum the elevated status the Defendant would have me apply.
  10. Both parties agree, and in any event I would have been bound, that consideration of CPR 26.9(1)(b) is necessary as part of the exercise envisaged by CPR 46.13.
  11. CPR 26.9(1)(b) speaks of “the value(emphasis added) of any other claim for damages”.
  12. Where parties agree a financial dispute by way of compromise, the settlement sum may be one measure of value but it is not definitive. Context and circumstance are important.
  13. The colloquial “man of means” is far better placed to negotiate a favourable deal than a “man of straw”, because whilst the former can likely afford to wait for their compensation and hence hold out for the best bargain, the latter will come to a point earlier where their immediate needs outweigh the additional time and resources necessary to secure what a Claimant with deeper pockets may consider fair compensation.
  14. In the index matter, an elderly Claimant suffering with multiple health issues (and accepted by the Defendant as vulnerable) endured over a year of uncertainty and had no choice but to pay her full rent whilst living in sub-par conditions. She had already suffered diminution for a sustained period and prior to the Defendant’s final Part 36 offer was facing uncertainty as to when the repairs would be completed and a wait of at least 4 months beyond acceptance of any proposals.
  15. The terms ultimately accepted included an agreement to effect the repairs within 8 weeks, plus damages of £1,000. However, I am in no doubt that the facts and circumstances as at the date of acceptance were such that had proceedings instead been commenced, this claim would not have been allocated to the Small Claims Track on the basis that pursuant to CPR 26.9(1)(b)(iii) the Small Claims Track would not have been the normal track for a “claim which includes a claim by a tenant of residential premises against a landlord” where the valueof the claim for damages would have reasonably been pleaded at more than £1,000 based on the circumstances presented at the time.
  16. The Claimant accepted terms that brought her ordeal to an end, and crucially on terms where the Defendant at the very least strongly inferred no intention to argue costs on the basis of allocation to the Small Claims Track.
  17. The conduct of the Defendant in this matter is such that, if permitted, future agreements would likely be imperilled due to a lack of trust between parties or otherwise result in the undesirable practice of horse-trading offers which either by pennies or a few pounds exceed the threshold to escape ‘would-be’ allocation to the Small Claims Track.
  18. Further, the overriding objective is not best served by an approach to litigation which, in effect, requires Claimants to issue proceedings in order to achieve certainty as to costs recovery.
  19. Faced with compelling contemporaneous evidence from the Claimant as to value, and nothing from the Defendant save for the settlement sum, I am persuaded by the Claimant’s arguments and I am therefore not minded to interfere with the outcome of the provisional assessment carried out by Costs Officer Piggott.
  20. The provisional assessment is therefore final and the Defendant shall pay the Claimant’s costs of assessment, to now additionally include the costs of the oral review hearing, to be summarily assessed by way of a remote hearing with a time estimate of 30 minutes if not agreed.
  21. A short order reflecting the above shall accompany this judgment when handed down.