Gibbon v Manchester City Council

These appeals have been heard together because they raise similar issues concerning the interpretation and effect of Part 36 of the Civil Procedure Rules. Part 36 contains provisions which enable either party to the proceedings to make an offer to settle the dispute which has far-reaching consequences if the case goes to trial and the other party fails to obtain a judgment which is more advantageous to him than the offer. The central question raised on this appeal is whether Part 36 embodies a self-contained code or is subject to the general law of offer and acceptance insofar as it fails expressly to provide otherwise.

Part 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 his claim with protection in relation to 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.

The following are the most important provisions of Part 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.”

It can be seen from Part 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 which have specific consequences in relation to 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 Part 36 offer or a Part 36 offer has been bettered the judge has a broad discretion in dealing with costs within the framework provided by Part 44. Rule 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 which falls outside the terms of Part 36. In seeking to settle the proceedings, therefore, parties are not bound to make use of the mechanism provided by Part 36, but if they wish to take advantage of the particular consequences for costs and other matters that flow from making a Part 36 offer, in relation to which the court’s discretion is much more confined, they must follow its requirements.

Part 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 relation to costs; in others they do not; for example, rule 36.14(3) allows the court to award a claimant who has obtained a judgment at least as advantageous as his offer interest on the sum for which he 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.

Basic concepts of offer and acceptance clearly underpin Part 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 Part 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 which must be understood and followed by ordinary citizens who wish to conduct their own litigation. In my view, Part 36 was drafted with these considerations in mind and is to be read and understood according to its terms without importing other rules derived from the general law, save where that was clearly intended.

With these general observations in mind I turn to consider the two appeals before us.

In December 2007 Mrs. Gibbon was injured when she tripped and fell in a playground for which Manchester City Council was responsible. She brought proceedings against the Council, which admitted liability.

On 10^th November 2008 the Council made a Part 36 offer to Mrs. Gibbon of £1,150 in settlement of her claim. She rejected that offer and on 18^th November made a Part 36 offer in response, offering to accept £2,500 plus repayment of any sums recoverable by the Compensation Recovery Unit and costs.

On 24^th November the Council increased its offer to £1,500. The solicitors acting for Mrs. Gibbon rejected that offer, indicating that they expected something more generous. However, they did not withdraw the Part 36 offer made on her behalf on 18^th November.

On 7^th January 2009 the Council increased its offer to £2,500, but on 18^th February Mrs. Gibbon’s solicitors again rejected it. Once again, however, they took no steps to withdraw the offer made on 18^th November.

On 26^th February the Council, mindful of the fact that the offer made on 18^th November had not been withdrawn, wrote to Mrs. Gibbon’s solicitors formally accepting that offer. On receipt of that letter the solicitors promptly purported to withdraw the offer and again rejected the Council’s offer of £2,500, but the Council was determined to stick to its position. It made an application for a declaration that it was entitled to accept the offer made on 18^th November and an order for judgment to be entered to reflect that fact that it had done so.

The application was heard by District Judge Richmond. He held that, since the offer made on 18^th November had not been formally withdrawn, the Council was 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.

Mrs. Gibbon’s appeal was heard by His Honour Judge Holman. He held that Part 36 is quite explicit and puts the onus on the offeror to take positive steps to withdraw any existing offer if he does not wish it to be available for acceptance. He therefore dismissed the appeal.

Dr. Friston, who appeared on behalf of Mrs. Gibbon, submitted that, although no formal steps were taken by her solicitors to withdraw the Part 36 offer made on 18^th November, its rejection by the Council on 24^th November 2008 rendered it incapable of acceptance thereafter in accordance with general principles of law. Alternatively, he submitted that the solicitors’ letter of 18^th 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 Part 36 offer sufficient to satisfy the requirements of rule 36.3(7). The offer was therefore no longer open for acceptance.

In my view, attractive though these arguments are, they cannot be reconciled with the clear language of Part 36, or indeed with the scheme which it embodies. Rule 36.9(2) is quite clear: a Part 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 which is contrary to the general position at common law. The rules state clearly how a Part 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 Part 36, which proceeds on the footing that the offer is on the table and available for acceptance until the offeror himself chooses to withdraw it. There are good reasons for that. An offer which appears unattractive when made, and which is therefore rejected, may become more attractive as the proceedings progress and the parties reassess the strength of their respective cases. A defendant who chooses to leave his offer on the table may tempt the claimant into accepting it, with the benefit to himself of the consequences for costs of an offer made at an early stage. Part 36 allows a defendant (or for that matter a claimant) to decide whether to leave his offer open for acceptance or to withdraw it and make another offer later. To import into Part 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 about whether the offer had been rejected in any given case so as 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 Part 36 offer does not render it incapable of later acceptance. In my view he was right to do so.

Nor do I think that the letter of 18^th February 2009 can be read as containing an implied withdrawal of the Part 36 offer. Rule 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 which 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 Part 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 about whether the notice fulfils the requirements of the rule. However, that is a different question. The letter of 18^th February 2009 did not refer to the Part 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 rule 36.3(7).

In some cases the demands of clarity and certainty in the operation of Part 36 may appear to produce injustice and I see the force of Dr. Friston’s submission that Mrs. Gibbon’s solicitors had made it clear that she was not willing to accept £2,500 to settle her claim. Her difficulty, however, is that a Part 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.

In January 2006 the defendants, Mr. and Mrs. Reeves, entered into a contract with a building contractor, the claimant, L G Blower Specialist Bricklayer Ltd, to carry out improvements to their home, including the construction of a two-storey extension, re-wiring 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 claimant’s work. On 20^th July 2006 the claimant 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.

Mr. and Mrs. Reeves sought to set off against the claimant’s final invoice various amounts which they said represented the loss they had suffered as a result of the claimant’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 claimant was unwilling to accept that the defendants 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 the Shrewsbury County Court claiming £15,793.06. They made a counterclaim in the sum of £9,160.60 together with an unquantified claim for damages for breach of contract.

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^nd February 2007 claiming (at that time) £15,003.41 they made an offer on 9^th February to pay £8,023.14 and tendered a cheque in that amount. However, that was not acceptable to the claimant. The claim form was issued on 30^th March and served on 6^th April 2007. On 15^th May Mr. and Mrs. Reeves made a Part 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”.

Part of the claimant’s bill related to some plumbing work for which it sought payment of £649.36. On 6^th August 2007 Mr. and Mrs. Reeves paid that item in full, thereby reducing the claim against them.

On 28^th August Mr. and Mrs. Reeves made another Part 36 offer, this time of £8,188.38. I shall refer to it as “the August offer”. The claimant rejected it.

On 9^th November 2007 Mr. and Mrs. Reeves made another Part 36 offer, this time of £9,000, but on 9^th January 2008 they withdrew all their offers apart from the May offer.

Further offers, however, followed. On 28^th 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 about whether that was a Part 36 offer and what exactly it was intended to refer to.

Initially the claimant had adopted a rather intransigent attitude, but in the latter part of 2007 it made offers of settlement itself and thereafter various offers were made by both the claimant and by Mr. and Mrs. Reeves. Regrettably, however, the parties were unable to reach agreement and the matter went to trial.

On 9^th June 2009 District Judge Brown gave judgment for the claimant in the sum of £8,375.94 together with interest and costs. He ordered Mr. and Mrs. Reeves to pay half of the claimant’s costs from 8^th January 2008.

Mr. and Mrs. Reeves considered that the District Judge’s order was far too favourable to the claimant. 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 His Honour Judge Rubery. They argued that the judgment obtained by the claimant was not materially more advantageous to it than the May offer, especially after taking into account the payment they had made in respect of the plumbing, and that they should therefore have the benefit of Part 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^th February 2008 and that, since the claimant had emerged as the winner, the District Judge had not gone seriously wrong in making his order for costs.

The first question for consideration is whether the judge was right to hold that Mr. and Mrs. Reeves’ earlier Part 36 offers had been superseded by the offer made on 28^th February, since, if he was right about that, none of those earlier offers fall to be considered for the purposes of Part 36. For the reasons given earlier, I think that Mr. Plewman was right in submitting that Part 36 is a self-contained code which 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 Part 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 rule 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 Part 36 offer that remained open for acceptance. Accordingly, the May offer was unaffected by it.

The position at the end of the trial, therefore, can be summarised as follows. On 9^th January 2008 Mr. and Mrs. Reeves had revoked all existing Part 36 offers other than the May offer, which accordingly remained for consideration. On 28^th February they had repeated their offer of £8,188.38, inclusive of interest and costs. Mrs. Pigott 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 Part 36 offer, since it did not comply with the requirements of rule 36.2(2)(b) or (c). The only Part 36 offer that the District Judge had to consider, therefore, was the May offer.

That makes it unnecessary to decide whether under Part 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.

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 Part 36. As to the language, Part 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 a varying or revoking a previous offer and it would be inconsistent with the recognition of Part 36 as a self-contained code to read provisions of that kind into it. The purpose of Part 36 is to promote settlement by encouraging sensible offers. As Mr. Plewman pointed out, every Part 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 he wishes, he 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 about 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 make their intentions clear. If they do so, problems of that kind should not arise.

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 Part 44 he was entitled to make an order giving the respondent at least part of its costs.

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 Part 36 are treated as inclusive of interest (rule 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 his 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 him under the offer. Clearly, the longer the 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 Part 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.

In the course of his judgment the District Judge commented on the offer made by Mr. and Mrs. Reeves on 9^th 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 which 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.

The claimant 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 9 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 farther.) Viewed in that light, at the time it was made the May offer fell £1,586.48 short of the amount which the claimant 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.

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. Nonetheless, the fact remains that at the end of the day the claimant 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.

That raises the question whether the claimant failed to obtain a judgment more advantageous than the enhanced May offer within the meaning of rule 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 W.L.R. 113, it did.

In Carver v BAA this court considered the terms of rule 36.14(1) and concluded that when asking itself whether the judgment was more advantageous to the claimant than the Part 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 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.

The decision in Carver has been criticised by many commentators, and most recently by Lord Justice Jackson in his Review of Civil Litigation Costs, Final Report, on the grounds that it introduces an unwelcome degree of uncertainty into the operation of Part 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 Part 36 offer which 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 (No.7) [2008] EWHC 2280 (TCC) (see paragraph 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 his 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 Part 36 offer ought to be entitled to evaluate it by reference to a rational assessment of his own case (including the risk of incurring unrecoverable costs if he presses on). He 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.

In the present case we do not know on what basis the claimant 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 counterclaim, 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.

The District Judge proceeded on the basis that the judgment was more advantageous to the claimant than the Part 36 offer and, for the reasons I have already given (which differ to some extent from his), I think he was right to do so. He was therefore faced with the task of exercising his discretion, taking into account the general rules about costs contained in Part 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 claimant had failed to respond in kind. However, a turning point came in January 2008 when Mr. and Mrs. Reeves withdrew all their existing Part 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 which made the failure to accept it culpable.

Quite correctly the District Judge took as his starting point the fact that the claimant had been successful, having recovered a substantial proportion of its claim in the face of a defence which, at the start of the trial, denied that anything was due. However, he considered that the claimant’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. Nonetheless, 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 claimant of its costs for the period up to 8^th January 2008 and to order Mr. and Mrs. Reeves to pay only half of its costs thereafter.

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^th 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.

In my view the judge’s order was well within the ambit of his discretion. For the reasons I have given I think that he was right to assess costs in accordance with the principles set out in Part 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 which, 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 relation to a relatively modest claim has led to the parties’ incurring substantial costs, but the opportunity to avoid it was there on many occasions if only they had both been willing to grasp it.

In my view there are no grounds for criticising the District Judge’s decision and I would therefore dismiss this appeal.

I agree. I add a brief comment on the judgment of this court in Carver, having regard to the criticisms to which Moore-Bick LJ has referred.

In Multiplex Constructions Jackson J interpreted paragraphs 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.” (para 71)

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 L.J. treated the matter as one of construction of the new Part 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 –

“… 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.” (para 3)

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:

“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.” (para 31)

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.”

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.

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.

I agree that each of these appeals should be dismissed for the reasons given by Moore-Bick L.J..