The Court of Appeal in Attersley v UK Insurance Ltd has clarified the interaction between Part 36 offers and the fixed recoverable costs (FRC) regime where a claimant accepts a defendant’s offer after the expiry of the relevant period and the claim has subsequently been allocated to the multi-track.
The court held that the costs consequences of the offer are determined by the costs regime applicable when the relevant period expired, not by later procedural developments in the litigation.
The decision resolves an uncertainty created by a High Court ruling which suggested that a claimant might escape the fixed costs regime by delaying acceptance of a Part 36 offer until after a claim had been allocated to the multi-track.
Part 36 and costs consequences
Part 36 provides a structured mechanism for settlement offers which carry defined costs consequences designed to encourage early resolution of disputes.
Where a claimant accepts a defendant’s Part 36 offer within the relevant period (usually 21 days), the claimant is entitled to their costs up to the date of acceptance.
If a claimant fails to beat a defendant’s offer at trial, the usual consequence under CPR 36.17(3) is that the claimant must pay the defendant’s costs from the expiry of the relevant period, unless the court considers it unjust to do so.
Conversely, where a claimant matches or beats their own Part 36 offer at trial, the court will normally order enhanced consequences under CPR 36.17(4), including indemnity costs, enhanced interest and an additional damages uplift.
The regime is intentionally robust. It is designed to encourage parties to evaluate settlement offers carefully and to discourage unnecessary litigation.
The factual background
The claimant sustained injuries in a road traffic accident. The claim initially proceeded under the RTA Protocol but exited the protocol due to liability disputes. The relevant chronology was as follows:
- March 2021: The defendant made a Part 36 offer of £45,000. At that point the claim was subject to the fixed recoverable costs regime. The claimant did not accept the offer within the relevant period.
- January 2022: The claim was allocated to the multi-track.
- July 2022: The claimant accepted the defendant’s Part 36 offer approximately 16 months after the relevant period had expired.
The issue
The dispute concerned the costs recoverable up to the expiry of the offer.
The claimant argued that because the claim had been allocated to the multi-track before the offer was accepted, the fixed recoverable costs regime no longer applied and the claimant was entitled to standard basis costs.
The defendant contended that because the claim was within the FRC regime when the relevant period expired, the claimant’s recoverable costs were limited to fixed costs. The issue was therefore whether a later change in track allocation could retrospectively alter the costs consequences of a Part 36 offer.
The Court of Appeal’s decision
The Court of Appeal allowed the defendant’s appeal. The court held that the claimant was restricted to fixed recoverable costs.
The reasoning centred on CPR 36.20, which governs the costs consequences where a Part 36 offer is accepted after the relevant period in a case falling within the FRC regime.
The court emphasised that the relevant question is which costs regime applied when the relevant period expired. At that point the claim fell within the fixed recoverable costs framework. Subsequent allocation to the multi-track could not retrospectively alter the consequences of the offer.
The relevance of Qader v Esure
The claimant relied on Qader v Esure, where the Court of Appeal held that fixed recoverable costs do not apply to claims allocated to the multi-track.
However, the court rejected the suggestion that Qader operated retrospectively. While allocation to the multi-track may affect the costs regime going forward, it does not re-characterise the consequences of a Part 36 offer whose relevant period expired while the claim remained within the fixed costs framework.
Certainty in the Part 36 regime
The decision reflects a broader structural feature of Part 36. Costs consequences are attached to identifiable procedural events, most notably the expiry of the relevant period. Once that event occurs, the applicable costs framework is effectively fixed.
Allowing later procedural developments to alter those consequences retrospectively would undermine the certainty that Part 36 is designed to provide when parties evaluate settlement offers.
The Court of Appeal’s approach also preserves the settlement incentives embedded in the regime. If parties could improve their costs position simply by delaying acceptance until the litigation had evolved procedurally, the predictive value of Part 36 offers would be significantly weakened.
Practical implications
The decision provides useful guidance for practitioners.
- First, late acceptance of a Part 36 offer does not allow a party to escape the fixed recoverable costs regime where the relevant period expired while the claim fell within that regime.
- Second, the case confirms the continuing strategic importance of early Part 36 offers, particularly in cases which may later involve track allocation disputes.
- Third, the judgment emphasises that settlement decisions must be assessed against the procedural context existing at the time the offer expires, rather than by reference to developments which may occur later in the litigation.
Significance following the FRC reforms
The decision is likely to assume greater importance following the October 2023 expansion of fixed recoverable costs, which extended the regime to claims worth up to £100,000 and introduced the intermediate track.
Track allocation disputes are now more common, and claims may move between different procedural regimes as litigation develops. The reasoning in Attersley suggests that such developments will not retrospectively alter the costs consequences of earlier Part 36 offers.
Conclusion
The Court of Appeal’s decision in Attersley restores clarity to the relationship between Part 36 and the fixed recoverable costs regime.
The costs consequences of a Part 36 offer are determined by the procedural context in which the relevant period expired. Subsequent changes in track allocation do not retrospectively alter those consequences.
For practitioners, the lesson is clear: delay in accepting a reasonable Part 36 offer will not convert a fixed costs case into one capable of attracting standard basis costs.
