In 2018 there have been a number of interesting cases on part 36 including my own venture into the procedural jungle that of Hogg v Newton. In the case of Tuson v Murphy  EWCA Civ 1461 the Court of Appeal dealt with the scope of the judicial discretion to make some other costs order than the usual order that the paying party pay the receiving party’s costs to the point in time 21 days after making the offer and receive their own costs thereafter. The essential issue in the case was the strength of the discretion that the rules vest in the court: in particular whether the discretion can be characterised as a weak discretion or a strong discretion: the latter giving the court much more scope to make a muscular decision.
The case concerned a personal injury claim, with allegations that the claimant was being less than frank about the nature and extent of her disabilities. A part 36 offer had been made by the defendant, which was not accepted within the 21 day period: thereafter the claimant changed her mind and accepted the part 36 offer out of time. Because costs were not agreed, that issue was listed for a hearing before HH Judge Harris QC, now sadly retired from the circuit bench, after a particularly rich and interesting career; devotees of my other blog www.credithirebarrister.com will be well aware of his significant contribution to many of the principal casess in that field.
As the Court of Appeal noted:
14. The 21 day period for acceptance of the offer expired on 8 October 2015. The Claimant did not accept the offer. The Defendant was given permission to instruct a new psychiatrist, Dr Holden, who by a report served on 23 November 2015 disputed the causation of the Claimant’s OCD.
15. On 1st December 2015 the Claimant accepted the Defendant’s Part 36 offer of £352,060. The trial of quantum which had been set for 9-11 December 2015 was vacated. But since the parties were unable to agree costs, a hearing on costs took place on 7 March 2016 before His Honour Judge Charles Harris QC (“the judge”). No application was made that the Claimant should attend for cross-examination on her witness statements.
In a typically robust judgment the circuit judge held, as noted by the Court of Appeal:
16. By a reserved judgment given orally on 6 April 2016 the judge ordered the Defendant to pay the Claimant’s costs only up to 1st April 2014 and ordered the Claimant to pay the Defendant’s costs thereafter. The material parts of the judgment were as follows:
“18. The position therefore is, in short, should the usual costs order apply or is the court persuaded that this would be “unjust”?
19. The defendant says it would be unjust and this was a dishonest claimant who seriously misrepresented her position. She was in “contumelious default” of her disclosure obligations and presenting her case on an “utterly misleading” basis. Had she made accurate disclosure, then the defendants could have made a realistic valuation of her claim and settled it at an early stage. Mr McCluggage submits therefore that it should not have to pay the defendant’s [sic] costs pre-offer or at worst only some of them and that the claimant should pay the defendant’s costs after the acceptance.
20. The claimant says that it is not unjust. The defendants chose to adopt the Part 36 procedure and did so at a time when they were in full possession, albeit late, of the claimant’s condition and history, when her previous reticence had been exposed. The de fe nda nt co uld ha ve made a Calderbank o ffer (Calderbank v Calderbank, 1976 Fam 1993 and see Lord Clarke in Summers v Fairclough 2012 1 WLR 2004, para 54) making it clear that costs would not be offered. Since the Part 36 procedure was deliberately adopted, it is not unjust, argued Mr Moore, for its normal consequences to be applied. He submits that the claimant should get all her costs up to the date of acceptance and, optimistically and with less confidence, afterwards as well.
28. Each case is of course different. In the instant case, the claimant’s dishonesty was in relation to a period before the Part 36 offer was made. My view is that the “normal” order in the instant case would be unjust because it would mean that the claimant is not sanctioned in any way (depending upon the order in relation to post-acceptance but where the costs would be modest in any event) for presenting her case on a misleading basis, for failing to disclose discoverable documents and for failing to tell the defendant, the court and the doctors about activities which she engaged in, which clearly cast significant doubt on her assertions about the extent to which she was disabled by OCD.
29. For my part, I do not see why the defendant should not be allowed to use the Part 36 mechanism and argue injustice in order to avoid a normal costs order. The very terms of the rule
itself envisage that that is possible. Otherwise, the defendant would in effect be punished by not choosing an alternative method of making an offer, possibly more favourable, outside the structure of Part 36, which is a rule which has been provided for the use of litigants who wish to settle claims.
30. I have considered the matters which the court is enjoined to consider. The offer is substantial and perhaps more than it would have been if the expert doubts about causation had been earlier appreciated. The offer was made at a time after the claimant’s lack of candour had been demonstrated but before the claimant offered to accept perhaps half what she had been claiming. Most materially, the claimant’s conduct was dishonest and misleading about what she could do. The offer was clearly a genuine one.
31. The defendants were being actively misled about the extent of the claimant’s disability, at least from the dates upon which disclosure and witness statements were due, namely March and April 2014. That is some 18 months before the 15 September Part 36 offer.
32 Accordingly, in my judgment, the appropriate order here is that the defendant should pay the claimant’s costs up to 1 April 2014, the date from which it can be said that the claimant commenced to mislead them. Thereafter, the claimant should pay the defendant’s costs. That is, the defendant’s costs up to the date of the payment in and thereafter.”
It will be noted that the judge effectively treated his discretion as wide ranging and going far beyond the scope of adjusting the 21 day period, in order to do justice. The Court of Appeal disagreed with this approach, holding that the discretion was constrained, and adopting the following formulation:
32. In Tiuta PLC (in liquidation) v Rawlinson & Hunter (a firm)  EWHC 3480 (QB) (a judgment given after Judge Harris’ decision now under appeal) a Part 36 offer had been made at a very early stage of the dispute with a 21 day period for acceptance expiring on 11 January 2016. The Claimants served notice of acceptance but only on 3 October 2016, nearly nine months after the 21 period expired. Andrew Baker J noted at paragraph 14 that:-
“It is common ground that the persuasive burden must lie on the party contending that the court should not rest with the default rule [that the claimant accepting an offer late should have costs up to the expiry of the period for acceptance but should pay the defendant’s costs thereafter] on the basis that it would be unjust to do so. In that regard, and as general background to the consideration of injustice the authorities have repeatedly emphasised the importance of remembering that the part 36 regime is there to provide a clarity and balance for the encouragement of the resolution of claims that would otherwise be litigated through to a trial.”
33. At paragraphs 29-30 Andrew Baker J said:
“The essence of the Part 36 strong prima facie justice is that the Part 36 offer, to have been a qualifying Part 36 offer, must have involved a considered acceptance of the value, as much to the offeror as to the offeree, of the claimant recovering its pre-offer costs, together with whatever is being offered to resolve the substantive claims. The essence of the enquiry as to injustice where that offer is accepted only after the relevant period, as it seems to me, must therefore be whether there is something in the particular circumstances of the case that undermines that assessment on the part of the offeror, particularly if that is the consequence of, although it is elusive to see in what circumstances this will be so, the fact that the offer has been accepted after, rather than within, the relevant period. I accept in principle that it cannot be sufficient to say that there is no injustice that the consequence in question would have applied as of right if the offer had been accepted within the relevant period. As a matter of logic, that would prove too much and it would never be possible to depart from the claimant’s pre-offer costs default rule that I am considering. It would therefore, as a matter of analysis, contradict CPR 36.13(6). However, it does mean, it seems to me, that in the case of a claimant’s acceptance of a defendant’s Part 36 offer, where the acceptance is given after the expiry of the relevant period, if nothing emerges from the facts to show that the defendant’s assessment of the risks and benefits involved in making the offer he made is in some significant way upset or contradicted or misinformed, it is highly unlikely to be unjust to apply the default rule. The defendant must be taken to have been content to compromise on the basis of paying the claimants’ costs on the standard basis to the end of the relevant period by reference to his assessment of matters as they stood when the offer was made. If nothing is shown to the court clearly to upset or undermine that assessment, there will almost always be nothing unjust about holding the defendant to it. One should never say never, of course; one cannot be entirely prescriptive. For example, in particular, one can envisage, and I will come back to that in this case, that there could be a change of circumstances after the expiry of the relevant period not known to the defendant which can be demonstrated – bearing in mind that we are not descend into lengthy satellite trial litigation over the question of the Part 36 consequences – would or might well have led to the withdrawal of the Part 36 offer prior to its actual acceptance.” [emphasis added]
34. This decision was cited with approval by Warby J in Optical Express Ltd v Associated Newspapers Ltd  EWHC 2707 (QB).
35. I agree entirely with what Andrew Baker J said in Tiuta. In particular, he was right to emphasise the difference between:
a) a case where the facts known to the defendant’s advisers at the time of the Part 36 offer do not change significantly during the period before the delayed acceptance; and
b) a case where the defendant’s advisers’ assessment at the time of making the Part 36 offer of the true value of the case, based on the facts then known to them, is upset or undermined by subsequent events or subsequently discovered facts.
The appeal was allowed: the point to take from the judgment, is that absent something extra-ordinary, an “unknown unknown”, a paying party who makes a part 36 offer must do so in the clear understanding that by making that offer, they are expressly accepting the receiving party’s entitlement to costs to the end of the 21 day period.
The comfort for the paying party, is to note that although an order for costs in the receiving party’s favor is made, that does not preclude all relevant arguments on conduct being raised on any assessment of costs: and even in a budgeted case, there must be scope to argue that there is a “good reason” to depart from the budget, in circumstances of exaggeration and misconduct.