Analysis
The appellant trustees sought permission to appeal from a costs order. An application had been issued in December 2006 pursuant to which the trustees sought sanction to pursue claims for (inter alia) breach of trust. Three related beneficiaries (Lorna, Fiona and Marcus) resisted the application as defendants, save in respect of a negligence claim against solicitors. In July 2008, Lindsay J declined to sanction any of the claims (save for the negligence claim) and made clear that the trustees had acted in an inappropriately partisan way. Directions were given for a costs hearing, which was ultimately listed for May 2010.
Offers as to costs were made in advance of the hearing. By a letter dated 9 April 2009 (the April 2009 letter), Lorna was offered either 75% of her costs to be assessed on the indemnity basis or a fixed sum of £354,417.88. This was described as a Part 36 offer, with a period for acceptance of 21 days. By a separate letter dated 9 April 2009, Fiona was offered nothing. By a letter dated 26 March 2010 (the March 2010 letter) the trustees indicated that they were willing to offer Fiona £100,000 if the offers made in April 2009 were accepted. The terms of the March 2010 letter were accepted.
The trustees contended that they were entitled to their costs pursuant to Part 36 from the expiry of the 21-day period referred to in the April 2009 letter until acceptance. Sir John Lindsay gave judgment in June 2010 rejecting the trustees’ arguments and made no order for costs because (inter alia) the April 2009 letter did not contain a Part 36 offer owing to the substantive issue having already been determined and because the terms of the March 2010 letter that were accepted were more attractive than the April 2009 letter.
Held (granting permission to appeal but dismissing the appeal)
- (1) The April 2009 letter was not a Part 36 offer. It could not comply with CPR 36.10(1) because it excluded the offeree from recovering all her costs up to the date of acceptance of the offer (para [23]).
- (2) Nonetheless, the overriding objective and common sense suggested that where the offerors could not have framed their offer to fall within Part 36, where an offer is expressed as a Part 36 offer and otherwise complies with the requirements of Part 36, in the absence of a good reason to the contrary it should be given substantially the same effect as a Part 36 offer (para [27]).
- (3) The proper approach for the judge to adopt was to consider whether the offer that the respondents had accepted was the same or worse than the offer made in the April 2009 letter, and (a) if it was the same or worse, whether there was any good reason to deprive the trustees of their costs between May 2009 and April 2010, and (b) if it was not the same or worse, what the correct order for costs should be (para [28]).
- (4) As a matter of common sense, an offer by A simply to pay £X to B is not the same as an offer by A to pay £X to B on terms that if B accepts the offer, A will offer to pay the sum of £Y to C. Consequently, the offer in the March 2010 letter was more attractive to the respondents than the April 2009 letter because the trustees included the additional proposal that if the respondents accepted the offer, they would offer Fiona £100,000 towards her costs (paras [29]-[30]).
- (5) Given that the March 2010 letter made a more attractive offer than the April 2009 letter, the question of costs was a matter for the judge’s discretion. Once one accepted that the respondents were better off by refusing the offer in the April 2009 letter and accepting the offer in the March 2010 letter, in the absence of any other consideration, the right order to make was that the respondents and the trustees should each pay their own respective costs (paras [34]-[40]).
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