Hislop v Perde

The issue that arises in these two appeals concerns the correct approach to costs in cases under the fixed costs regime in Section IIIA of Part 45 (low value road traffic accident (“RTA”) and employers’ liability/public liability (“EL/PL”) claims), where the defendant eventually accepts, after they should or could have done, the claimant’s offer under CPR Part 36. We are told that the issue is of some significance and will affect the costs outcome in many other cases. In addition to counsel’s submissions, in completing this Judgment, I have taken into consideration detailed written submission by both the Association of Personal Injury Lawyers, and the Forum of Insurance Lawyers.

By reference to two earlier decisions of this court, the issue of principle can be delineated in this way. Where a Part 36 offer is accepted within 21 days, in a case governed by the fixed costs regime, neither party can recover more or less by way of costs than is provided for by that fixed costs regime: see Solomon v Cromwell Group PLC[2012] 1 WLR 1048. Conversely, where a claim that is subject to the fixed costs regime goes on to trial and, by way of judgment, the claimant recovers more than a Part 36 offer, he or she is entitled to indemnity costs from the date that the offer became effective: see Broadhurst v Tan[2016] EWCA Civ 94; [2016] 1 WLR 1928. That leaves what might be called the cases in the middle, where a defendant accepts the claimant’s Part 36 offer many months after it was made, and the case does not then go on to trial. In those circumstances, does the case remain within the fixed costs regime, or can the claimant escape its confines and recover standard or even indemnity costs from the date that the offer became effective?

On 17 December 2013, Ms Hislop (the respondent in the first action and the appellant in the first appeal) was injured in a road traffic accident. She blamed Ms Perde (the appellant in the first action and the respondent in the first appeal).

On 7 April 2014, Ms Hislop served a Claim Notification Form under the pre-action protocol (“PAP”) for low value personal injury claims. Ms Perde did not respond on liability so the claim was removed from the PAP, although it remained subject to the fixed costs regime.

On 21 July 2014, Ms Hislop offered to accept £2,100. This was rejected by Ms Perde. On 18 September 2014, the claimant commenced proceedings. On 10 October 2014, Ms Perde offered £1,800, subject to liability. On the same day, Ms Perde offered a 50/50 split on liability. Ms Hislop rejected both offers, because she maintained that she was not responsible for the accident at all.

On 11 November 2014 Ms Hislop offered to accept £1,500. That was an offer in accordance with Part 36. There was no response to this offer until 9 January 2015, when Ms Perde rejected it. The proceedings continued: a trial date was fixed for 9 June 2016 and witness statements were exchanged in March 2016. On 20 May, Ms Perde offered £1,000 but this was rejected by Ms Hislop on 31 May.

Finally, on 2 June 2016, a week before trial, Ms Perde accepted Ms Hislop’s offer of 11 November 2014 at £1,500. The claim was settled on this basis.

By then, Ms Hislop’s costs were:

£2,372 by way of fixed costs up to 2 December 2014, when the offer should have been accepted;

£5,534, being the costs actually incurred from 2 December 2014 onwards.

On 3 October 2016, at the County Court at Willesden, DDJ Lenon QC rejected the claim for indemnity costs. The approved note of his judgment makes clear that he did not reach this conclusion because of any interaction between the fixed costs regime and Part 36. This was unsurprising because, at that stage, it was accepted by both sides that he had the power to grant an order for indemnity costs pursuant to r.36.13. He refused to do so, saying:

Ms Hislop appealed. At the appeal hearing on 19 May 2017, it remained common ground that the judge could make an order under r.36.13. In a careful judgment dated 8 August 2017, Judge Walden-Smith overturned the District Judge’s order, on the basis that he had erred in determining that the order for costs ought to have been fixed costs throughout. She did not interfere with his decision not to award costs on an indemnity basis, but ruled that the costs after 2 December 2014 would be assessed on the standard basis.

Ms Perde now seeks to appeal against that decision. It was only before this court that the point was taken on her behalf by Mr Mallalieu that the only costs that could be awarded were fixed costs because r.36.13 simply did not apply to fixed costs cases.

In addition, there was some debate in the skeleton arguments before us as to whether or not the approach taken by Judge Walden-Smith was open to her. Mr Mallalieu submitted that the argument about the standard basis had not been raised before her. Mr Bacon QC, on behalf of Ms Hislop, disputed that. As we indicated at the outset of the hearing, we thought that the judge was entitled to reach that conclusion on the basis of the argument before her and that, in any event, since both parties had come prepared to deal with the full range of issues, it would be unsatisfactory if we did not address all the relevant points.

On 25 January 2014, Mrs Kaur was injured at the Board’s premises in Leicester. A Claim Notification Form under the PAP was sent on 7 February 2014. On 15 April, liability was denied and so the claim moved outside the PAP, although again the fixed costs regime remained in force.

On 8 January 2016, the proceedings were commenced. On 7 September 2016, Mrs Kaur offered to accept £2,000, in accordance with CPR Part 36. That offer was rejected on 15 September 2016.

In January 2017 there were further negotiations between the parties. A joint expert’s report was produced, parts of which helped Mrs Kaur, and parts of which did not. The Board wanted to settle but was concerned that it might be penalised in costs if it belatedly accepted her offer of 7 September 2016. So, instead, on 6 February 2017, the Board made its own, higher Part 36 offer in the sum of £3,000. That offer was accepted by Mrs. Kaur.

Thereafter, the claimant sought indemnity costs from the date that her offer of 7 September 2016 could have been accepted until the date that she accepted the defendant’s offer. The defendant said that only fixed costs could apply.

On 23 August 2017, District Judge Reed, sitting at the County Court at Leicester, decided that the claimant was entitled to £2,450 by way of fixed costs up to the date of allocation, and costs to be assessed on the standard basis thereafter. He concluded that, if the defendant had simply sought to accept the claimant’s earlier Part 36 offer of £2,000 out of time, then the claimant would have been entitled to claim indemnity costs for the period of delay. In those circumstances, he concluded that the claimant should not be worse off simply because the defendant had got round that difficulty by making a higher offer months later. He said that such a result did not sit comfortably with the overriding objective and talked about a lacuna in the CPR. He also indicated (for the same reasons) that this was an exceptional case under r.45.29J, which justified a departure from the fixed costs regime in any event.

His reasoning is summarised in the following passages of his judgment:

The appeal from District Judge Reed has been ‘leap-frogged’ to this court to be heard at the same time as the Hislop appeal.

I set out below the relevant parts of the CPR. CPR Part 36 was revamped and renumbered in 2015. It is convenient to set out the rules in their current form (and using the current numbering) because, although there have been some changes, the current wording applies to the Kaur appeal, and both counsel in the Hislop appeal (to which the pre-2015 rules apply) agreed that the changes make no substantive difference to the argument. However, for completeness, I consider the old rules in Part 36, as they applied to the Hislop case, at paragraphs 59 – 61 below. In addition, I cross-refer to the previous Part 36 numbering at paragraph 25 below, because it facilitates an understanding of the judgments in both Solomon and Broadhurst, which were cases decided under the old version of Part 36.

The general costs consequences of acceptance of a Part 36 offer before trial are set out in CPR 36.13. That provides as follows:

The general costs consequences following a judgment where a Part 36 offer has not been accepted and is subsequently bettered at trial are set out in CPR 36.17. It is only necessary to set out part of that rule for present purposes:

Under the heading ‘Personal Injury Claims’, CPR 36.20 sets out the particular costs consequences of acceptance of a Part 36 offer before trial, where Section IIIA of Part 45 applies. This provides:

Under the same heading, CPR 36.21 sets out the particular costs consequences following judgment where a Part 36 offer has not been accepted and where Section IIIA of Part 45 applies. The relevant parts of this rule provide as follows:

The cross-referencing of the old and the new rules within Part 36 is as follows:

It is common ground that the claim in the Hislop action was started under the RTA PAP, and the claim in the Kaur action was started under the EL/PL PAP. Thus, Section IIIA of Part 45 applies to both claims, which fell within the fixed costs regime. In respect of the RTA protocol, Rule 45.29B provides as follows:

The exceptions referred to within r.45.29B and r.45.29D are limited and do not arise here. Rule 45.25F is concerned only with the defendant’s costs, although it is perhaps noteworthy that r.45.29F(8) and (9) provide as follows:

The only other potentially relevant exception can be found at r.45.29J which provides:

The comprehensive nature of the fixed costs regime in Part 45, and the limited ways of escaping from it, was the subject of detailed consideration by this court in Sharp v Leeds City Council[2017] 4 WLR 3465. Briggs LJ (as he then was) said:

Briggs LJ identified the exceptions at r.45.29F, 45.29H and 45.29J, although he omitted to refer to the exception identified by this court in Broadhurst v Tan, set out at paragraphs 33 – 34 below. His judgment is an important explanation of the comprehensive nature of the fixed costs regime; the small category of exceptions; and the fact that there will inevitably be swings and roundabouts in any regime designed to deal with high bulk, low value claims.

As noted, r.45.29J allows an escape route from the fixed costs regime in “exceptional circumstances”. We were told that there is no authority on the operation of this provision. It was one of the grounds on which District Judge Reed reached his conclusion in the Kaur case (see paragraph 18 above). It was never in play in the Hislop case because, until the appeal to the Court of Appeal, the appellant in Hislop had always accepted that r.36.13 applied, so it had always been accepted that the judge had the power to award indemnity costs in any event. I return to that topic in paragraphs 51 – 54 below.

In Solomon v Cromwell Group PLC, the claimants had accepted Part 36 offers within the 21 days. The claims were governed by the fixed costs regime in Part 45. The claimants sought to argue that they were entitled to costs to be assessed on the standard basis, relying on what was then CPR 36.10(1)(3) (now 36.13(3)). The Court of Appeal rejected that submission, saying that Section II of Part 45 took precedence over Part 36. Moore-Bick LJ said:

In Broadhurst v Tan, the claimants recovered by way of judgment more than the amount of their own Part 36 offers. They sought indemnity costs for the period between the date on which their offers expired, and the date of judgment. The Court of Appeal upheld that claim noting that, although r.45.29B provided the general rule which applied to all Section IIIA cases, what is now r.36.21 (then 36.14A) set out the costs consequences of Part 36 offers following judgment where Section IIIA of Part 45 applied. That rule specified that r.36.17 (then r.36.14) applied “with the following modifications”. There was no modification in r.36.21 dealing with the position whereby a claimant beats its own Part 36 offer at trial. In such a case, therefore, the Court of Appeal held that r.36.17 applied and that, in accordance with 36.17(4) as it now is, the claimant was entitled to indemnity costs.

In giving the judgment of the court, Lord Dyson MR said:

The general principles relating to indemnity costs can be found in the well-known authorities of Petrotrade v Texaco [2002] 1 WLR 947; Reid Minty v Taylor[2002] 1 WLR 2800; Kiam v MGM (2) [2002] 1 WLR 2810 and Excelsior Commercial and Industrial Holdings Ltd v Salisbury Hammer Aspden and Johnson[2002] CP Rep 67. More recent authorities on the same issue include Wates Construction Ltd v HGP Greentree Alchurch Evans Ltd [2006] BLR 45 and Euroption Strategic Fund Ltd v Skandinaviska Enskilda Banken AB[2012] EWHC 749 (Comm).

Those general principles can be summarised as follows:

Indemnity costs are appropriate only where the conduct of a paying party is unreasonable ‘to a high degree’. ‘Unreasonable’ in this context does not mean merely wrong or misguided in hindsight.

The court must therefore decide whether there is something in the conduct of the action, or the circumstances of the case in general, which takes it out of the norm in a way which justifies an order for indemnity costs.

(d) General Approach to Late Acceptance of Part 36 Offers

Leaving aside the complexities introduced by the fixed costs regime, the general position is that the late acceptance of a Part 36 offer may warrant an order for indemnity costs. But that will always be a question of fact in each case; there is no presumption to that effect. In Fitzpatrick Contractors Ltd v Tyco Fire and Integrated Solutions (UK) Ltd(3)[2009] EWHC 274 (TCC); [2010] 2 Costs LR 115, I said:

Mr Bacon QC sought to argue, by reference to more recent cases such as OMV Petrom SA v Glencore International AG [2017] 1 WLR 3465 that the ‘carrot and stick’ effect of the new rules, following the Jackson reforms, means that the courts should be much quicker to conclude that a defendant who delays accepting a Part 36 offer should be liable for indemnity costs. In my view, that confuses a presumption in favour of indemnity costs (applicable in every case of late acceptance of a Part 36 offer), and the making of such an order if it is warranted on the facts. All that I was addressing in Fitzpatrick was the absence of any implicit presumption in the CPR in favour of an order for indemnity costs, in every case of late acceptance of a Part 36 offer. That is far from saying that there will not be cases in which, on the facts, late acceptance without proper reason will justify an order for indemnity costs.

I now turn to consider the proper interpretation of the CPR in cases covered by the fixed costs regime where a defendant accepts a claimant’s Part 36 offer out of time, but before trial.

Solomon is authority for the proposition that the fixed costs regime made mandatory by r.45.29B and r.45.29D will continue to apply to those cases covered by it, unless there is an express exception. The claimants in Broadhurst moved out of the fixed costs regime (even though they could not put themselves within one of the Part 45 exceptions (rr.45.29F, 45.29G, 45.29H and 45.29J)) because they could demonstrate that what is now 36.21 (then 36.14A) provided an additional exception. It dealt expressly with what should happen when a claimant beat a Part 36 offer after judgment, even in a case to which the fixed costs regime would have otherwise applied. In this way, although the draftsman had not made the point clear in Section IIIA of Part 45, it did not matter, because he had made it clear in Part 36.

How was the exception made clear? This was achieved by adding particular modifications which were relevant to the fixed costs regime via r.36.21 (old r.36.14A), but at the same time expressly confirming that r.36.17 (old r.36.14) was preserved and continued to apply to fixed costs cases. In other words, the rules expressly provided that, even though the fixed costs regime had brought about a number of specific modifications, the underlying rules in r.36.17 (old r.36.14) also applied to such cases. In this way, the CPR expressly preserved what has been called the ‘enhanced package’ provided for by r.36.17(4), and made that applicable to a claimant within the fixed costs regime, provided that he or she had done better at trial than the Part 36 offer.

The fundamental difficulty for a claimant in a fixed costs case seeking to say that something very similar should happen where the defendant has delayed before accepting the claimant’s Part 36 offer is that different rules apply. In my view, those different rules demonstrate that the applicable costs regime in fixed costs case where there has been late acceptance is different to that described in Broadhurst v Tan and, on analysis, very similar to that explained in Solomon.

Whilst the general rule dealing with costs consequences following judgment (r.36.17) is expressly preserved by the particular rule relating to the fixed costs regime (r.36.21), that is not the position in relation to the rules relating to the costs consequences of accepting Part 36 offers before trial. For that situation, the general rule (r.36.13, old rule r.36.10) is not preserved by the rule applicable to fixed costs cases (r.36.20, old rule r.36.10A). Instead, r.36.20 makes plain that it is the only rule which applies to the costs consequences of acceptance of a Part 36 offer in fixed costs cases. It preserves no part of the general rule set out in r.36.13.

What is more, r.36.13 itself says that it is “subject to” r.36.20 which, because that rule applies to fixed costs cases and r.36.13 does not, also leads to the conclusion that r.36.13 does not apply to fixed costs cases. Where (without more) a general rule is made ‘subject to’ a specific rule that governs a particular class of case then, in that class of case (here, those subject to fixed costs), it will be the specific rule that applies, not the general rule (see Solomon).

There are other parts of r.36.13 which also demonstrate that it has no application to fixed costs cases. These include the signpost in brackets after r.36.13(1), which makes it clear that it is r.36.20 which “makes provision for” the relevant rules in fixed costs cases, and r.36.13(3), which qualifies the reference to standard costs with the words “except where the reasonable costs are fixed by these Rules”.

In this way, the interaction between the fixed costs regime and Part 36 is different where the claimant is successful after trial (r.36.17 expressly preserved), as compared to where a Part 36 offer is accepted before trial (r.36.13 not preserved, and excluded by the use of the words ‘subject to’ and the other amendments referred to in paragraph 45 above). In this way, the drafting of the interaction between the two pairs of rules is very different. If the sort of twin-track approach applicable to the position after judgment (as described in Broadhurst v Tan) was intended to apply to late acceptance of a Part 36 offer before trial, the same sort of wording in r.36.21, and in particular the express preservation of the general rule, would have been required in r.36.20. There is no such preservation. On that basis, I consider that the correct interpretation of the rules is to say that, in a fixed costs case, r.36.20 applies where an offer is accepted late, and that r.36.13 does not apply at all.

Finally on interpretation, both Mr Bacon QC and Mr Benson in their respective cases argued that r.45.29B and r.45.29J could not be relevant to the costs consequences of acceptance of a Part 36 offer, because if they were relevant, there would be no need for r.36.20(2). That is a bad point, for two reasons. First, the draftsman has always striven to make Part 36 self-contained, so it has always contained some provisions which can also be found elsewhere in the CPR. Second and more generally, the fact that there is some duplication within the CPR is, unsatisfactory though it might be, inevitable. Rules should not be construed in reliance on duplication.

Having set out my interpretation of the relevant rules, I consider that there are four reasons why that interpretation leads to a sensible and coherent result. It is manifestly not a drafting error nor, with respect to District Judge Reed, a lacuna in the CPR.

First, this interpretation is in accordance with the comprehensive nature of the fixed costs regime in Part 45 and the policy that, subject to limited exceptions, the fixed costs regime is intended to apply to the relevant PAP cases, without further ado or argument. This means that, in relation to offers made under Part 36, the only way out of the regime is triggered where a claimant beats the Part 36 offer at trial (Broadhurst v Tan). Moreover, that particular circumstance has always been a situation where the rules have striven to reward the claimant: hence the enhanced package provided by r.36.17. It therefore makes sense to say that, even in a fixed costs case, that enhanced package should be available to a claimant after trial, just as it is in any other kind of case.

Secondly, I consider that my interpretation preserves the autonomy of Part 45. If a case begins under the fixed costs regime then it should only be in exceptional circumstances that the parties are able to escape it. The whole point of the regime is to ensure that both sides begin and end the proceedings with the expectation that fixed costs is all that will be recoverable. The regime provides certainty. It also ensures that, in low value claims, the costs which are incurred are proportionate. In addition, whatever the perceived injustice in any given case, the ‘swings and roundabouts’ identified by Briggs LJ in Sharp will still apply.

Thirdly, it should not be thought that this interpretation means that the defendant who makes an offer which the claimant accepts late is in a radically different position to a claimant whose own offer has been accepted late. True it is that, in that situation, r.36.20(4)(b) imposes a specific liability on the claimant to pay the defendant’s costs relating to the period between when the offer should have been accepted and when it was accepted. But r.36.20(12) makes it clear that the costs awarded to a defendant in respect of that delay will be assessed by reference to fixed costs only.

This is important. These rules demonstrate that, in the mirror image of the situation in which these claimants find themselves (namely, where a claimant has accepted a defendant’s offer late) there is no question of either indemnity or standard basis costs being awarded to the defendant. The defendant’s recovery for the period of delay is limited to fixed costs only. There could be no reason to treat the claimant in a radically different way and to go outside the fixed costs regime, and order standard or even indemnity costs, in circumstances where a defendant in a similar position to these claimants is not permitted to recover costs on that basis. In this way, my interpretation of the rules applies the same fixed costs regime to any party whose offer has not been accepted when it should have been.

Finally, it remains the position that, in an exceptional case of delay, it may be possible for the claimant to escape the fixed costs regime. That arises under r.45.29J. In this way, my interpretation of the specific rules within Part 36 does not lead to a dogmatic or rigid conclusion, because the draftsman of the Rules already had one eye on ensuring that, in an exceptional case, it might be possible for a claimant to escape, at least in part, the fixed costs regime. In that way, there remains a clear incentive for a defendant not to delay in accepting a claimant’s Part 36 offer.

I am anxious not to express detailed conclusions about the scope and extent of r.45.29J because, other than acknowledging that it provides a potential escape route in an appropriate case, I do not consider that its general ambit is directly relevant to this appeal: the point did not arise in the Hislop case at all (so was not argued before us) and, for the reasons set out in paragraphs 65-68 below, I consider that the reference to the rule by DJ Reed in the Kaur case was based on a false premise. However, two particular issues were raised as to the scope of r.45.29J, and I address each briefly.

First, I do not consider that a defendant’s late acceptance of a claimant’s Part 36 offer can always be regarded as an “exceptional circumstance”. On the contrary, I take the view that my reasoning in Fitzpatrick as to why there can be no presumption in favour of indemnity costs in these circumstances (see paragraph 37 above) is also applicable, at least in general terms, to the suggestion that there is a presumption that a late acceptance of a Part 36 offer is an exceptional circumstance for the purposes of r.45.29J. Again, what matters are the particular facts of each case. A long delay with no explanation may well be sufficient to trigger r.45.29J; a short delay with a reasonable explanation will not.

Secondly, I reject the argument advanced by Mr Post QC, in the Kaur appeal, that this provision would only come into play if it could be shown that the exceptional circumstances had caused the litigation to be more expensive for the claimant. In support of this proposition, he relied on r.29J and r.29K which are concerned with the circumstances in which a party seeks to recover more than fixed costs. The rules make that party liable for the costs consequences if the assessment gives rise to a sum which is less than 20% greater than the amount of the fixed recoverable costs.

I do not accept Mr Post’s gloss on r.45.29J. His suggestion that a claimant must demonstrate a precise causative link between the exceptional circumstances and any increased costs would, in my view, lead to an unnecessarily restrictive view of the rule. It goes without saying that a test requiring “exceptional circumstances” is already a high one. It is not a proper interpretation of the rules to suggest that there should be further obstacles placed in the way of a party who wishes to rely on that provision.

As a result of my analysis of the existing rules, set out above, I consider that Judge Walden-Smith was wrong to order that the claimant was entitled to anything other than fixed costs. I should say at once that this is no criticism of her, since the argument successfully advanced by Mr Mallalieu on this appeal was simply not raised before her.

I said at paragraph 20 above that I would consider whether a different result in the Hislop appeal was suggested by the old Part 36 rules, since they applied to that case. In my view, Mr Bacon QC was right to concede that the old wording cannot lead to a different result.

The old rules relating to the costs consequences of a Part 36 after judgment are r.36.14 and r.36.14A. As I have demonstrated, and was confirmed in Broadhurst v Tan, r.36.14(3) was expressly preserved by r.36.14A(1), which meant that under the old rules a claimant beating a Part 36 offer after trial was entitled to the enhanced package, including indemnity costs, provided by r.36.14(3).

In relation to the costs consequences of the acceptance of a Part 36 offer prior to judgment, the old rules were r.36.10 and r.36.10A. R.36.10A expressly provided that “this rule applies where a claim no longer continues under the RTA or EL/PL Protocol…”. Accordingly, that is the rule which applies to the Hislop claim and that rule, like the new r.36.20, does not allow the claimant to make any additional claim in consequence of late acceptance. The old general rule (r.36.10), was not preserved (or indeed referred to) in r.36.10A. And r.36.10 was again made “subject to r.36.10A”. Still further, r.36.10 contained rules which Mr Bacon QC had to accept could not apply to a fixed costs case, such as r.36.10(3) (the reference to assessment on the standard basis). Accordingly, although the amendments noted in paragraph 45 above do not appear in the old rules and so are irrelevant for this purpose, the analysis of the existing rules at paragraphs 40 – 44 above is equally applicable to the rules which have now been superseded.

I do not consider that Ms Hislop can now argue that a 19 month delay with no apparent justification triggered the ‘exceptional circumstances’ provision in r.45.29J. Whilst she did not do so originally because it was wrongly assumed by both parties that the court had the necessary powers under Part 36, the District Judge’s conclusion that there was nothing out of the norm in this case (paragraph 9 above) applies a fortiori to any suggestion that there were exceptional circumstances under r.45.29J. If it is not out of the norm, it certainly cannot be exceptional.

That brings me to Mr Bacon QC’s final point, which amounted to an attack on that part of Deputy District Judge Lenon QC’s reasoning. His short point was that paragraph 6 of the District Judge’s reasoning put the test for indemnity costs too high and therefore amounted to an error of principle. Although on my analysis this issue does not strictly arise for decision (because there can be no basis for indemnity costs in any event), I should say that, for the avoidance of doubt, I do not accept that submission. It is not appropriate to subject the District Judge’s extempore judgment to a close textual analysis. It is quite clear that he applied precisely the right test in paragraph 5 of his short judgment, and his use of the word “exceptionally” was simply to make the point that orders for indemnity costs are not usual. This is a very different case on the facts to Whaleys (Bradford) Ltd v Bennett and Cubitt [2017] 6 Costs LR 1241 where the judge manifestly applied the wrong test.

For all those reasons, the appeal against the decision of Judge Walden-Smith is allowed, and the order of District Judge Lenon QC is restored.

As noted in paragraph 18 above, District Judge Reed’s conclusion in the Kaur case was based on the assumption that, but for the Board’s late Part 36 offer, Mrs Kaur would have been entitled to indemnity costs under the rules, and therefore she should not be deprived of those indemnity costs because of her acceptance of the Board’s late offer. For the reasons set out above, that assumption was wrong: there was no such entitlement under the rules.

District Judge Reed went on to say this was an exceptional case which triggered r.45.29J. But that was based on the same false assumption that the Board’s tactics had deprived Mrs Kaur of her entitlement to indemnity costs. Since there was no such entitlement, there was nothing else which indicated (or could indicate) that this was an exceptional case. Indeed, I note that the District Judge did not criticise the Board’s conduct.

Of course, the District Judge’s decision was an exercise of discretion. This court will always allow a judge a wide latitude on the exercise of discretion: it is necessary to show that the judge erred in principle or left out of account (or took into account) some material feature that he or she should (or should not) have considered: see Islam v Ali[2003] EWCA Civ 612. Moreover, in a case where the exercise of discretion concerns the award of costs, the discretion could be regarded as at its widest. As Wilson J (as he then was) said SCT Finance Limited v Bolton[2002] EWCA Civ 56; [2003] 3 All ER 434:

However, in this case the Board has been able to demonstrate a material error of principle in the District Judge’s reasoning and his conclusion that this was an exceptional case. His approach was based on the erroneous assumption that the Board’s offer deprived Mrs Kaur of a right to indemnity costs. She had no such right, so it inevitably follows that the District Judge failed to exercise his discretion properly.

Once that point is understood, the rest of the appeal falls into place. Mrs Kaur recovered more by way of damages by taking the £3,000 than she would have received if the Board had accepted her offer of £2,000. The Board may have made their own offer because they (wrongly) thought they were potentially liable for indemnity costs if they instead accepted her offer late, but Mrs Kaur has benefited from that error to the tune of £1,000. Her costs entitlement was always going to be pursuant to the fixed costs regime. The costs consequences of her acceptance of the Board’s offer, with the Board paying up to the stage when her acceptance occurred, were largely the same as if the Board had accepted her offer late and paid her fixed costs up to the date when they belatedly accepted that offer. Indeed, as Mr Benson very fairly noted when considering the draft judgment, her costs recovery (being in part a percentage of the sum recovered) will be slightly better because of her acceptance of the £3,000.

There is one final point in the Kaur appeal. Although it was not argued in front of District Judge Reed, we allowed Mr Benson to argue it before us, since it was a short point of construction.

Mrs Kaur’s offer of 7 September 2016 stated that, if the offer was not accepted within time, she would seek indemnity costs. The Board’s offer of 6 February 2017 accepted liability for costs if it was accepted within time, but made no mention of the basis on which those costs were to be assessed. When Mrs Kaur’s solicitors wrote to accept the offer, also on 6 February, they said:

On behalf of Mrs Kaur, Mr Benson argued that this was not an acceptance but a counter-offer, one term of which was the payment of indemnity costs by the Board to Mrs Kaur. He said that this counter-offer was accepted by the Board’s solicitors’ conduct, when they paid the £3,000 to Mrs Kaur’s solicitors.

I reject that submission. I consider that the email of 6 February 2017 from Mrs Kaur’s solicitors was an acceptance of the Part 36 offer but no more than that. The reference to indemnity costs was a warning that Mrs Kaur was going to pursue the indemnity costs argument, but the language fell far short of making the payment of indemnity costs a condition of their acceptance of the offer. For that construction to work, the email needed to spell out either that an offer was being made on behalf of Mrs Kaur, or that any acceptance was conditional on the Board’s consequential acceptance of a liability to pay indemnity costs. It did neither.

It would in my view be wrong in principle to construe a letter which confirms “that my client has agreed to accept your Part 36 offer” as anything other than an unqualified acceptance. It would also be wrong, in claims of this sort, to complicate the process of offer and acceptance under Part 36, and to subject that process to convoluted legal arguments as to contract formation and the like.

Accordingly, I reject Mr Benson’s new argument as to the alleged agreement to pay indemnity costs.

For all these reasons, the appeal against the decision of District Judge Reed is allowed. Mrs Kaur is entitled to fixed costs up to the relevant stage when she accepted the Board’s offer.

I agree.

I agree also.