An unwelcome Christmas surprise: late acceptance of Part 36 offers and the risk of adverse costs

Paul Fuller discusses the recent High Court decision in Moradi v The Home Office [2022] EWHC 3125 (KB).

What was the case about?

Ms Moradi made a claim against the Home Office, seeking damages of £30,000 for alleged unlawful detention.  Both parties made various Part 36 offers.  Ultimately Ms Moradi accepted an offer of £15,000, made just one clear day before trial. 

CPR 36.13(4)(a) sets out the costs consequences that apply when a Part 36 offer is accepted less than 21 days before the trial: “liability for costs must be determined by the court unless the parties have agreed the costs”.  On what basis then should the court determine costs?

What did the court decide?

HHJ Tindal took guidance from the general principles in CPR 44.2.  That rule provides that – generally – losing parties will be ordered to pay the winning parties’ costs; but the courts have discretion to depart from that general rule.  In deciding whether (and how) to exercise that discretion, the court will have regard to all the circumstances of the case, including the parties’ conduct.

In this case, it was relevant that Ms Moradi had adopted an unreasonable approach to settlement.  In December 2021, she had “abruptly abandoned” settlement negotiations; she had failed to negotiate for 9 months; and then she had made offers above the pleaded value of her claim.

HHJ Tindal took the view that Ms Moradi’s conduct warranted “some adjustment to [her] costs, especially as substantial costs were incurred”.  The judge took note of the fact that Ms Moradi had initially instigated mediation, and that she was "entitled to pursue vindication of her claims for unlawful detention which the MOJ admitted in part”.  For those reasons the judge found that Ms Moradi’s conduct was “neither the most trivial nor the most egregious case of failing to negotiate”.

Ms Moradi was awarded all of her costs up to Christmas 2021 (the point when she had abandoned negotiations), and 66% of her costs thereafter.

Comment

When a Claimant accepts a Defendant’s Part 36 Offer within 21 days, the Claimant will normally be entitled to his costs of the proceedings: CPR 36.13.

An exception is where acceptance takes place within 21 days of the trial date.  In those circumstances CPR 36.13(4) hands the costs discretion back to the court.  This case shows that the courts will then exercise their discretion in accordance with the general principles in CPR 44.2.

Moradi serves as a useful reminder that, when exercising its general discretion on costs, the court will have very serious regard to the parties’ conduct – in particular their approach to settlement. 

Ms Moradi had pursued a complex claim involving a serious allegation, liability for which the Home Office had partly admitted.  Ms Moradi had gone to the lengths of instigating and taking part in mediation.  Those factors alone were, however, not sufficient to rescue Ms Moradi from the adverse costs consequences that flowed from her subsequent intransigence.  

The full judgment can be found here.

Paul Fuller

Call 2021

14.12.2022