When Part 36 Offers Demand Total Capitulation | Matière v ABM

The Technology and Construction Court’s nuanced approach to Part 36 consequences demonstrates that offers demanding “total capitulation” on substantial counterclaims may not attract full indemnity costs protection, even where the offeror ultimately succeeds at trial.

MATIÈRE SAS V ABM PRECAST SOLUTIONS LTD [2025] EWHC 2030 (TCC)

In Matière SAS v ABM Precast Solutions Ltd the court determined consequential costs orders following a liability judgment. The central issue was whether the claimant was entitled to the full beneficial consequences of its April 2022 Part 36 offer under CPR 36.17(4). The court found the offer was a genuine attempt to settle the claim, representing a 12% concession, but was not a genuine attempt to settle the counterclaim, which it valued at ‘nil’ against a multi-million pound valuation. Consequently, it was held unjust to apply the indemnity costs consequence to the counterclaim. Matière was awarded its costs of the claim on the standard basis to the expiry of the relevant period and on an indemnity basis thereafter, but its costs of the counterclaim were awarded on the standard basis throughout. The court rejected the defendant’s application under CPR 44.2 for a 70% reduction in costs, finding the sub-issues it succeeded on were merely stepping stones to its overall failed loss of chance claim. The court awarded the 10% uplift on damages (£37,329.51) per CPR 36.17(4)(d). Enhanced interest on the principal sum and on costs under CPR 36.17(4)(a) and (c) was awarded, but the court exercised its discretion to set the rate at 7% above base, not the maximum 10%, and only for the claim costs from the relevant period. A payment on account of costs was ordered at 90% of the approved budget, amounting to £935,000.

Mr Lewis submits that Matière was right to be confident in its defence on the merits of the counterclaim. I do not agree. A key reason why I disagree is that Matière knew (or should be taken to have known) that the nature of its own conduct was of a type that was likely to place it in breach. The fact that, at the time of the offer, the correct legal basis of the duty had not been set out by ABM should not have played a significant part in its thinking because there was always a risk that that basis could have been improved upon. In any event, at the date of the offer, Matière could not have been so confident about its prospects that the counterclaim would fail that it was worth offering a nil amount in respect of it. An offer of 'nil' in respect of the counterclaim, if accepted, would have amounted to total capitulation.

Citations

Webb v Liverpool Women’s NHS Foundation Trust [2016] EWCA Civ 365 Where a claimant obtains judgment more advantageous than its own Part 36 offer, the court must apply CPR 36.17(4) unless it would be unjust to do so, and the burden on the offeree to establish such injustice is a formidable obstacle. Smith v Trafford Housing Trust [2012] EWHC 3320 (Ch) Costs consequences under Part 36 turn on whether it is unjust to apply them, not the reasonableness of the offeree’s refusal to accept the offer, with broad discretion permitted but guided by all the relevant circumstances. Matthews v Metal Improvements Co. Inc [2007] EWCA Civ 215 In evaluating the justice of costs consequences under a Part 36 offer, the focus must be on whether it would be unjust to enforce them, not on whether the offeree acted reasonably in refusing the offer. Factortame Ltd v Secretary of State for Transport [2002] EWCA Civ 22 The court assessing costs must consider who is in reality the unsuccessful party and who is responsible for unnecessary costs being incurred. Lilleyman v Lilleyman (Costs) [2012] EWHC 1056 (Ch) There is no limitation on the type of factors the court may consider when assessing whether it would be unjust to give effect to the default costs consequences under Part 36. AB v CD [2011] EWHC 602 (Ch) A Part 36 offer must involve genuine concession and cannot constitute a demand for total capitulation; offers lacking such concession are not genuine attempts to settle and will not attract Part 36 costs benefits. Jockey Club Racecourse Ltd v Willmott Dixon Construction Ltd [2016] EWHC 167 (TCC) Even a very high value claimant Part 36 offer, such as of 95%, may be a genuine offer to settle and effective for CPR 36.17 purposes where the claimant’s case is extremely strong. Mundy v TUI UK Ltd [2023] EWHC 385 (KB) A claimant’s Part 36 offer of 90% may not be genuine where there is no realistic prospect of the claimant being found partly responsible, rendering the offer incapable of constituting a proper attempt to settle. Yieldpoint Stable Value Fund LP v Kimura Commodity Trade Finance Fund Ltd [2023] EWHC 1512 (Comm) Part 36 offers must be assessed contextually to determine whether they genuinely offered settlement; very high claimant offers may be effective where proportionate and meaningful in the proceedings’ context. Rawbank SA v Travelex Banknotes Ltd [2020] EWHC 1619 (Ch) The court may uphold a Part 36 offer representing 99.7% of the claim sum where the claimant’s case is overwhelmingly strong, supporting the genuineness of the offer. JMX v Norfolk & Norwich Hospitals NHS Foundation Trust [2018] EWHC 185 (QB) A claimant’s offer of 90% was accepted as genuine and attracted Part 36 advantages where it included meaningful concession and was likely to achieve settlement without trial. Telefónica UK Ltd v The Office of Communications [2020] EWCA Civ 1374 Even extremely high-value Part 36 offers can be considered genuine where proportionate to the strength of the case and the overall conduct of the dispute. OMV Petrom SA v Glencore International AG [2017] EWCA Civ 195 An uplift of up to 10% interest under CPR 36.17 is discretionary and must be assessed proportionately in light of the parties’ conduct, timing of the offer, and impact on proceedings. BXB v Watch Tower and Bible Tract of Pennsylvania [2020] EWHC 656 (QB) Where a party’s conduct is not unreasonable beyond failure to engage in ADR, an enhanced interest rate under CPR 36.17 may be set at a moderate level, such as 4% above base rate. ABFA Commodities Trading Ltd v Petraco Oil Company SA [2024] Costs LR 623 Courts may reduce costs to mark disapproval where a party’s dishonesty has prolonged litigation or occasioned additional cost, even where the dishonesty was incidental to the claim’s failure. Hutchinson v Neale [2012] EWCA Civ 345 There is no rule that dishonest conduct by a successful party automatically justifies a departure from the general rule that costs follow the event; relevance and effect of the conduct on proceedings must be evaluated. HLB Kidsons v Lloyds Underwriters [2007] EWHC 2699 (Comm) A successful party’s costs should not be reduced merely for failing on some issues; courts should consider whether the failures significantly changed the character or scope of the litigation.

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 claimant who obtains judgment at least as advantageous as its own valid Part 36 offer is entitled to the costs consequences under CPR 36.17(4) unless the court determines it would be unjust, a threshold described as a “formidable obstacle” for the defendant to overcome. [13, 17–18, 43]
In assessing whether it is unjust to impose the full consequences of CPR 36.17(4), the court must consider all the circumstances of the case, including whether the offer was a genuine attempt to settle the proceedings and not a mere tactical step. [12, 24–27]
A Part 36 offer covering both a claim and a counterclaim must represent a genuine attempt to settle the proceedings as a whole. A ‘nil’ offer for a substantial and discrete counterclaim may, in the specific circumstances of a case, be found not to be a genuine attempt to settle that part of the proceedings if it amounts to a demand for total capitulation without a meaningful concession.[26-27]
When a claimant’s Part 36 offer only constitutes a genuine attempt to settle part of the proceedings, the court may apply Part 36 consequences partially, distinguishing between the claim and the counterclaim. [27–28, 44]
Enhanced interest under CPR 36.17(4) is discretionary and must be proportionate to the circumstances, with 10% over base rate representing a maximum rather than a starting point; reasons for lower awards may include the conduct of the case or procedural history. [52–56]

"Whilst recognising the formidable nature of the obstacle (see above) I am wholly satisfied that the feature in CPR 36.17(5)(e) is sufficient, in and of itself, to mean that it would be unjust to apply the full effect of CPR 36.17(4) in respect of the Part 36 Offer."

Key Findings In The Case

The Claimant’s Part 36 offer made in April 2022 was held to be a genuine attempt to settle the claim element of the proceedings, but not the counterclaim, as it offered no monetary concession in respect of a substantial counterclaim pleaded at nearly £5 million at the time, amounting to an offer of ‘total capitulation’ on that part of the case [20–27].
The judge found it would be unjust to apply the full costs consequences of CPR 36.17(4) to the counterclaim, given that the Claimant’s Part 36 offer did not constitute a genuine effort to compromise that element of the proceedings, resulting in standard costs being awarded for the counterclaim rather than indemnity costs [27–28, 44].
The Defendant failed to establish that it lacked sufficient information to evaluate the Claimant’s Part 36 offer in April 2022, as it had already launched a counterclaim supported by relevant allegations of breach, causation and loss, and had access to material indicating its chances on causation were limited [30–32].
The judge rejected the Defendant’s argument that the Claimant’s dishonest conduct during the relevant contractual dealings, and later denial of breach, should result in any reduction or adverse adjustment to its cost recovery, concluding that while the conduct was wrongful, it was not of an egregious nature or causative of materially increased litigation costs [38–41].
The Claimant was awarded enhanced interest at 7% over base rate on the principal claim and its costs from the expiry of the relevant period of the Part 36 offer, reflecting the Defendant’s failure to settle a claim it ultimately did not seriously contest at trial; however, no such uplift was awarded on the counterclaim costs, which remained on a standard basis [54–56].

"In my judgment, it is not enough for ABM to point to its successes at trial in demonstrating the scope of Matière's contractual obligations and breaches by Matière. These were just stepping stones along the way to proving the loss of chance contended for. ABM failed at the one of the last stepping stones, in respect of causation, for three separate reasons. I do not consider it appropriate to divide the case into separate issues of obligation, breach, causation and loss when they all formed part of a single claim for damages for loss of a chance."

The Technology and Construction Court’s decision in Matière SAS v ABM Precast Solutions Ltd [2025] EWHC 2030 (TCC) establishes that Part 36 offers demanding “total capitulation” on multi-million pound counterclaims may not attract full indemnity costs consequences.

Background

The dispute arose from a Consortium Agreement between the French claimant, Matière SAS, and the defendant, ABM Precast Solutions Ltd. In December 2021, Matière issued proceedings to recover £373,295.06 in unpaid invoices. ABM’s Defence and Counterclaim, served in February 2022, partially admitted the debt, acknowledging £157,241.91 was due subject to set-off. The remainder of the claim was not admitted. ABM counterclaimed for damages for breach of express obligations of good faith under the Consortium Agreement and a subsequent Collaboration Agreement. The counterclaim was initially valued at approximately £4.8 million but was later amended to £18.92 million, alternatively £16.62 million.

By the time of the trial, ABM had admitted all but £35,000 of Matière’s claim. The court’s liability judgment, handed down on 11 June 2025, found in favour of Matière on the claim, awarding the full sum of £373,295.06 plus interest. The counterclaim was dismissed in its entirety.

A significant feature of the procedural history was a Part 36 offer made by Matière on 4 April 2022. This offer proposed settling the entire proceedings, including the claim and counterclaim, for a single payment of £350,000 to be made to Matière. The offer was expressed to have the consequences set out in CPR Part 36. ABM did not respond to this offer. A further Part 36 offer was made by ABM on 17 September 2024, shortly before trial, in which it offered to accept £5 million to settle the proceedings.

Costs Issues Before the Court

The court was required to determine the consequential matters arising from its liability judgment, with the primary focus being the appropriate costs orders. The central issue was whether Matière was entitled to the full beneficial consequences under CPR 36.17(4) as a result of its April 2022 Part 36 offer. This included claims for indemnity costs from the expiry of the offer’s relevant period, enhanced interest on both the damages awarded and costs, and an additional 10% uplift on the damages sum. A further issue was whether, in the alternative, the court should make an issue-based or proportionate costs order to reflect ABM’s success on certain sub-issues at trial and Matière’s conduct. Finally, the court was asked to determine the appropriate rate of interest on sums awarded and to rule on Matière’s application for a substantial payment on account of costs.

The Parties’ Positions

Matière argued that its April 2022 offer was a valid Part 36 offer and that it had achieved a result more advantageous than the terms of that offer. It contended that the full consequences of CPR 36.17(4) must follow unless ABM could demonstrate it would be unjust, a burden it characterised as a “formidable obstacle”. Matière submitted that the offer was a genuine attempt to settle the entire proceedings and that ABM had sufficient information to evaluate it at the time it was made. It sought indemnity costs from the expiry of the relevant period, the maximum 10% enhanced interest, the 10% uplift on damages, and a payment on account of 95% of its budgeted costs.

ABM accepted that the Part 36 offer was valid in relation to the claim and that Matière was therefore entitled to the 10% uplift on damages and enhanced interest on the claim. However, it contended that the offer was not a genuine attempt to settle the proceedings in respect of the counterclaim. ABM argued that an offer of ‘nil’ for a counterclaim valued at millions was a demand for total capitulation. It further submitted that, applying the principles of CPR 44.2, the court should make a proportionate costs order and reduce Matière’s costs of the counterclaim by 70% to reflect its success on certain issues (scope of duty and findings of breach) and to mark the court’s disapproval of Matière’s dishonest conduct. ABM also argued that the maximum 10% enhanced interest rate was inappropriate and proposed a rate of 4% above base rate.

The Court’s Decision

The court conducted a detailed analysis of whether it would be unjust to apply the full Part 36 consequences. It found that the April 2022 offer was a genuine attempt to settle the *claim*, representing a concession of approximately 12% of its value. However, it was not a genuine attempt to settle the *counterclaim*. The offer of ‘nil’ for a multi-million pound counterclaim amounted to a demand for total capitulation. The court noted that whilst Matière was ultimately successful in defending the counterclaim, it could not have been so confident of its prospects at the time of the offer that a nil valuation was justified, particularly given the court’s subsequent findings that Matière had acted dishonestly and in breach of its duties.

Consequently, the court held it would be unjust to apply the indemnity costs consequence of CPR 36.17(4) to the costs of the counterclaim. Matière was awarded its costs of the claim on a standard basis up to the expiry of the relevant period (25 April 2022) and on an indemnity basis thereafter. Its costs of the counterclaim were awarded on a standard basis throughout.

The court rejected ABM’s argument for a 70% reduction in costs under CPR 44.2. It found that the issues on which ABM succeeded (scope of duty and breach) were merely stepping stones to establishing its loss of chance claim, on which it failed entirely. There was significant overlap in the evidence between breach and causation, and ABM did not succeed on all its alleged breaches. The court also declined to reduce costs to mark its disapproval of Matière’s conduct, finding the dishonesty was not at the most egregious level and did not materially fuel the dispute or lengthen the trial beyond what was necessary.

On interest, the court awarded Matière the 10% uplift on the principal sum (£37,329.51) as provided for by CPR 36.17(4)(d). For the period before the relevant date, pre-judgment interest on the claim was awarded at 4% above base rate. Enhanced interest under CPR 36.17(4)(a) was awarded on the principal sum from the relevant date, but the court exercised its discretion to set this at 7% above base rate, not the maximum 10%. Enhanced interest on costs under CPR 36.17(4)(c) was also awarded at 7% above base rate, but only for the costs of the claim from the relevant date. Interest on the costs of the counterclaim was awarded at 2% above base rate.

On the application for a payment on account of costs, the court ordered ABM to pay 90% of Matière’s approved budgeted costs, amounting to £935,000. Interest on this payment was set at 2% above base rate. The costs of the consequential hearing were deemed to be part of the general costs of the proceedings and were subsumed within the overall costs order.

Key Takeaway

This decision reinforces that Part 36’s protective regime cannot be manipulated through offers that demand total capitulation on substantial claims. Practitioners should ensure settlement offers involve genuine concessions across all aspects of disputes to secure full Part 36 benefits.

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