Part 36 Archives

A Near Full-Value Part 36 Offer On A Binary Recognition And Enforcement Claim Held To Be ‘Genuine’ Where The Strength Of The Claim Justified It

Indemnity Costs, New Costs Blog, Part 36, Payment on Account

The King’s Bench Division’s decision in Timokhin v Timokhina [2026] EWHC 1194 (KB) addresses whether a Part 36 offer representing a 9% discount on a binary recognition and enforcement claim was a genuine attempt to settle or a strategic device to secure indemnity costs.

Background

The underlying proceedings concerned a dispute between two Russian national former spouses, Alexander Valeryevich Timokhin (the claimant) and Anna Anatolyevna Timokhina (the defendant), about the recognition and enforcement in England and Wales of two Russian judgments relating to a contested post-nuptial agreement. The trial judgment ([2026] EWHC 439 (KB)) found in favour of Mr Timokhin and rejected the several objections advanced by Ms Timokhina. The Russian judgments were ordered to be recognised and enforced, with the debt arising from those judgments quantified at £417,416.67.

The consequentials judgment ([2026] EWHC 1194 (KB)), handed down by Mr Justice Dexter Dias on 19 May 2026, dealt with four applications: a stay of enforcement pending a domestic appeal and pending Russian bankruptcy proceedings, costs, interest, and payment on account. The claimant was represented by Matthew Bradley KC and William Birch, instructed by Brown Rudnick LLP. The defendant was represented by Charles Samek KC, Jennifer Perrins and Bláthnaid Breslin, instructed by Goodman Ray LLP.

For the purposes of this article, the focus is on the costs-related issues, namely the application of CPR Part 36, the appropriate rate of enhanced interest on costs, interest on the debt, and the quantum of the payment on account. The stay applications are addressed only insofar as they provide relevant context.

Costs Issues Before the Court

The claimant had made a Part 36 offer on 20 May 2025, with the relevant period expiring on 10 June 2025. The offer represented a 9% discount on the full value of the claim, specifying a figure of £380,000. At trial, the claimant succeeded in full, beating his own Part 36 offer.

The costs issues before the court were therefore as follows. First, whether it would be unjust, within the meaning of CPR 36.17(5), to impose the standard Part 36 consequences under CPR 36.17(4), namely indemnity costs from the expiry of the relevant period, enhanced interest on costs and an additional 10% payment. Second, if the Part 36 consequences were to apply, what rate of enhanced interest on costs should be ordered. Third, what rate of interest should be awarded on the debt itself. Fourth, what sum should be ordered by way of a payment on account of costs.

The defendant’s primary submission on the Part 36 issue was that the offer had not been a genuine attempt to settle the proceedings, as required by CPR 36.17(5)(e), on the basis that a 9% discount on a binary recognition and enforcement claim was effectively tokenistic. The defendant also raised a subsidiary argument that the offer was underspecified, confusing, equivocal or indistinct.

The Parties’ Positions

The claimant’s position

The claimant submitted that the Part 36 consequences under CPR 36.17(4) should follow in the ordinary way. It was argued that the offer of £380,000, representing a discount of just under 10% on the full claim value, was a genuine and reasonable attempt to settle. The claimant’s position was that the strength of his case justified a high offer level, and that the binary nature of recognition and enforcement claims did not render a high percentage offer inappropriate or illusory. The claimant further submitted that the defendant had raised arguments with poor prospects of success, some of which were floated and then disappeared with little more, and that her case had obvious weaknesses, particularly in its family law aspects. On the interest rate on costs, the claimant sought 8% above base rate. On interest on the debt, the claimant proposed a commercial rate of 5% from the date of the second Russian judgment (11 October 2023) to the expiry of the relevant period. On the payment on account, the claimant sought 65% of his costs, pointing to the volume of work necessitated by the defendant’s diffuse array of objections, some of which were first ventilated or particularised in detail only as trial approached.

The defendant’s position

The defendant submitted that it would be unjust to impose the CPR 36.17(4) consequences. Her primary argument was that the offer was not a genuine attempt to settle, relying on CPR 36.17(5)(e). It was contended that, given the binary yes/no nature of a recognition and enforcement claim, a discount of only 9% was effectively a device to secure an indemnity costs award rather than a meaningful invitation to compromise. The defendant also submitted that she had raised important arguments with very real merits, characterising her points as “entirely reasonable”, and that the offer was underspecified, confusing, equivocal or indistinct. On the interest rate on costs, the defendant submitted, on a contingent basis, that 1% above base rate was appropriate. On interest on the debt, the defendant raised a pleading objection, submitting that interest had not been pleaded as required by CPR Part 16 and should therefore not be awarded. On the payment on account, the defendant submitted that the lowest figure in the likely range was no more than 55%, criticising the scale of the costs incurred by the claimant.

The Court’s Decision

Part 36 consequences | was it unjust to apply CPR 36.17(4)?

The court confirmed the well-established starting point that the burden of establishing injustice rests on the unsuccessful party, and that this burden represents a formidable obstacle. The court cited ABFA Commodities Trading Ltd v Petraco Oil Company [2024] EWHC 706 (Comm) and the frequently cited passage from Briggs J in Smith v Trafford Housing Trust [2012] EWHC 3320 (Ch), to the effect that the court does not have an unfettered discretion to depart from the ordinary costs consequences under Part 36, and that to hold otherwise would undermine the salutary purpose of the regime in promoting compromise and avoiding unnecessary expenditure of costs and court time.

The court also noted the need for vigilance against very high settlement offers being used strategically, as a device to secure an indemnity award rather than as a genuine attempt to settle. However, on the facts, the court rejected the defendant’s submission that the offer fell into that category. The court accepted that a discount in the early 90% range was justified given the strength of the claimant’s case. The claimant had a rational and reasonable basis to conclude that his prospects were strong, and a discount of just under 10% was therefore sober and realistic rather than tokenistic or illusory. The court did not accept that the binary nature of recognition and enforcement claims rendered a high offer inappropriate. Binariness is inherent in such claims, and the more pertinent factor was the strength of the claim itself.

The court also rejected the defendant’s characterisation of her own arguments as having “very real merits” or being “entirely reasonable”. Some of her arguments had poor prospects of success, some legal points were raised and then disappeared with little more, and the family law aspects of her case were described as particularly unconvincing. The court further rejected the submission that the offer was underspecified, confusing, equivocal or indistinct, noting that it was perfectly clear that the offer related to the King’s Bench claim, and that clarification had been provided when requested.

The court also noted that the defendant had applied very late in the day to amend her initial defence, a recognition of the limitations of her original position, but the amended defence fared no better and had obvious weaknesses of its own. It was to the credit of the claimant’s legal team that even though it could have applied to adjourn the trial in light of the amendment, it determined to retain the trial listing and do its best to avoid incurring yet more costs.

Taking into account all the circumstances under CPR 36.17(5), the court concluded that the defendant had not come close to establishing that it would be unjust to order the CPR 36.17(4) consequences. The court also noted, by reference to the passage from Briggs J in Smith v Trafford, that the essential purpose of Part 36 is to visit costs consequences upon parties of whom it can properly be said that they ought to have settled by accepting the other party’s offer, rather than taken the matter to trial. The defendant had a reasonable and realistic opportunity to accept a genuine settlement offer from the claimant. She failed to take it. Instead, she persisted in a case that was materially flawed in key respects, with some parts of it largely devoid of merit.

Enhanced interest on costs | what rate?

The parties disputed the rate of interest to be granted on costs. The maximum is 10% above base rate. The claimant applied for 8%. The defendant, on a contingent basis, submitted that it should be 1%. The court rejected the defendant’s proposal as unrealistically low. However, the court also considered 8% to be too high, noting that while the defendant took a series of bad points, not all of them were fundamentally flawed or highly likely to fail, and that the court was not persuaded that in the three months from offer to trial the disruption to the claimant was as acute as he maintained. The correct interest figure was held to be 6% above base rate.

Interest on the debt | the pleading point

The defendant submitted that interest on the debt should not be awarded since it had not been pleaded by the claimant as required by CPR Part 16. The court rejected this objection. The short point was that CPR 16.1 makes plain that Part 16 is inapplicable to a Part 8 claim, which this was. In any event, the Court of Appeal had considered the question of a failure to plead interest in El Ajou v Stern [2006] EWCA Civ 120, in which Carnwath LJ held that a pleading failure is not necessarily fatal to a claim for interest, and that where the point had been raised, the judge could give leave to amend on appropriate terms if necessary. The court exercised its discretion to award interest on the debt at a commercial rate of 5% from the date of the second Russian judgment (11 October 2023) to the expiry of the relevant period.

Payment on account | what percentage?

Approximately 70% of the costs incurred (exclusive of VAT) fell to be assessed on an indemnity basis as a Part 36 consequence. In accordance with Excalibur Ventures LLC v Texas Keystone Inc [2015] EWHC 566 (Comm), per Christopher Clarke LJ at paragraphs 23 to 24, the court was required to arrive at a “reasonable sum” of likely recovery, allowing for uncertainty and margin for error.

Given the level of interest granted combined with the indemnity basis also granted, the court judged that there were good prospects that the claimant would recover 65% of his costs following detailed assessment. This was close to what the claimant might expect on a standard assessment. As to the defendant’s criticism of the scale of the costs incurred by the claimant, the court had fully in mind the scale of the work necessitated by the diffuse array of objections to recognition and enforcement the defendant placed before the court. It took the court over 100 pages of trial judgment to deal with them. The claimant had no option but to undertake the necessary professional work to meet the shifting and expanding case, some aspects of which were first ventilated, or particularised in detail, as the trial was imminent. The court rejected the defendant’s submission that the lowest figure in the likely range was no more than 55%.

Conclusion

The court ordered standard basis costs up to the expiry of the relevant period and indemnity basis costs thereafter. On interest, the court ordered: interest on the debt at 5% from the second Russian judgment (11 October 2023) to the expiry of the relevant period, then at 6% above base rate thereafter; interest on costs incurred prior to the expiry of the relevant period at 5%; interest on costs incurred after the expiry of the relevant period at 6% above base rate; interest on costs incurred after judgment at 6% from the date the cost was incurred; and interest on the debt at 8% from the date of the order for payment until payment under the Judgments Act 1838. The court also ordered a 10% additional payment under CPR 36.17(4)(d)(ii) and a payment on account of 65% of costs. The court also refused both applications for a stay of enforcement, finding that the balance of prejudice fell decisively in favour of the claimant and that there was a real risk of dissipation by the defendant.

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CPR 36.17(4) | Does It Apply To The Costs Of Detailed Assessment?

Pre-Action Solicitor Costs Recoverable Where Insurer Settles Damages But Refuses Costs

Fixed & Predictable Costs, New Costs Blog, Part 36, Personal Injury

The Senior Courts Costs Office’s decision in Alphabet (UK) Limited v AXA Insurance UK plc [2026] EWHC 674 (SCCO) concerned whether a vehicle leasing company acted reasonably in instructing solicitors before issuing proceedings to recover vehicle damage, and whether fixed recoverable costs applied to any resulting costs order.

Background

Alphabet (UK) Limited, a vehicle leasing company forming part of the BMW Group, was the registered owner of a Citroën van leased to Acorn Engineering Limited (“Acorn”). The van was insured by AXA Insurance UK plc under a policy taken out by Acorn. On 8 February 2023, the van was seriously damaged in a road traffic accident and was subsequently written off as uneconomical to repair. Regulations 2 and 3 of the European Communities (Rights Against Insurers) Regulation 2002 permitted Alphabet to pursue a claim directly against AXA in respect of the loss.

By 28 March 2023, solicitors had been instructed on behalf of Alphabet. On that date, the solicitors wrote to AXA notifying them of their instruction, nominating motor engineers to value the van and its salvage in the event of any dispute, and making a Part 36 offer to settle the claim for vehicle damage at £12,408.70. The letter made clear that costs were also being sought. On the same day, AXA’s agent, Copart UK, responded asserting entitlement to credit for a £500 policy excess and offered £11,909.88 in settlement of the damages claim. No mention was made of costs in that counter-offer. Alphabet subsequently delivered a bill for its costs totalling £1,006.80 plus VAT. AXA declined to pay those costs.

Proceedings were issued in the Civil National Business Centre on 12 March 2024 under Part 7 of the Civil Procedure Rules. The issue arising was understood to concern costs only and District Judge Worthington, sitting in the County Court in Willesden, transferred the matter to the SCCO on 29 May 2025. At a directions hearing on 3 September 2025, Costs Judge Brown, sitting as an ex officio District Judge of the County Court, determined that the principal issue was whether a costs order should be made at all, rather than merely the quantum of costs, and that the matter should therefore remain in the County Court.

The substantive hearing took place on 16 January 2026, with a further hearing on 13 March 2026. Benjamin Williams KC appeared for Alphabet, instructed by Clifford James Consultants Limited. Elahe Youshani appeared for AXA, instructed by Kennedys Law LLP. The judgment was handed down on 23 March 2026.

An earlier argument advanced by AXA—that the claim had been settled before the commencement of proceedings without costs—was withdrawn at the directions hearing. A further question as to whether the Part 36 offer had been accepted was also raised but was quickly resolved; it was clear that no such acceptance had taken place.

Costs Issues Before the Court

Three distinct costs issues fell to be determined. The first was whether the proceedings themselves constituted an abuse of process, AXA’s position being that it was abusive to issue Part 7 proceedings solely for the purpose of obtaining a costs order where there was no genuine dispute as to the underlying damages claim. The second, and more substantively argued, issue was whether it had been reasonable for Alphabet to instruct solicitors at all, given the prompt settlement of the damages claim and Alphabet’s status as a sophisticated commercial entity with regular experience of such matters. The third issue—which emerged as perhaps the most technically complex—was the basis upon which any costs order should be framed, specifically whether the fixed recoverable costs (FRC) regime under CPR Part 45 applied, and if so, what sum was recoverable.

The FRC point arose in an unusual way. Prior to the January 2026 hearing, both parties had proceeded on the common assumption that any costs would be assessed on the standard basis. Shortly before that hearing, it was argued that the FRC regime under CPR 45 applied, on the basis that the normal track for the claim was the fast track and that it would be assigned to complexity band 1, producing a fixed costs figure of £599. Mr Williams KC then contended that the January hearing itself constituted a “trial” for the purposes of the FRC regime, which would entitle Alphabet to the full fixed costs for a trial, including an advocate’s fee—a significantly higher sum. Neither party had addressed this point in their earlier submissions, and the judge requested further clarification before the March 2026 hearing.

The judge also raised, of his own motion, the question of whether the costs of the proceedings themselves could be dealt with proportionately, noting that the current dispute did not sit easily within the FRC framework as drafted, and querying whether the matter might have been more appropriately brought under Part 8 rather than Part 7.

The Parties’ Positions

Alphabet (Claimant)

Alphabet’s position was that the claim as a whole had not settled, because although there had been no dispute as to the value of the damages, AXA had not agreed to pay costs in circumstances where Alphabet had made clear, before AXA’s offer was made, that no complete agreement existed. Alphabet relied on the witness evidence of Mr Jackson, its Used Car Operations Manager, who explained that the company habitually engages solicitors to recover its losses in claims exceeding £10,000, and that it aims to recover the costs of doing so. Mr Jackson’s evidence set out a number of reasons why solicitor instruction was a reasonable and necessary part of Alphabet’s business operations: insurers frequently attempt to under-settle, raise liability issues, and seek to retain salvage to which they have no entitlement; insurers commonly make offers limited to the remaining finance rather than the pre-accident value less salvage; and the appointment of lawyers enables Alphabet to operate on equal terms against major insurers with in-house legal expertise. Mr Jackson also noted that the prompt instruction of solicitors had in fact led to an expeditious resolution of the claim, and that solicitor involvement enabled Alphabet to police the terms on which vehicles are written off and their salvage disposed of by licensed agents—a matter of public safety importance.

On the FRC point, Mr Williams KC argued that the normal track for the claim was the fast track, and that the FRC regime therefore applied. He submitted that the existence of a fixed costs provision for claims of this nature in Table 12 of CPR 45 was itself indicative that the instruction of solicitors in such claims was reasonable—otherwise there would be no provision for fixed costs at all. He further submitted that the January 2026 hearing constituted a “trial” or “final hearing” for the purposes of CPR 45.45(1)(d), relying on Bird v Acorn [2017] 1 WLR 1915, such that Alphabet was entitled to the full fixed costs for a trial together with an advocate’s fee.

On the abuse of process point, Alphabet relied on Birmingham City Council v Lee [2008] EWCA Civ 891, Ayton v RSM Bentley Jennison [2018] EWHC 285, and Moreira v French (HHJ Stewart, CC, 30 September 2008), all of which supported the proposition that where a defendant refuses to pay pre-action costs, the claimant’s only remedy is to issue proceedings.

AXA (Defendant)

AXA advanced two principal arguments. First, it contended that the proceedings were an abuse of process, there being no real dispute as to the damages claim which had already been paid. This argument was not ultimately pressed with any vigour at the hearing, and Ms Youshani appeared to acknowledge the force of the authorities relied upon by Alphabet.

Second, and more substantively, AXA argued that it had not been necessary for Alphabet to instruct solicitors. The submission was essentially that Alphabet, as a sophisticated commercial body dealing with such matters on a regular basis, had been too quick to instruct solicitors and should have allowed time for the matter to resolve itself. As events demonstrated, had Alphabet waited, an offer would have been received without the need for legal representation. Ms Youshani pointed to the fact that arrangements were already being made to deal with the damaged vehicle, and that agents had been appointed to deal with uninsured losses arising from the accident. The test, she suggested, was whether it had been necessary to instruct solicitors, rather than merely reasonable to do so.

On the FRC point, AXA’s position was that if a costs order were made, the applicable sum under the FRC regime would be £599, on the basis that the claim would normally be allocated to the fast track and complexity band 1.

Abuse of Process

Costs Judge Brown rejected the abuse of process argument. It was well-established that where a defendant refuses to pay costs properly incurred in the pre-action process, a claimant may issue proceedings to recover them. This was recognised by the Court of Appeal in Birmingham City Council v Lee, where Hughes LJ explained the importance of ensuring that defendants cannot evade liability for pre-action costs by strategically conceding damages only. Similarly, in Ayton v RSM Bentley Jennison, May J held that when a defendant tendered damages but refused to pay the claimant’s pre-action costs, “the only option left to a claimant” was to issue proceedings. This reasoning was echoed in Moreira v French, where the court observed that absent agreement, a claimant would have to issue proceedings for a nil-damages claim merely to recover costs.

There was an obvious problem with AXA’s position. In many claims—the judge gave the example of damages claims by victims of mesothelioma—the instruction of solicitors is plainly reasonable. Many such claims are settled before proceedings, and parties are encouraged in various pre-action protocols to settle their claims without the need for litigation. If AXA were right, an unscrupulous defendant could simply pay damages which are claimed and refuse to pay costs, and there would be no remedy for the claimant.

Further, the provisions of Part 36 contemplate that a claim may be settled before issue with the benefit of a costs order (see CPR 36.7). The rules anticipate that in respect of a claim where the normal track is the fast track for a claim for vehicle damage arising out of a road traffic accident, in the event of the claim being settled before proceedings are commenced the claimant would ordinarily be entitled to costs of £599. The judge reasoned that where there is an entitlement to an order for payment of this amount there must be a means of obtaining it. Accordingly, and in the absence of any other apparent means of doing so, a claimant whose claim for damages is settled before proceedings are commenced must be able to issue proceedings for an order for costs.

Reasonableness of Instructing Solicitors

The judge turned to the more substantive issue: whether it had been reasonable for Alphabet to instruct solicitors. Neither party had provided any authority which provided any principled or binding determination on this issue. The judge was not satisfied that the test was, as Ms Youshani suggested, whether or not it was necessary for Alphabet to instruct lawyers. There appeared to be no basis in law for such a high hurdle. If she were right it would be open to a losing party to argue that it would have been possible for someone to represent themselves (in many cases that may be so) and that the costs they actually and reasonably incurred would not be recoverable. The question was whether it was reasonable for solicitors to be instructed, albeit that test inherently imports at least some element of need.

The judge accepted that the line drawn in Table 12 was at least indicative for this purpose, so that in a claim for in excess of £10,000 it was prima facie reasonable to instruct solicitors. The judge did not think that merely because Alphabet was a commercial organisation, possibly of some size, with a degree of sophistication or that they would be dealing with these matters on a regular basis, made it unreasonable to instruct solicitors. Just because the company had experience and expertise in car leasing did not mean it had the expertise to deal with a claim for damages. Such a claim might involve consideration as to whether there is responsibility as a matter of law for an accident. Moreover the higher the value of the claim the more important the claim can be assumed to be, and the more important and complex it may be.

Perhaps recognising the force of these points, Ms Youshani’s emphasis was on the assertion that it was premature to instruct solicitors even if it were reasonable in general to instruct solicitors in a claim such as this. True it was that arrangements were being made to deal with the damaged vehicle and agents were appointed to deal with uninsured losses arising out of the accident. However much of the material she relied on was not known by Alphabet at the material time. Moreover, there was no admission of liability by the date of instruction and it seemed to the judge not unreasonable for Alphabet to instruct lawyers from the outset of any potential claim.

On the limited information available, the judge was unable to conclude that there was any degree of certainty that AXA would accept liability or make an offer in the amount claimed. In the event AXA made an offer for the full sum Alphabet said was due on same day as the various letters sent by Alphabet’s solicitors, and this happened very rapidly after solicitor’s instruction. Had Alphabet delayed instruction they may not have received an offer so quickly. In fact liability was somewhat transiently put in doubt at some point thereafter. It appeared that whilst AXA acted promptly once solicitors were instructed, whether they would have acted so quickly if no solicitors were instructed and costs were not payable was perhaps a matter of speculation.

The judge noted that he could readily understand that if there were a protocol or mutual understanding by which insurers were required unilaterally to inform interested parties, such as the owner of the vehicle, if liability is disputed and make a suitable offer within a certain period, things might be different. He was not however made aware of any such protocol or understanding. Alphabet was entitled to proceed with the claim promptly and the judge could see why the prompt resolution of these claims was important for their business. It was not suggested that it was improper or unreasonable for them to press for an admission of liability.

The judge accepted Mr Jackson’s witness evidence as to the reasonable business need to instruct solicitors. There had been no cross-examination of Mr Jackson on the contents of his witness statement. Ultimately it should benefit insurers to have claims presented with the benefit of some legal assistance. For these reasons the judge accepted that it was reasonable to instruct solicitors.

Application of Fixed Recoverable Costs

Before turning to the FRC analysis, the judge noted that having looked at the bill of costs, the costs claim had the appearance of being unreasonably high. He was concerned that before any Part 36 offers were made the parties should first have been clear that a dispute arose. Further, it was difficult to justify any involvement of a Grade A fee earner, and it struck the judge that if payable in principle it was difficult to see how the reasonable cost might have exceeded a very modest sum. It seemed that before the FRC regime came in, it would have been at the very least doubtful that a claim would have been made by the claimant to recover any costs.

The judge noted that where a party represents itself, the FRC do not apply (see CPR 45.4). This exception might be relevant where it is said that no representation was reasonable.

The judge agreed that the normal track for this claim was the fast track. A District Judge may have allocated this matter to the small claims track having regard to the factors in CPR 26.13. The claim may have had limited complexity. But merely because that might have happened was not relevant for the purposes of CPR 45.43. For these purposes the term “normal track” is a term of art, relying on the unreported decision of Costs Judge Haworth in Thaxton v Goodman (23 November 2010).

The judge addressed a conceptual difficulty: it appeared from Table 12 that even if there is settlement of the claim before issue, some view must be taken as to whether the claim “would normally be” allocated to the fast track. Plainly at that stage nobody would have known how long the trial would be, or indeed as to whether there might be the need for expert evidence, so the parties and the court cannot ascertain whether it was the normal track for the purposes of allocation under CPR 26.9(5). CPR 45.43 assumes that the “normal track” can be ascertained even in a claim which settles before issue. It seemed to the judge that the drafter of the rules must have assumed that in deciding whether the Table 12 fixed costs apply to claims which settle pre-issue, the parties and the court should look to the amount of the claim and the nature of the claim but not the provisions of CPR 26.9(5) (length of trial etc.) in deciding the track to which the claim would normally be allocated.

The judge added that he was not sure that it was open to AXA to complain that the costs were too high in this case, albeit the work actually done was very modest. It is in the nature of a fixed costs regime that there will be instances where the payment exceeds that which would be assessed as being reasonable; but there may be other more difficult cases where the fixed costs payable are less than would be reasonable. If the judge were to parse back the costs so that only reasonable costs were allowed it would undermine the ‘swings and roundabouts’ nature of the scheme.

It followed that if the claim was treated as having settled, Alphabet was entitled to £599. Had AXA accepted that in principle that would have been the end of the matter.

The Costs of the Proceedings

The question of what order to make as to the costs of the proceedings themselves emerged as perhaps the more difficult element of the dispute between the parties. Both parties, at least in their written submissions following the hearing in January, appeared to indicate that if the judge were to accept Alphabet’s case on the above two points, it ought to follow that the FRC apply and indeed that that hearing should be treated a “trial” for these purposes. Reference was made to CPR 45.45(1)(d) which provides that the reference in Table 12 to a ‘trial’ is a reference to a ‘final hearing’, and to Bird v Acorn [2017] 1 WLR 1915.

As both advocates observed, the current dispute did not sit easily within the FRC as drafted. The difficulty was perhaps not so obvious in this case given the sums involved but if in principle Alphabet were right about this, and the costs of these proceedings can only be awarded on the basis that the hearing that took place were a ‘trial’, then the costs payable in similar circumstances involving a Complexity Band 4 case might be said to be highly disproportionate (c. £10,000 plus VAT). It might be questioned whether Parliament can have intended such an outcome.

Ms Youshani made it clear that she was not arguing that Alphabet acted unreasonably when issuing the claim under Part 7. The judge was told that in other cases insurers appear to have equated the position to that which applies in Costs-only proceedings, when there is an agreement that costs are payable (see CPR 46.14). Here there was no agreement that costs were payable. But since, on one view, the only real issue was about costs the judge raised the question as to whether this claim could be dealt with under the more general provisions of Part 8. If there is, as the parties agree, a discretion as to whether pre-issue costs are payable then it might be said that there must be a proportionate way of resolving any issue that might arise as to the exercise of that discretion.

The judge determined that it was not necessary or appropriate to determine the issue as to the order as to costs at that stage. He stated that his comments were not intended to do anything more than indicate some concern, not binding determinations. The matter was reserved for further submissions.

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Fixed & Predictable Costs, New Costs Blog, Part 36, Personal Injury

The Court of Appeal’s decision in Attersley v UK Insurance Limited [2026] EWCA Civ 217 resolves an important question about the interplay between Part 36 costs consequences and the fixed costs regime for claims that exit the Pre-Action Protocol for Low Value Personal Injury Claims in Road Traffic Accidents.

Background

The claim arose from a road traffic accident on 9 March 2018. The claimant, Laura Attersley, initiated her claim under the Pre-Action Protocol for Low Value Personal Injury Claims in Road Traffic Accidents (the RTA Protocol) on 19 March 2018, valuing it at up to £10,000. The claim exited the protocol on 9 April 2018 after the defendant, UK Insurance Limited, disputed liability pending enquiries. Liability was subsequently admitted on 29 April 2019.

Shortly before limitation expired, the claimant issued a Part 7 claim form on 13 February 2021, now valuing the claim at up to £150,000 with reference to ongoing physical and psychological issues. The defendant filed a defence admitting liability on 4 March 2021 and, on the same day, made a Part 36 offer of £45,000. The 21-day relevant period for acceptance expired on 25 March 2021.

The case was allocated to the multi-track at a case management conference on 5 January 2022. A costs management order was made. It was agreed by the parties at the CMC that the case was suitable for the multi-track given the quantum claimed, the expert evidence required, and the time estimate for trial. On 8 July 2022, the claimant accepted the defendant’s Part 36 offer, which had not been withdrawn. The acceptance was late, occurring well after the expiry of the relevant period. A dispute arose as to the correct basis for assessing the claimant’s costs up to the date of acceptance, leading to a costs hearing.

Costs Issues Before the Court

The central issue was determining the costs consequences of the claimant’s late acceptance of the defendant’s Part 36 offer. The dispute turned on which rule in CPR Part 36 governed the situation. The claimant argued that because the case had been allocated to the multi-track by the date of acceptance, the fixed costs regime in Section IIIA of Part 45 was disapplied, and therefore her costs fell to be assessed on the standard basis under CPR 36.13. The defendant contended that the claim, having started under the RTA Protocol, was governed by the specific costs consequences for such cases set out in CPR 36.20, which provided for fixed costs even on late acceptance. The court had to decide whether allocation to the multi-track retrospectively ousted the application of rule 36.20.

The Parties’ Positions

The defendant argued that its construction was dictated by the plain wording of the rules. Rule 36.20(1) applied where a claim no longer continued under the RTA Protocol, which was the case here. Rule 36.20(4) specifically addressed late acceptance, entitling the claimant only to fixed costs for the stage applicable when the relevant period expired. It was submitted that rule 36.20 was a specific provision dealing with ex-Protocol claims, which should prevail over the more general rule 36.13. The defendant argued that the claimant’s interpretation would create a perverse incentive to delay accepting offers to try and secure a more favourable costs regime upon later allocation, undermining the purpose of Part 36 to encourage early settlement.

The claimant’s primary argument relied on the Court of Appeal’s decision in Qader v Esure Services Ltd [2016] EWCA Civ 1109. She submitted that the effect of allocation to the multi-track was to disapply the fixed costs regime in Section IIIA of Part 45 entirely. Consequently, the claim no longer fell within the scope of rule 36.20, and the default position in rule 36.13 applied, with costs to be assessed on the standard basis. The claimant emphasised that her claim was always suitable for the multi-track and she was not seeking a windfall, but rather the costs appropriate to such a case. She also advanced an alternative argument that even if rule 36.20 was engaged, rule 36.13(3) (“except where the recoverable costs are fixed by these Rules”) meant standard costs applied because allocation had disapplied the fixed costs.

The Court’s Decision

The Court of Appeal allowed the defendant’s appeal, restoring the order that the claimant was entitled only to fixed costs. Lord Justice Miles, giving the leading judgment with the agreement of Lady Justice Falk and Lord Justice Lewison, held that rule 36.20 applied and that the claimant was restricted to the fixed costs applicable at the date the relevant period expired.

The court found that the natural and straightforward reading of the rules was that where, on the date the relevant period of a Part 36 offer expired, the claim was still within the Section IIIA fixed costs regime (i.e., not yet allocated to the multi-track), the consequences of acceptance were governed by rule 36.20. Rule 36.20(4) expressly fixed the claimant’s entitlement by reference to the costs stage applicable at the expiry date of the relevant period. In this case, that date (25 March 2021) was long before allocation to the multi-track (5 January 2022).

The court confined Qader to its context and rejected the claimant’s broad proposition that it had retrospective effect for all purposes, including Part 36. It held that Qader decided that the fixed costs regime should not apply to a case once it was allocated to the multi-track, but it did not establish that allocation operated to treat the case as if it had never been within the regime for all purposes, retrospectively. The words “for so long as the case is not allocated to the multi-track” in rule 45.29B had a temporal meaning; the regime ceased to apply prospectively from allocation, not retrospectively. The court noted that Qader did not have to consider the interplay with other rules or the question of potential retrospective effect of allocation for other purposes.

The court emphasised that this interpretation promoted certainty and coherence with the purpose of Part 36. Drawing on the reasoning in Qader itself, where Briggs LJ had explained that requiring parties to guess whether a case which settled prior to allocation was subject to fixed costs would introduce damaging uncertainty, the court held that the claimant’s interpretation would similarly bring undesirable uncertainties into the operation of Part 36. It ensured that a defendant’s liability for costs was anchored to the costs environment applicable during the period when the claimant was deciding whether to accept the offer. It would be surprising and potentially unjust if a claimant could improve their costs position by accepting late, based on a subsequent allocation outside the defendant’s control. This would undermine the regime’s aim of encouraging early settlement.

The court rejected the claimant’s alternative argument based on rule 36.13(3). It gave two reasons: first, rule 36.13 is expressed to be “subject to” rule 36.20, so it was necessary to determine whether rule 36.20 applied before considering the specific wording of rule 36.13(3); and second, where a case continued to come within the fixed costs regime on the date when the relevant period ended, the recoverable costs were indeed “fixed” by the rules for the purposes of rule 36.13(3).

The court concluded there was no conflict between the rules, but if there were, the specific rule 36.20 would prevail over the more general rules in Part 45. The court also noted that the Rules Committee may wish to consider scenarios where a Part 36 offer is made after multi-track allocation or where the relevant period expires after such allocation, as the existing rules do not yield entirely straightforward answers in such cases. The court noted that at first instance, Stacey J had found that the claim was “always likely to be allocated to the multi-track” once the Part 7 form was issued, yet the court reached its decision favouring fixed costs even in such a case, underscoring the strength of the rule-based and policy reasoning.

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CPR 44.14(1) | QOCS Following Late Acceptance Of A Part 36 Offer

Part 36 Offers Cannot Displace The Solicitors Act One-Fifth Costs Rule

New Costs Blog, Part 36, Solicitor & Client Costs

The Senior Courts Costs Office’s decision in Griffin v Kleyman & Co Solicitors Ltd [2026] EWHC 257 (SCCO) clarifies that a settlement offer which attempts to reverse the statutory one-fifth rule through CPR Part 36 mechanics will not constitute a “special circumstance” under section 70(10) of the Solicitors Act 1974.

Background

The case concerned an assessment, under section 70 of the Solicitors Act 1974, of bills totalling £181,954.64 (including VAT and disbursements) rendered by the defendant firm, Kleyman & Co Solicitors Ltd, to its former client, Clare Griffin [§1]. The bills related to work undertaken between 30 March 2020 and 28 May 2021 [§1]. The assessment was ordered by consent on 13 May 2022 following a Part 8 application made by Ms Griffin on 30 July 2021 [§1]. That Part 8 application had initially been opposed, with a one-day hearing listed on 18 May 2022 to determine whether an order should be made, but that hearing was rendered unnecessary by the consent order agreed five days earlier [§2].

The consent order incorporated, at paragraph 2, the standard provision taken from Precedent L to Practice Direction 47 requiring the court to assess both the bills and the costs of the Part 8 proceedings, reserving the award and quantification of costs to the conclusion of the assessment process [§3–4]. The detailed assessment was a lengthy process. The claimant’s case on estimates was heard as a preliminary issue but did not succeed; Costs Judge Leonard found that whilst the defendant had failed to advise adequately on estimates, the claimant’s own refusal to conduct herself in a reasonable, realistic and cost-effective fashion made it impossible to set a limit upon the defendant’s recoverable costs [§12]. A final figure for the assessed bill was not established until 7 July 2025, with the process hampered by errors and misunderstandings on both sides [§13].

The bills, originally totalling £181,954.64, were assessed at £154,039.94, a reduction of £27,914.70 (15.34%) [§5]. As Ms Griffin had already paid £174,309.82, a refund of £20,269.88 was due to her [§5]. Importantly, it was established during the assessment that the defendant had incorrectly included in its bills disbursements to the value of £4,334.10, meaning the bills should have totalled £177,620.54 rather than £181,954.64 [§24]. Even without any other deduction, the defendant could never have claimed more than £3,310.72 as an outstanding balance, and the sum of £10,452.82 it had asserted as owing was substantially overstated [§24].

Costs Issues Before the Court

The primary issue was the award of costs for the solicitor-client assessment. The statutory framework in section 70(9) of the Solicitors Act 1974 prescribes that, unless the order for assessment provides otherwise, costs follow the “event” based on a one-fifth rule: if the bill is reduced by one-fifth or more, the solicitor pays the costs; if the reduction is less than one-fifth, the client pays [§7]. As the reduction was 15.34%, section 70(9) dictated that the defendant should receive its assessment costs unless special circumstances under section 70(10) justified a different order [§8].

This presumption could be displaced by section 70(10), which empowers the costs officer to certify special circumstances and the court to make such order as to costs as it sees fit [§7]. The claimant argued that a settlement offer she made constituted such a special circumstance. A secondary issue was the award of costs for the separate Part 8 application, the costs of which were reserved by the consent order and fell to be determined under the court’s general costs discretion in CPR 44.2 [§30].

Settlement Offers

Both parties accepted, for the purposes of this decision, that CPR Part 36 has no application to an assessment under section 70 of the 1974 Act. Costs Judge Leonard had previously given his reasons for reaching that conclusion in Zuhri v Vardags Ltd [2023] EWHC 3050 (SCCO), and neither party wished to reopen that point [§18]. The key part of the rationale behind that earlier decision was that the costs provisions of CPR Part 36 (as secondary legislation) are inconsistent with the costs provisions of subsections (9) and (10) of section 70 (as primary legislation) [§19]. There was, however, no obstacle to an offer not carrying Part 36 consequences being accepted so as to create a binding contract of settlement [§20].

On 23 May 2022, ten days after the assessment order, the claimant sent an offer headed “Part 36 Offer To Settle” proposing that the defendant’s bills be reduced by £28,000 in full and final settlement [§22]. The offer expressly stated it was intended to have Part 36 consequences and that, if accepted, the defendant would be liable for the claimant’s costs under CPR 36.13 [§22]. After deducting the £10,452.82 the defendant claimed as outstanding, the payment to the claimant would have been £17,547.18 [§22].

The defendant responded on 6 June 2022, questioning why the offer was “plus costs” given that a £28,000 reduction was less than the 20% needed to trigger the one-fifth rule in the claimant’s favour [§23]. The defendant offered instead to settle on a “drop hands” basis with no order as to costs, the outstanding balance of £10,452.82 to be written off [§23].

The Court’s Decision on Special Circumstances

Costs Judge Leonard found that the claimant’s 23 May 2022 offer was not sufficient to establish special circumstances displacing the one-fifth rule [§48]. The court accepted that, on the authority of Angel Airlines SA v Dean & Dean [2008] EWHC 1513 (QB), a clear without prejudice offer made in proper time and in proper form can constitute a special circumstance capable of reversing the statutory presumption in section 70(9) [§15, §32]. The judge accepted that the general principle from Wills v Crown Estate Commissioners [2003] 4 Costs LR 581 — that paying parties should make realistic settlement offers at the beginning of assessment proceedings and not at the end — was of general application to solicitor-client assessments as well as inter-party assessments, as recognised in Angel Airlines [§16–17].

However, the judge found the claimant’s offer was not in “proper form” [§35]. The offer provided for a reduction of less than one-fifth of the bills, yet required that, on acceptance, the defendant would lose its section 70(9) right to recover its assessment costs and would instead pay the claimant’s costs by reference to CPR 36.13(1) [§36]. In short, the offer represented a misconceived attempt to reverse the effect of section 70(9) through the operation of CPR Part 36, which was not possible [§37]. The judge found it unsurprising that the defendant was unwilling to accept it, and regarded the defendant’s “drop hands” offer as a more sensible proposition [§38].

The court also rejected the argument that accepting the offer would have left the defendant in a better position. While the billing refund under the offer (£17,547.18) was £2,722.70 less than the eventual refund of £20,269.88, acceptance would have required the defendant to pay the claimant’s costs — estimated at least £10,400 based on document time alone — and to forfeit its right to its own costs under the one-fifth rule [§27, §42–43]. The judge observed that the great majority of solicitors’ bills are reduced at least to some extent on a section 70 assessment, particularly in lengthy retainers involving hard-fought contentious matters, and that a solicitor whose costs are reduced by less than one-fifth may nonetheless regard the outcome as a success if it retains the right to assessment costs [§40]. The preservation of those rights, even subject to an element of uncertainty, outweighed the reduction of the billing refund by £2,722.70, or was at least sufficient to prevent the claimant from relying on the offer as establishing special circumstances [§47].

The judge added that even had he reached a different conclusion on special circumstances, it was unlikely that the claimant could have been awarded the costs of the estimates issue. The claimant’s case on estimates had been overstated and had involved unfounded and unfair allegations of impropriety against the defendant’s principal, Ms Kleyman, which the judge described as “regrettable”. Even after the estimates issue had been determined, the unfounded attacks on Ms Kleyman remained a feature of the proceedings [§49–50].

Conduct and the Award of Assessment Costs

The court awarded the defendant its costs of the assessment under the one-fifth rule, but reduced those costs to 80% to reflect the defendant’s conduct [§57].

The principal factor was the defendant’s negligent overbilling by £4,334.10, which should never have occurred [§53]. The claimant also identified a wider pattern of poor financial management: the defendant failed to produce a cash account as required by the assessment order in May 2022, failed again when ordered on 11 December 2024, and did not finalise a cash account until June 2025, even with some assistance from the claimant’s costs draftsman [§54]. The court found this poor record-keeping had impeded the clarification and resolution of the assessment, and that it should never have been necessary for the claimant to engage in a detailed assessment to discover that she had been overbilled [§55–56].

The Part 8 Costs

The Part 8 application and the assessment costs are distinct: section 70(9) governs only the costs of assessment, while the Part 8 costs fall to be determined under CPR 44.2 [§30]. However, there was logic in the parties’ mutual assumption that the Part 8 costs would follow the assessment costs, since the Part 8 claim was part and parcel of the claimant’s attempt to reduce the defendant’s bills [§31, §58].

The claimant argued she should receive the Part 8 costs on the basis that the defendant had initially opposed her application and only conceded shortly before the hearing. The court did not characterise the consent order as a capitulation, finding instead that it was a sensible compromise to have all disputes resolved within the assessment process [§59–60]. Nevertheless, the defendant could have recognised this at the outset rather than waiting until shortly before the hearing. In the exercise of discretion, the court ordered the claimant to pay 50% of the defendant’s Part 8 costs [§61].

Key Takeaway

This decision reinforces that settlement offers in Solicitors Act assessments must be crafted within the statutory framework, not around it. An offer which attempts to import CPR Part 36 consequences into a section 70 assessment — and which seeks to reverse the one-fifth rule through the backdoor — will fail the “proper form” test from Angel Airlines and will not constitute a special circumstance under section 70(10). Practitioners making settlement offers in solicitor-client assessments should ensure they do not attempt to reverse statutory costs entitlements, should make offers early and in realistic terms, and should be aware that a “drop hands” offer may carry more weight than an ambitious offer encumbered by misconceived Part 36 conditions. Separately, solicitors face tangible costs penalties for overbilling and poor record-keeping even where they prevail on the one-fifth rule.

Monthly Costs Law RoundUp | January 2026

Fixed & Predictable Costs, Monthly Newsletter, New Costs Blog, Part 36, Payment on Account, Solicitor & Client Costs

Costs Orders, Assessment & Payments on Account

VAT On Costs In Liquidation | Moller & Ors v One Touch Solution Ltd (08/01/2026)

HHJ Pearce held that a receiving party in creditors’ voluntary liquidation could recover VAT on assessed costs, as Regulation 111(5) of the VAT Regulations 1995 permits post-deregistration VAT recovery by the estate via liquidators. However, the paying party was not liable for VAT where no actual loss was suffered, with the court drawing a careful distinction between insured and insurer for input tax purposes.

Reserved Costs of Interim Applications Determined at Trial | Gable Insurance AG v Dewsall & Others (08/01/2026)

Deputy Judge Robin Vos determined the reserved costs of interim applications including freezing orders, search orders and contempt proceedings following trial. Applying the Dos Santos v Unitel principles, the court held that the trial outcome remained a relevant factor when costs had been reserved, awarding indemnity costs where a party had relied on a discredited investigative report and making cross-orders reflecting the differing outcomes on each application.

Summary Assessment | Disproportionate Costs Reduced and Recovery Halved for Aggressive Conduct (15/01/2026)

Mr Justice Pepperall reduced claimed costs of £61,366 related to a strike out application to £12,000 on summary assessment, finding them disproportionate, with recovery further limited to 50% due to the claimants’ aggressive conduct in breach of CPR 1.3. The court warned that the parties’ combined budgets of £12.7 million were “enormous” and should not be expected to receive approval at those levels.

“Extraordinarily High” Costs With “Paucity Of Information” Result In £43 Million Payment On Account (21/01/2026)

Mrs Justice O’Farrell DBE ordered a payment on account of £43 million from a £189 million costs claim in the Fundão dam litigation, adopting a cautious approach given the limited supporting evidence. The court stripped out over £109 million in sign-up and collateral costs, applied a 10% reduction for issues lost and awarded pre-judgment interest on costs under CPR 44.2(6)(g).

Costs Procedure & Case Management

Non-Party Costs Order Against Secured Creditors Who Funded Insolvent Company’s Failed Claim (13/01/2026)

HHJ Stephen Davies made a non-party costs order under s.51 Senior Courts Act 1981 against secured creditors who funded an insolvent company’s failed construction claim. Applying Dymocks and Goknur, the court treated the creditors as the “real parties” to the litigation, ordering them to pay a further £995,000 beyond £583,000 in security already provided, holding that the provision of security for costs does not cap non-party costs liability.

CPR 3.14 | Relief From Sanctions Refused After Late Costs Budget (15/01/2026)

Recorder Singer KC refused relief from sanctions after a limited company failed to file its costs budget by the CPR 3.14 deadline, restricting future recoverable costs to court fees only. Applying the Denton three-stage test, the court held that the solicitors’ withdrawal did not constitute good reason, and that an unrepresented limited company remains subject to budgeting requirements unlike a litigant in person.

Hospira Three-Question Test Applied in Multi-Claim IP Litigation (15/01/2026)

Mrs Justice Joanna Smith DBE applied the Hospira v Novartis three-question framework to determine costs following mixed success in multi-claim IP litigation. The defendant was identified as the overall winner despite the claimants’ partial success on trade mark infringement, with the late abandonment of three substantial claims resulting in a net reduction of 30.6% from the defendant’s costs recovery and payments on account at 90% of budgeted and 70% of incurred costs.

Solicitor-Client Costs & Retainers

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CFA Termination | Accepting Repudiation Instead Of Using Contractual Rights Left Solicitor With Nothing (19/01/2026)

Mr Justice Marcus Smith upheld a nil assessment of a solicitor’s bill where the firm accepted a client’s repudiatory breach rather than relying on its contractual termination clause. Applying Dargamo Holdings and Barton v Morris, the court held that the contractual risk allocation in CFAs precludes restitutionary claims, and that quantum meruit is available only as a “last resort” where the contract does not already address the scenario.

Unless Order Stands | Defendants Fail To Evidence Impecuniosity After Non-Payment Of Interim Costs (26/01/2026)

Costs Judge Nagalingam dismissed an application to discharge an unless order following non-payment of a £741,122.85 interim costs order in solicitor-client proceedings. Applying Tibbles and the Denton principles, the court held that impecuniosity must be supported by “detailed, cogent and proper evidence” per Michael Wilson v Sinclair, with the defendants’ ability to secure €200,000 for legal representation undermining their claim of inability to pay.

Inadequate Estimate Fails To Establish Special Circumstances Under s70(3) (27/01/2026)

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Trust & Estate Costs

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Part 36 & Fixed Recoverable Costs

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The Court of Appeal (Bean LJ, Phillips LJ, Stuart-Smith LJ) overruled Mundy v TUI UK Ltd, holding that CPR 36.17(4) enhanced costs consequences for Part 36 liability-only offers require an actual determination of liability rather than a global settlement. A 90:10 liability split remains valid in principle following Huck v Robson, and a court-approved settlement under CPR 21.10 constitutes “judgment” for Part 36 purposes.

Wrongful Interference With Goods Against Police Mandates Multi-Track Allocation | Part 36 Acceptance Does Not Oust Fixed Costs (31/01/2026)

Costs Judge Whalan held that a claim against the police for wrongful interference with goods fell within CPR 26.9(10)(e)(i) as it included an intentional tort, mandating multi-track allocation and excluding fixed recoverable costs. The court also held (obiter) that Part 8 costs-only proceedings issued after 1 October 2023 trigger FRCs for legacy settlements, and that Part 36 acceptance does not constitute “contracting out” under CPR 45.1(3).

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CPR 26.9(10)(e) | Wrongful Interference With Goods Against Police Mandates Multi-Track Allocation | Part 36 Acceptance Does Not Oust Fixed Costs

Actions Against Police, Fixed & Predictable Costs, New Costs Blog, Part 36

Background

The case concerned a claim brought by the Executors of the Estate of Kenneth Collins against the Chief Constable of Thames Valley Police. In July 2015, police officers arrested Mr Collins and, during a search of his property, seized thirteen guns and ammunition [§2]. He was later convicted of related offences in February 2017, and a destruction order was made for some of the items [§3]. Following revocation of his shotgun certificate, requests for the return of the remaining guns to his partner were refused. On 6 November 2018, the police informed Mr Collins that the guns had been destroyed [§4].

Mr Collins instructed Brabners LLP to pursue a claim in negligence and/or wrongful interference with goods, with losses quantified at approximately £228,000. A Letter of Claim was sent on 12 July 2019 [§5]. The Defendant’s response on 28 October 2020 indicated it could identify no defence to liability in principle [§5]. Mr Collins died on 15 April 2022, and the claim was continued by his estate [§6]. Both parties obtained expert valuation evidence.

On 11 January 2023, the Claimant made a Part 36 offer of £50,000 [§7]. On 17 January 2023, the Defendant made a Part 36 offer of £32,500 using Form N242A, which included a term that acceptance within 21 days would render the Defendant liable for the Claimant’s costs in accordance with CPR 36.13 [§8]. The Claimant accepted this offer on 1 February 2023, within the relevant period.

Costs were not agreed. On 31 December 2024, the Claimant issued Part 8 costs-only proceedings [§9]. The Defendant contested the making of an order for assessed costs, leading to the hearing before Costs Judge Whalan.

Costs Issues Before the Court

The sole issue for determination was whether the Claimant was entitled to an order for costs to be assessed on the standard basis, or whether their recovery was limited to fixed recoverable costs under the extended regime introduced by the Civil Procedure (Amendment No. 2) Rules 2023. This turned on three alternative questions [§10]:

1. Whether FRCs were excluded because the substantive claim fell within the scope of CPR 26.9(10)(e), requiring mandatory allocation to the multi-track.
2. Whether FRCs did not apply because the claim was a non-personal injury claim that settled without proceedings being issued, per the transitional provisions of the 2023 Rules.
3. Whether FRCs were ousted by the express terms of the Part 36 settlement agreed in February 2023.

The Parties’ Positions

The Claimant’s Position: Counsel, Mr Waszak, submitted that FRCs did not apply for three reasons. First, the claim fell within CPR 26.9(10)(e)(i) as a “claim against the police which includes a claim for… an intentional or reckless tort” [§13]. The Letter of Claim referenced “wrongful interference with goods”, which encompassed the intentional torts of conversion and trespass to chattels [§14-16]. The destruction of the guns was, by nature, a deliberate act [§17]. This would have mandated multi-track allocation, taking the claim outside the FRC regimes.

Second, on the transitional provisions, Mr Waszak argued that FRCs only applied to non-personal injury claims where substantive “proceedings are issued” on or after 1 October 2023 [§21]. The phrase “proceedings” referred to the substantive claim, not subsequent Part 8 costs proceedings. As the substantive claim settled pre-issue, it was not caught. He cited a Q&A supplement to the White Book in support [§24] and invoked the presumption against retrospective legislation, arguing it would be “manifestly unjust” and “absurd” to apply FRCs retrospectively to a claim conducted under a different costs regime [§26].

Third, he argued that the Part 36 agreement itself expressly ousted FRCs. The Defendant’s offer stated costs would be payable “in accordance with rule 36.13”, which provides for assessment on the standard basis. This constituted an express agreement that costs would not be fixed, per CPR 45.1(3) [§35].

The Defendant’s Position: Counsel, Mr Hogan, submitted that FRCs applied. On the first issue, he contended the claim was, in legal and factual reality, solely in negligence. The Letter of Claim’s language was “redolent of negligence” and contained no elaboration on intentional torts [§18]. The Defendant’s admission of liability was based on negligence.

On the transitional provisions, Mr Hogan argued that the word “claim” in the rules included Part 8 costs-only proceedings. A “claim” remained in being until all elements, including costs, were concluded [§28]. Therefore, issuing costs proceedings after 1 October 2023 triggered the FRC regime for all costs incurred. He cited the county court decisions in Asmat Bi v Tesco Underwriting Ltd [§32] and Bek v Simsek [§33] which reached this conclusion. He also noted that procedural changes are not subject to the rule against retrospectivity [§30].

On the third issue, he submitted that acceptance of a Part 36 offer did not amount to “contracting out”. It merely conferred an entitlement to costs determined by the rules as a whole, which included the potential for FRCs [§36]. Part 36 is a procedural code, not a contractual agreement to oust other rules.

The Court’s Decision

Costs Judge Whalan held that the Claimant was entitled to an order for costs to be assessed on the standard basis.

On Issue 1 (CPR 26.9(10)(e)): The court found that the substantive claim did fall within CPR 26.9(10)(e)(i). The provision required only that the claim “included” a claim for an intentional tort — the provisions were “not exclusive but inclusive” [§19]. The reference to “wrongful interference with goods” in the Letter of Claim “sensibly and inevitably” suggested an alternative claim in conversion and/or trespass to chattels. The destruction of the firearms was “self-evidently the consequence of an intentional act” on the part of the Defendant [§19]. Therefore, the claim would have been mandatorily allocated to the multi-track, placing it outside the scope of FRCs under CPR 45. This finding was determinative in the Claimant’s favour.

On Issue 2 (Transitional Provisions): The court concluded that, had Issue 1 been decided differently, FRCs would have applied by virtue of the transitional provisions [§34]. It rejected the Claimant’s narrow interpretation. The court held that “claim” in the 2023 Rules included Part 8 costs-only proceedings issued to obtain a costs order. There was a single, continuing claim until all elements were concluded. No material distinction should be drawn between the substantive claim and costs-only proceedings. The changes were procedural and not subject to the rule against retrospectivity. The court found the scheme created a “bright line” demarcation and noted the Claimant had eight months to issue costs proceedings before the 1 October 2023 commencement date. It found the county court decisions of Asmat Bi and Bek “reassuring”, though not binding. The court expressly declined to place any reliance on the CPRC Minutes of 3 November 2023 [§34].

On Issue 3 (Contracting Out via Part 36): The court rejected the argument that the Part 36 agreement ousted FRCs [§37]. Offer and acceptance under Part 36 invoked a procedural, not a contractual, process. The entitlement to costs under CPR 36.13 was expressly subject to the proviso “Except where the recoverable costs are fixed by these Rules”. Therefore, it could not be construed as an agreement that costs would not be fixed if the Rules otherwise provided for FRCs.

Implications for Costs Practice

This decision has two significant implications for practitioners.

First, it establishes that claims against the police for wrongful interference with goods — even where framed primarily in negligence — will include an element of intentional tort (conversion or trespass to chattels) sufficient to engage CPR 26.9(10)(e)(i). Such claims must be allocated to the multi-track and are therefore excluded from the FRC regime regardless of value. Practitioners handling claims against the police should carefully consider whether any intentional tort element is present, as this provides an escape route from fixed costs.

Second, the court’s analysis of the transitional provisions is strictly obiter — the claim having already been excluded from FRCs on the intentional tort ground — but it represents the first SCCO-level endorsement of the approach taken by the county courts in Asmat Bi and Bek v Simsek, and is therefore of considerable practical significance. Notably, the court reached this conclusion on the proper construction of section 2(1) of the Civil Procedure (Amendment No. 2) Rules 2023 without placing any reliance on the CPRC Minutes of 3 November 2023, which practitioners had previously been citing as the primary authority for the position that Part 8 costs-only proceedings constitute “proceedings” for the purposes of those transitional provisions. The fact that the SCCO arrived at the same result through independent statutory analysis makes the reasoning considerably more robust. For any legacy non-PI claims that settled pre-issue before October 2023 but where Part 8 costs-only proceedings were issued after that date, this confirms that FRCs will apply. Practitioners with such cases still in the pipeline should take note.

Third, the court’s finding that acceptance of a Part 36 offer does not constitute contracting out of FRCs under CPR 45.1(3) is also technically obiter, but has implications well beyond police claims. The judgment confirms that Part 36 is a self-contained procedural code, and that the entitlement to costs under CPR 36.13 is expressly subject to the proviso “Except where the recoverable costs are fixed by these Rules.” Practitioners relying on Part 36 settlements to escape FRCs will need to seek express contractual language — a standard Part 36 acceptance, on its own, will not suffice.

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Court Of Appeal Overrules Mundy | 90:10 Liability Offers Valid Under Part 36 — But Only Where Liability Is Determined

Fixed & Predictable Costs, New Costs Blog, Part 36, Personal Injury

The Court of Appeal’s decision in Smithstone v Tranmoor Primary School [2026] EWCA Civ 13 overrules Mundy v TUI and confirms that 90:10 liability Part 36 offers are valid in principle, while clarifying that such offers only trigger CPR 36.17(4) where there is a determination of liability rather than a global monetary settlement.

Background

The claim arose from a minor injury sustained by Jayden Smithstone, a ten-year-old pupil, when his fingers became trapped in a door at Tranmoor Primary School on 25 September 2018 [§2]. A claim in negligence and under the Occupiers’ Liability Act 1957 was submitted via the Claims Notification Form into the Portal on 31 October 2018 [§3], bringing it into the Low Value Personal Injury Protocol and the associated fixed costs regime.

On 13 December 2018, before any medical report had been served, the claimant made a Part 36 offer to settle liability on a 90/10 basis in his favour [§4]. This offer was rejected by the defendant on 19 December 2018. Proceedings were subsequently issued. The defendant denied liability and raised issues of contributory negligence in its Defence [§5]. The case was allocated to the fast track and listed for trial. A further without prejudice offer to settle the entire claim for £3,500 was made by the claimant on 18 March 2020, which was not accepted [§6-7].

The matter was listed for a fast track trial before Deputy District Judge Ruwena Khan on 26 November 2020 [§8]. On the day of trial, the defendant’s witness failed to attend and the parties negotiated a settlement of the claim in the global sum of £2,650 [§8-9]. The settlement was put before DDJ Khan for approval pursuant to CPR r.21.10, as the claimant was a child. The judge approved the settlement sum [§10].

The parties were unable to agree on costs. The claimant argued that the case should be taken outside of the fixed costs regime due to the consequences of its Part 36 offer on liability, invoking CPR r.36.17 [§10]. The defendant contended that fixed costs applied. DDJ Khan ruled that the fixed costs regime applied, stating there was nothing exceptional about the case and that the settlement sum was lower than the claimant’s previous offers [§12]. An order was sealed on Form N24 recording the approval of the £2,650 settlement and ordering the defendant to pay the claimant’s fixed costs, summarily assessed at £7,114.50 [§13].

Permission to appeal was granted more than three years later [§14]. His Honour Judge Baddeley heard the appeal on 19 August 2024. The defendant relied heavily on the High Court decision in Mundy v TUI UK Ltd [§14]. HHJ Baddeley, considering himself bound by Mundy, dismissed the appeal [§21]. The claimant then appealed to the Court of Appeal.

Costs Issues Before the Court

The central dispute concerned the recoverable costs following settlement of a fast track personal injury claim initially subject to fixed costs. The Court of Appeal was required to determine four specific issues [§27]:

1. 1. Whether the court-approved settlement constituted a “judgment” for the purposes of engaging CPR r.36.17.
  2. Whether, as a matter of principle, a claimant’s Part 36 offer to settle liability on a 90/10 basis (without specifying a monetary sum) could be effective to trigger the enhanced costs consequences under CPR r.36.17(4).
  3. If so, whether on the facts of this case the settlement outcome was “at least as advantageous to the Claimant” as the proposals in his 90/10 liability offer.
  4. If the answer to issue 3 was no, whether it would be “unjust” to confine the claimant’s solicitors to recovering fixed costs.

The Parties’ Positions

The Appellant/Claimant’s Position: The claimant argued that DDJ Khan had erred in law by not awarding the consequences under CPR r.36.17(4) when there was a “judgment” which was “at least as advantageous” as the terms of the Part 36 offer, and no finding that such consequences would be unjust [§23(1)]. It was submitted that the decision in Mundy v TUI, which the first appeal judge felt bound by, was decided per incuriam and should be overruled [§23(2)]. In the alternative, it was argued that the defendant’s conduct in running the case to a full trial on liability without making any offer on liability constituted circumstances justifying the use of the escape clause in CPR r.36.17 where it would be “unjust” to confine the claimant to fixed costs [§23(3)].

The Respondent/Defendant’s Position: The defendant advanced two primary arguments [§24]. First, it contended that the court-approved settlement was not a “judgment” for the purposes of CPR r.36.17, as it was a consensual agreement placed before the court for approval under CPR r.21.10. Second, should the court find there was a judgment, the 90/10 liability offer could not engage CPR r.36.17(4) because: (a) for a money claim, “more advantageous” is defined in money terms under CPR 36.17(2); (b) the offer made no monetary proposal and was therefore incapable of comparison; (c) the offer sought a liability concession which was never given; and (d) the settlement sum was less than 90% of the claimant’s own monetary offer [§24(ii)]. The defendant argued the 90/10 offer was not a genuine offer of concession but a tactical step, relying on AB v CD [§25]. In the further alternative, the defendant submitted it would be “unjust” to apply CPR r.36.17(4) in the context of a low value money claim where liability was not subject to separate determination [§26].

The Court’s Decision

The Court of Appeal (Bean LJ giving the lead judgment, with Phillips and Stuart-Smith LJJ agreeing) dismissed the appeal [§38-40].

On the first issue, the court held definitively that the court order approving the settlement was both a judgment and an order [§30]. Relying on Vanden Recycling Ltd v Kras Recycling BV [§29], the court found that the Form N24, which ordered the defendant to pay both damages and costs, was in substance and effect a final decision on the claim. Attempts to distinguish between the terms “judgment” and “order” were misconceived in this context [§30].

On the second and pivotal issue of principle, the Court of Appeal overruled the High Court decision in Mundy v TUI [§35]. Bean LJ found it “unfortunate” that Mundy had been decided without reference to binding Court of Appeal authority, specifically Huck v Robson, and indeed that save on the separate question of set-off, “no authorities are referred to at all” [§34]. In Huck, the Court of Appeal had held that a claimant’s 95/5 liability offer was effective for Part 36 costs consequences [§32]. The policy of the Civil Procedure Rules was to encourage settlement, including of discrete issues like liability [§34]. A 90/10 offer could constitute a genuine offer to compromise, reflecting a claimant’s legitimate desire for certainty over the ordeal of trial, and was not inherently incompatible with the mechanism of CPR r.36.17 [§32, §34]. The “generous outcome” for a claimant who beats their own Part 36 offer was consistent with the policy of the rule as affirmed in Broadhurst v Tan [§33]. Bean LJ also referred to Hill J’s observation in Chapman v Mid and South Essex NHS Foundation Trust that the factual context of Mundy was important [§34].

On the third issue – application to the facts – the claimant’s case failed [§36]. The court held that while a 90/10 liability offer could in principle engage CPR r.36.17, it did not do so on the facts of this case. For the offer to be triggered, the judgment needed to be “at least as advantageous” as the offer’s proposals. Here, liability was never determined [§36]. If the defendant had admitted liability, or DDJ Khan had tried the case and found the defendant 100% liable, there would have been a potential basis for awarding the claimant, pursuant to CPR 36.17, costs relating to the issue of liability from the date of the 90:10 offer [§36]. But that was not what happened. It was therefore impossible to say that the outcome of the case was a finding, even on liability, more advantageous to the claimant than a 90/10 apportionment of liability [§36]. Consequently, CPR r.36.17(4) did not apply.

On the fourth issue, the court rejected the argument that it was unjust to confine the claimant to fixed costs [§37]. Citing Webb v Liverpool Women’s NHS Foundation Trust, Bean LJ noted that the burden of showing that the usual consequences of Part 36 will be “unjust” presents a “formidable obstacle” [§37]. The defendant’s conduct in defending the claim to trial was not, in itself, a sufficient reason to depart from the fixed costs regime. Conversely, the court noted that had the claimant triggered CPR r.36.17, it would equally not have been unjust to require the defendant to pay the enhanced costs [§37].

As the claimant failed on the third issue, the order for fixed costs made by DDJ Khan was upheld and the appeal was dismissed [§38].

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The High Court’s decision in Thomas v Secretary of State for the Home Department [2025] EWHC 3274 (KB) confirms that consent orders settling damages claims trigger the costs consequences under CPR 36.17.

Background

The claimant, Michael Anthony Thomas, a Jamaican national, brought proceedings against the Secretary of State for the Home Department for unlawful detention during early 2020. Following a contested hearing, judgment on liability was given on 22 November 2024, finding that the claimant had indeed been unlawfully detained for a period [§1]. The issue of quantum was adjourned for further submissions but was subsequently agreed between the parties [§2].

On 23 July 2025, a consent order was agreed [§3]. It recorded the defendant’s agreement to pay the claimant £16,000 in full and final settlement of his claim for damages, with the issue of legal costs remaining unresolved. The order provided a timetable for written submissions on costs, to be determined by the court without a hearing. Prior to the liability trial, the claimant had made four Part 36 offers, all for sums lower than the eventual £16,000 settlement figure [§5].

Costs Issues Before the Court

The primary issue for determination was whether the costs consequences under CPR 36.17 were triggered by the settlement [§6]. The rule provides enhanced costs consequences for a claimant who obtains a judgment at least as advantageous as their own Part 36 offer. The settlement sum of £16,000 exceeded all the claimant’s previous Part 36 offers. The dispute centred on whether a settlement encapsulated in a consent order constituted a “judgment” for the purposes of engaging CPR 36.17, or whether the rule required a formal judgment following a contested trial.

The Parties’ Positions

The Defendant’s Position: Counsel, Mr Gwion Lewis KC, argued that CPR 36.17 was not engaged [§7]. He relied on the rule’s title, “Costs consequences following judgment”, and its wording which refers to consequences applying “upon judgment being entered”. He submitted that the term “judgment” connoted an independent judicial decision on damages following a contested hearing [§8]. A settlement, even one embodied in a court order approved by a judge, was not a “judgment” and therefore the automatic costs consequences of Part 36 did not apply.

The Claimant’s Position: Counsel, Mr Gordon Lee, contended that the compromise contained within a sealed court order was equivalent to a judgment being entered [§9]. He argued this was merely a semantic difference. In support, he referred the court to the Court of Appeal authority of Vanden Recycling Ltd v Kras Recycling BV [2017] EWCA Civ 354 [§10], which considered the effect of a consent order in the context of claims against concurrent tortfeasors.

The Court’s Decision

The court found in favour of the claimant, holding that the true effect of the consent order of 23 July 2025 was to enter judgment in favour of the claimant in the sum of £16,000 [§15]. The court applied the reasoning from Vanden Recycling, where the Court of Appeal had focused on the substance and effect of a consent order rather than its precise wording [§12]. Hamblen LJ had stated that if an order requires a defendant to pay a specified sum in respect of the claimant’s claims and is a final order, then “in substance and in effect” it is the same as an order made following a judgment.

The court concluded that the mere fact that the word “judgment” did not appear in the consent order was of no consequence when considering the order’s effect [§13]. Indeed, an order made by the court following a trial could have been drafted in precisely the same terms. The consent order was enforceable in precisely the same way as if the court had awarded damages to the claimant at the end of the trial [§15]. This interpretation was supported by commentary in the White Book to CPR 40, which noted that the Civil Procedure Rules provide no clear basis for distinguishing between the terms “judgment” and “order” [§14].

The court recorded that the defendant had not argued it would be unjust in all the circumstances for the Part 36 costs consequences to apply, and the court observed there would be no reasonable basis for such a finding [§16].

As the settlement sum was more advantageous than the claimant’s Part 36 offers, the costs consequences under CPR 36.17 were engaged. The court accepted that the usual costs consequences should run from 8 November 2021, being 21 days after the first Part 36 offer of £15,000 [§17]. The court stated that the resulting order would follow the claimant’s written proposal (paragraph 10 of Mr Lee’s submissions), subject to two modifications: the interest rate on costs was set at 7%, and the claimant was required to bear the costs of the application dated 9 May 2025 to adduce a witness statement [§18].

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The High Court’s decision in Matrix Receivables Ltd v Musst Holdings Ltd [2025] EWHC 3204 (Ch) confirms that the “paying party” test is not determinative where a claimant’s overall recovery is a fraction of its claim and its principal claims have failed.

Background

The claim arose from a dispute concerning the introduction of investment customers to a fund manager, Astra. The claimant, Matrix Receivables Limited, was the assignee of a claim originally belonging to Matrix Money Management Limited (MMM). It alleged that MMM had played a significant role in introducing two customers, 2B and Crown, to Astra via the defendant, Musst Holdings Limited. Matrix claimed it was entitled to a share of the management and performance fees subsequently received by Musst from Astra.

The claim was advanced on two alternative bases: in contract and in unjust enrichment. The proceedings were brought in 2020 in the Business and Property Courts under case number BL-2020-001417. A substantive trial took place over seven days [§46]. In the main judgment, [2025] EWHC 2487 (Ch) [§1], the court dismissed the contractual claims in their entirety. On the unjust enrichment claims, the court found that Matrix was entitled to a share of the management fees received by Musst after 4 September 2014, awarding judgment in the sum of £175,380.76 plus interest [§2] (referred to elsewhere in the judgment as approximately US$175,000 [§34]). Matrix had sought 80% of management fees but was awarded 40% in respect of one customer and 20% in respect of another, with further reduction because receipts prior to September 2014 were statute-barred [§39]. The larger claim for a share of the performance fees was dismissed on the basis that the chain of causation between MMM’s introductory services and Musst’s eventual receipt of those fees had been broken. The court found that whatever service was provided in 2012 was “eclipsed” by the years of costs, risk and litigation effort undertaken by Musst against Astra, coupled with the lack of assistance—indeed opposition—on the part of Mr Reeves, the controller of Matrix [§40].

Following the substantive judgment, a consequentials hearing was held on 4 November 2025 to determine issues including interest, permission to appeal, costs, and a stay of execution [§1, §3]. Permission to appeal was refused, the court finding no real prospect of success [§15]. This blog post focuses on the court’s analysis and decision regarding costs.

Costs Issues Before the Court

The primary issue for the court was determining the appropriate costs order following a judgment where the claimant had succeeded on only a small part of its overall claim. The court needed to decide which party was the “successful party” for the purposes of CPR 44.2, and whether to depart from the general rule that the unsuccessful party pays the successful party’s costs. This involved a detailed evaluation of three matters: the relative success and failure on the different heads of claim (contract, management fees, performance fees); the proportionality of the recovery to the costs incurred; and the conduct of the parties—particularly the principal witness for the claimant.

The Parties’ Positions

Matrix’s Position: Matrix argued it was the successful party because it was the party to whom money was ordered to be paid [§16]. It relied on authorities such as AL Barnes v Time Talk [2003] EWCA Civ 402, Day v Day [2006] EWCA Civ 415, and Fox v Foundation Piling Ltd [2011] EWCA Civ 790, which emphasise that in commercial litigation, the “surest indicator of success” is identifying who has to pay money at the end of the case [§16–17]. Matrix also cited Global Energy Horizons v Gray [2021] Costs LR 133 for the proposition that a defendant facing an exorbitant claim should protect its position through a Part 36 offer [§19]. It submitted that the absence of a Calderbank or Part 36 offer from Musst was significant, as such offers are the recognised mechanism for a defendant to protect its position on costs [§25]. Matrix contended that the unsuccessful contract and performance fee claims did not substantially increase costs, as they were based on the same facts as the successful management fee claim [§23].

Musst’s Position: Musst contended that, looking at the substance of the litigation, it was the successful party [§26]. It relied on the test from Medway Primary Care Trust v Marcus [2011] EWCA Civ 750, which asks “who, as a matter of substance and reality, has won?” [§26]. Musst argued that “the juice” of the action was the claim for performance fees, which failed entirely [§34]. The recovery for management fees was less than 5% of the total sums claimed and was dwarfed by the costs of the action [§34–35]. It submitted that maintaining the weak contract claims until trial was unreasonable conduct [§36]. Musst also pointed to the conduct of Mr Reeves (Matrix’s controller), who had actively assisted Astra in litigation against Musst—a position fundamentally at odds with Matrix’s claim for a share of the fees generated by that very litigation [§36].

The Court’s Decision

The court held that the just order was that there should be no order as to costs [§81]. In reaching this decision, Sir Clive Freedman (sitting as a Deputy Judge of the High Court) conducted a detailed evaluation, proceeding through three stages of analysis.

The “Paying Party” Test

The court acknowledged the force of the “paying party” test, describing it as “highly relevant” [§38]. However, it concluded that the test was not “the be all and end all of the analysis” on the unusual facts of this case [§38]. The court expressly declined to treat the first instance decisions of Hamad Aldrees v Rotex [2019] EWHC 526 (TCC) and Rotam v GAT [2018] EWHC 3006 (Comm)—both of which had looked beyond the paying party test—as wrongly decided [§38].

Evaluating Success and Failure

The court found that it was “artificial” to label either party as the overall winner [§76]. While Matrix had secured a money judgment, its success was limited to a small fraction of its claim. The claim for performance fees—described as “the only sensible raison d’être for the claim being commenced or continuing” [§73]—had failed completely, as had the alternative contract claims. The sum recovered was “small relative to the costs of the claim as a whole” [§80(5)]. The court noted that if the claim had been confined to the management fees from the outset, it would likely have been conducted more proportionately, “confined to say 3 days rather than 7 days” and without the involvement of leading counsel [§46].

The court also drew a connection between delay and the costs outcome. The same unexplained delay in obtaining the assignment from MMM and bringing the claim that led to the refusal of pre-action interest [§5–6] also featured in the conduct analysis, reinforcing the conclusion that Matrix could not claim the full fruits of success [§68].

Conduct

The court considered the parties’ conduct to be a relevant factor under CPR 44.2 and 44.4 [§55–57]. It was critical of Matrix for maintaining “at best very weak” contract claims right up to trial [§53]. The claims were “barely maintained” from the opening and formally abandoned at the end of the trial; the court found there was “nothing to it” and Matrix should have notified Musst so that it would not have had to prepare to meet them [§53, §72].

More significantly, the court found the conduct of Mr Reeves justified a “significant adjustment” in the costs order [§69]. His actions in supporting Astra against Musst in parallel litigation—including providing disclosure, a witness statement, and giving evidence at trial for Astra—were “entirely at odds” with Matrix’s interests in the instant case [§60]. The court found that this was not merely a rejection of evidence, which is commonplace, but a “very stark and unusual” situation involving fundamentally contradictory positions [§65]. Mr Reeves’ evidence was found to have “all the hallmarks of someone who has suspended truth for his own changing interests from time to time” and to “appear to turn with the wind” [§61–62]. The court was entitled to deprecate this conduct and take it into account in respect of the costs of the action [§66–67].

Conclusion

The court concluded that neither party was successful [§76]. Even if Matrix were to be regarded as the successful party by virtue of being the receiving party, the numerous factors outlined—including the total failure of the contract claims, the total failure of the performance fees claim which was “the juice of the action”, the partial failure on management fees, the very small amount recovered relative to both the claim and the costs, and the criticised conduct of Mr Reeves—provided ample reason to depart from the general rule [§79–80]. The court ordered that there be no order as to costs [§81].

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The County Court’s decision in Barry v Essex County Council [2025] EWCC 64 confirms that enhanced interest on costs awarded under CPR 36.17(4)(c) is calculated using the aggregate costs method from the date of offer expiry. This is of course a first instance non-binding decision in the county court and should be treated accordingly.

Background

The claimant, Kelly Barry, brought a claim for damages against Essex County Council for personal injuries sustained in a tripping accident on 18th March 2018. Liability was denied by the defendant. On 7th October 2019, the claimant made a Part 36 offer to settle liability on a 70/30 basis in her favour, which was rejected. The offer expired on 28th October 2019. The matter proceeded to a trial on 5th and 6th July 2023 before District Judge Mills (as he then was). Quantum was partly agreed at £27,031, subject to liability. The trial judge found wholly in the claimant’s favour on liability, making no deduction for contributory negligence, and entered judgment for the agreed sum of £27,031.

As the claimant had beaten her own Part 36 offer, the judge applied the consequences under CPR 36.17(4). He awarded an additional 10% of the damages (£2,703.10) and enhanced interest on those damages at 9% per annum from 28th October 2019 to the first day of trial, amounting to £8,971.33. Regarding costs, the judge ordered that the defendant pay the claimant’s costs up to 28th October 2019 on the standard basis, and costs from that date on the indemnity basis. Crucially, he also ordered, pursuant to CPR 36.17(4)(c), that the defendant pay “additional interest on those costs… from 28th October 2019 at the rate of 9% per annum.”

A Bill of Costs was subsequently served totalling £91,173.92. The parties later agreed the base costs at £75,000, excluding interest and the costs of the assessment. A dispute arose solely concerning the method for calculating the interest on the post-offer indemnity costs, leading the claimant to issue an application on 25th April 2025 to resolve the issue.

Costs Issues Before the Court

The single issue for determination was the correct method for calculating interest on costs awarded under CPR 36.17(4)(c). The claimant argued for the “Aggregate Costs method,” whereby interest at 9% per annum is applied to the total sum of all costs incurred from the expiry of the Part 36 offer (28th October 2019) until the date of the costs order (6th July 2023). The defendant contended for the “Individual Item method,” whereby interest is calculated separately on each individual item of costs incurred after the offer’s expiry, running from the specific date that item of work was done or the disbursement was incurred.

The Parties’ Positions

Claimant’s Submissions: Mr Meehan, for the claimant, advanced two primary arguments. Firstly, he submitted that on a natural reading of District Judge Mills’s order, the only reasonable construction was that it intended the Aggregate Costs method. His second, alternative argument was that if the interpretation remained open, the Aggregate Costs method was consistent with case law, the policy behind CPR Part 36, and practical reality. He argued that the Court of Appeal’s decision in McPhilemy v Times Newspapers Ltd, upon which the defendant relied, was not binding. He relied on the subsequent case of OMV Petrom SA v Glencore International AG, which indicated that the policy behind Part 36 had evolved to include a non-compensatory, punitive element designed to encourage settlement—a “carrot and stick” scheme. He further argued that the Individual Item method was practically unworkable, creating unnecessary complexity for costs judges.

Defendant’s Submissions: Mr Roderick, for the defendant, clarified that the Individual Item method involved recalculating the interest due each time a new cost was incurred post-offer. He contended that this method was consistent with the precedent in McPhilemy, which he submitted was binding, where the Court of Appeal had expressly ordered that interest run from the date work was done. He accepted that Part 36 now had a punitive element but argued that this was delivered through the enhanced rate of interest itself, not the method of calculation. He submitted that the Aggregate Costs method could lead to absurd outcomes, such as interest running on a counsel’s brief fee for some three years before it was actually incurred. He argued for consistency with the principle that interest on damages typically runs from the date the loss was incurred. Finally, he asserted that the Individual Item method was practical and straightforward to operate using spreadsheets and electronic bills.

The Court’s Decision

Deputy District Judge Rathod found in favour of the claimant, holding that the Aggregate Costs method was the correct approach. The decision was reached for several key reasons.

- - First, on a straightforward construction of District Judge Mills’s order, the judge found that the wording indicated a clear intention to apply interest at 9% per annum to the entirety of the post-offer costs from a single specified date. This aligned with the “broad brush” approach to interest on costs endorsed by Lord Neuberger in Simcoe v Jacuzzi UK Group plc, which discouraged overly detailed and prolonged arguments on such points.
  - Second, the judge held that he was not bound to follow the specific outcome in McPhilemy. He analysed that the ratio of McPhilemy concerned the trial judge’s erroneous exercise of discretion in refusing Part 36 consequences, not the precise mechanics of interest calculation. The specific order made in that case was a product of its own facts and was not an issue that had been fully argued. Furthermore, the judge found McPhilemy to be of limited persuasive authority as it pre-dated the Jackson reforms, which introduced a stronger “carrot and stick” policy into Part 36, and its reasoning was based on compensating a claimant for loss of use of money paid on account—a factor not present in this case where a conditional fee agreement was used.
  - Third, the Court of Appeal’s decision in Petrom was found to dilute the authority of McPhilemy. The judge noted that in Petrom, the Chancellor held that enhanced interest awards under Part 36 were not purely compensatory and could include a non-compensatory element. This shift in policy supported an interpretation that could lead to a more punitive result for a defendant who rejected a reasonable offer.
  - Fourth, the judge rejected the defendant’s argument that the Aggregate Costs method produced an “absurd” result by potentially accruing interest on costs before they were incurred. He stated that if this was the outcome of a rule designed to encourage settlement, it was a fair consequence for a defendant who chose not to accept an offer. He also found the defendant’s analogy with interest on damages to be a false one, noting that in personal injury cases, a simple half-rate from the date of accident is often used to avoid complexity.

Finally, the judge agreed with the claimant that the Individual Item method was unworkable in practice. It would add significant complexity to detailed assessments and, crucially, would be impossible to apply in cases involving summary assessment of costs, where individual dates of incurrence are not examined. The Aggregate Costs method, in contrast, was consistent with authority, the policy of Part 36, and practical reality.

The application was therefore allowed, and it was declared that interest should be calculated at 9% per annum on the aggregate of all costs incurred from 28th October 2019 to 6th July 2023.