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Late Acceptance of an Open Offer: Conduct and the Effect on Costs

View profile for Claire Winn
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The matter of Patience v Tanner & Another [2016] EWCA Civ 158 provides helpful guidance on offers which are made outside the realms of Part 36 where conduct is an issue in considering the award of costs. The appeal was heard by Justice Gross, Lady Justice Black and the President of the Queen's Bench Division in the Court of Appeal (Civil Division) at the Royal Courts of Justice.

The Facts

Mr Patience sold an area of land to Mr Tanner on the terms that Mr Tanner would grant a particular right of way to Mr Patience. The easement was not granted and Mr Tanner sold the land to Mr Bloor, a property developer who subsequently built a housing estate on the land. Mr Bloor offered various rights of way to Mr Patience but none were as useful as the easement detailed within the terms originally agreed.

Proceedings

It was not possible to reach an agreement in relation to the issue and Mr Patience issued proceedings against Mr Tanner in 2012 claiming specific performance or, failing that, damages. The Defendant denied liability and commenced Part 20 proceedings again Mr Bloor, who also denied liability.

By May 2014 the time for exchanging witness statements was approaching. On 8 May 2014 the Part 20 Defendant wrote to the Claimant enclosing a Deed of Grant of an Easement for execution and advised that this should be returned by 4pm on 29 may 2014. This was understood by both parties to amount to an open offer however, as the offer was silent on the costs consequence upon acceptance, the Claimant contacted the Defendant on 27 May 2014 querying the effect on costs in the event the offer was accepted. A Consent Order, signed by all parties, was filed on in order to stay the matter until 4 July 2014 to allow the parties to explore the possible resolution of the matter.

The Defendant provided no comment in relation to the costs consequences of accepting the offer and on 16 June 2014 the Defendant advised that the offer had lapsed and any queries should have been raised within good time prior to the deadline. The Defendant further stipulated that the offer would not be repeated and, should the Claimant not be willing to immediately withdraw the proceedings, the matter would be proceeding to trial.

The trial was fixed for 10 November 2014 at Bristol County Court and on 3 November 2014. the Defendant put forward an offer mirroring that of the May offer. The offer was accepted and the executed Deed returned; however the parties still proceeded to trial. His Honour Judge Rutherford noted that the matter was “all about costs” and how the costs should be apportioned between the three parties. He noted that there was no doubt that the Claimant had a "proper, sustainable course of action" however he considered that he needed to “stand back and apply a dose of common sense" in relation to the costs claimed.

Costs in the First Instance

HHJ Rutherford noted that, in deciding what order to make as to costs, it was necessary to have regard to all the circumstances, including any admissible offers to settle (whether by way of Part 36 or not). He noted that the Claimant had been successful as he had sought and secured specific performance. He considered that it had not been reasonable for the Defendants to defend the claim and that the Defendants could have brought matters to an end by granting the right at an earlier stage.

However he noted that, whilst the offer was not made by way of Part 36 (and this appeared to be deliberate so the issue of costs could be left open) it must still be taken into account as the May offer should have brought the case to an end but the case still proceeded to trial, despite the fact that the case eventually settled on the same terms as the May offer.

HJJ Rutherford subsequently concluded that the Defendants would pay the Claimant's costs on the standard basis up until 29 May 2014 and that the Claimant would pay the Defendants' costs post 29 May 2014 on the standard basis. HHJ Rutherford also commented that, had this been a Part 36 offer, the Defendants would have been entitled to their costs on the indemnity basis. This misunderstanding was rectified through exchanges with Counsel however the Judge considered that the ruling should stand.

Appeal

The Claimant sought to challenge HHJ Rutherford’s decision claiming that he should be entitled to recover all of his costs, or alternatively a portion of his costs after 29 May 2014. The Defendants sought to uphold the previous decision.

On appeal Lord Justice Gross turned to the conduct of all parties in order to assess the payment of costs. He considered that there was no good reason for the Claimant not to accept the Defendants’ May offer and, due to this, HHJ Rutherford had been correct in his ruling to deny the Claimant of any costs incurred after the date the offer expired. However he opined that, in reaching his conclusions, the Judge had failed to take account of the Defendants' own failings; the conduct of withdrawing the offer was equally unreasonable. LJ Gross also considered that the Claimant's probing of the offer did not warrant withdrawal of the May offer.

He concluded that, in awarding the Claimant’s costs up until 29 May 2014, HHJ Rutherford had given sufficient effect to the May offer and that there was no reason to go beyond this by requiring the Claimant to pay the Defendants’ costs post 29 May 2014. LJ Gross allowed the Claimant's appeal but ordered that each party should bear its own costs after 29 May 2014.

Comment

It is interesting to note that both Judges referred to the provisions of Part 36 and what the outcome would be had the offer been made under this section, particularly as the facts would suggest the very reason the offer was not accepted in May was due to the uncertainty regarding costs; had the offer been made by Part 36, there would have been no ambiguity as to costs.

It is therefore arguable that the Judges’ comparisons to Part 36 are not entirely relevant but the case does confirm that any offer can, and often will, be considered by the Court when considering the appropriate costs award. In this particular instance the case does provide helpful guidance as to some of the pros and cons of making a Part 36 over an open offer. Furthermore this case also suggests that, where a favourable offer is received but it is silent on costs, it may be beneficial to repeat the offer under Part 36 to ensure your client's position is fully protected moving forward.

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