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

Claimant’s Part 36 liability offers that do not specify a monetary sum can, in principle, engage the enhanced costs consequences under CPR 36.17(4). However, the rule only applies where liability is actually determined — global settlement without a liability finding is insufficient.

SMITHSTONE V TRANMOOR PRIMARY SCHOOL [2026] EWCA Civ 13

In Smithstone v Tranmoor Primary School [2026] EWCA Civ 13, the Court of Appeal dismissed an appeal concerning costs following settlement of a fast-track personal injury claim subject to the fixed costs regime. The claimant made a Part 36 offer to settle liability on a 90/10 basis, which was rejected. The claim subsequently settled for £2,650 at trial without any determination of liability. The Deputy District Judge awarded fixed costs only. On appeal, the court held that the approval order constituted a “judgment” for CPR r.36.17 purposes. On the central issue of principle, the court overruled Mundy v TUI UK Ltd, holding that a 90/10 liability offer could, following Huck v Robson, engage CPR r.36.17(4) as a genuine offer to compromise. However, on the facts, the rule was not triggered because liability was never determined; a global monetary settlement could not be shown to be “at least as advantageous” as the liability offer. The order for fixed costs of £7,114.50 was upheld.

Accordingly, while Judge Baddeley understandably regarded Mundy v Tui as binding on him, I would overrule it on the issue of principle. That is not, however, enough to get the Claimant home... The difficulty for the Claimant’s solicitors on the facts is that liability was never determined. If the Defendant had admitted liability or DDJ Khan had tried the case and found the Defendant 100% liable, there would be a case for awarding the Claimant, pursuant to CPR 36.17, costs relating to the issue of liability from the date of the Claimant’s 90:10 offer. But that is not what happened. It cannot be said that the outcome of the case was a finding, even on liability, more advantageous to the Claimant than a 90:10 apportionment of liability. I therefore consider that CPR 36.17(4) does not apply on the facts of this case and that DDJ Khan was right to decide that the Claimant’s solicitors were limited to recovering fixed costs.

Citations

Mundy v TUI UK Ltd [2023] EWHC 385 (Ch) A 90:10 liability-only Part 36 offer by the claimant was held not to satisfy CPR 36.17, as such offers did not permit a straightforward monetary comparison and risked conflicting consequences under subparagraphs (3) and (4). AB v CD [2011] EWHC 602 (Ch) The court reiterated that a valid Part 36 offer must contain a genuine element of concession of significant value that the offeror is capable of giving up at the time the offer is made. Vanden Recycling Limited v Kras Recycling BV [2017] EWCA Civ 354 A consent order requiring payment of a specified sum was treated as a judgment, as its effect was sufficiently final and substantive to meet that definition under applicable rules. Huck v Robson [2002] EWCA Civ 398 A claimant’s offer to accept a 95:5 liability apportionment was upheld as effective under Part 36, even where such an apportionment would not likely be made at trial, provided it reflected a genuine attempt to compromise. Broadhurst v Tan [2016] EWCA Civ 94 The court confirmed that where a claimant obtains a judgment more advantageous than a Part 36 offer, CPR 36.17 entitles them to indemnity costs and enhancements even if this results in more generous recovery than fixed costs allow. Webb v Liverpool Women’s NHS Foundation Trust [2016] EWCA Civ 365 The court held that the burden of establishing injustice to displace the usual consequences of a successful Part 36 offer is a significant one, requiring compelling reasons.

Track allocation housing disrepair CPR 46.13 settlement sum costs restriction SCCO

MRO fee markup cap 25% detailed assessment personal injury Senior Courts Costs Office

Security for costs refused CPR 25.27 very high probability success excessive estimate King's Bench

IPEC scale costs transfer Patents Court PD 30 para 9.2 costs caps Court of Appeal

Costs budget variation CPR 3.15A promptness significant development unfair prejudice Chancery Division

Costs budgeting inter partes proportionality high hourly rates AI disclosure Patents Court CPR 3E

Beneficiary personal liability section 71(3) Solicitors Act 1974 indemnity costs VAT self-supply SCCO

Summary assessment indemnity costs unless order payment on account disclosure default Chancery Division

Provisional assessment set aside CPR 3.1(7) points of dispute filing duty PD 47 para 14.3 SCCO

Fixed recoverable costs police claims CPR 26.9(10)(e) intentional tort exemption

Key Points

A court order approving a settlement under CPR r.21.10 and directing payment of damages and costs constitutes a “judgment” for the purposes of engaging the costs consequences under CPR Part 36. [28-30]
A claimant’s Part 36 offer to settle liability on a percentage basis (such as 90/10) is capable in principle of being a genuine offer to compromise and of triggering the enhanced costs consequences under CPR r.36.17(4), provided it represents a real concession. [31-34]
For a claimant to obtain the costs consequences under CPR r.36.17(4) based on a liability-only Part 36 offer, the subsequent judgment or outcome must be demonstrably “at least as advantageous” as the proposals in that offer, which requires a determination or concession on liability in the claimant’s favour. [35-36]
The burden of demonstrating that it would be “unjust” to apply the usual costs consequences of CPR Part 36 is a formidable obstacle, and a defendant’s conduct in defending a claim to trial without engaging in earlier settlement negotiations is not, in itself, a sufficient reason to depart from a fixed costs regime. [37]
Where a claim settles for a global monetary sum without a determination or admission of liability, it cannot be said that the outcome is more advantageous than a claimant’s earlier Part 36 offer based on a percentage split of liability, and therefore CPR r.36.17(4) will not be engaged. [36]

"...as Hill J observed in Chapman v Mid and South Essex NHS Foundation Trust (re costs) [2023] EWCA 1871 (KB); [2023] Costs LR 1145, the factual context of Mundy is important. As noted above, the claimant had made two separate Part 36 offers, one based on a 90:10 liability split and one to accept £20,000 in settlement of the claim; the Defendant had made a Part 36 offer of £4,000 in full and final settlement; and the Claimant was ultimately awarded damages of £3,805.60. In those circumstances it is perhaps unsurprising that the judge was unwilling to find that the Claimant, who had been seeking damages of more than five times the amount which he recovered, was entitled to a favourable order for costs pursuant to CPR 36.17. But insofar as Collins-Rice J may have suggested (obiter) that a 90:10 liability offer is ineffective as a matter of principle to engage CPR 36.17, I disagree."

Key Findings In The Case

The order made by Deputy District Judge Khan approving the settlement under CPR r.21.10 and directing payment of damages and costs constituted a final decision on the claim and was therefore a “judgment” for the purposes of triggering the costs consequences under CPR Part 36 [28–30].
The Claimant’s solicitors made a valid and genuine Part 36 offer to settle liability on a 90/10 basis prior to trial; this offer constituted a real concession and was not merely tactical or unrealistic, thus capable in principle of engaging CPR 36.17(4) if the conditions were met [31–34].
The agreed settlement of £2,650 was a global figure made without any admission or determination of liability; since there was neither an express finding nor a concession on liability in the Claimant’s favour, the judgment was not “at least as advantageous” as the earlier 90/10 liability offer and therefore CPR 36.17(4) was not engaged [35–36].
Deputy District Judge Khan correctly held that this was a standard fast track personal injury case falling within the fixed costs regime, and that the Defendant’s conduct—failing to engage with settlement offers until trial—did not constitute exceptional circumstances justifying departure from that regime [12].
The Claimant failed to demonstrate that it would be unjust to apply the fixed costs regime in the absence of the enhanced consequences under CPR 36.17, as the Defendant’s conduct did not meet the requisite threshold for the “unjust” exception in CPR 36.17(5) or justify invoking the escape clause from fixed recoverable costs [37].

"I do not accept the fallback submission for the Claimant that this is an unjust result, nor that the Defendant’s refusal to admit liability or to engage in settlement negotiations before reaching the door of the court is in itself a reason for departing from the fixed costs regime. As Stanley Burnton LJ said in Webb v Liverpool Women’s NHS Foundation Trust [2016] EWCA Civ 365, the burden of showing that the usual consequences of Part 36 will be “unjust” presents a “formidable obstacle”. I should add that if the Claimant had made an offer which brought CPR 36.17 into play, it would equally not have been unjust to the Defendant to be required to pay the extra costs set out in that Rule."

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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