Costs on acceptance of Part 36 offer pre-action

Where a Part 36 offer is made and accepted pre-action, so that no proceedings are issued, is the claimant entitled to its costs? The answer was yes in a recent High Court decision, KT and others (minors) v Bruce [2011] EWHC B14 (QB).

Where a Part 36 offer is accepted within the period specified in the offer, the claimant is entitled to "the costs of the proceedings" up to the date on which notice of acceptance is served (CPR 36.10). The rules do not clarify whether "proceedings" for these purposes is restricted to post-issue proceedings, or whether it also includes steps taken where no proceedings are issued.

In this case, the Deputy High Court Judge (John Leighton Williams QC) expressed the view that CPR 36.10 is not restricted to post-issue proceedings, and that costs are recoverable under the rule even where no proceedings have been issued. In reaching this conclusion, he disagreed with an earlier county court decision, Soloman v Cromwell Group Plc, 2 August 2010, which held that CPR 36.10 creates an entitlement to costs only if there are proceedings in existence. A similar conclusion to Soloman was reached by Master Haworth of the Supreme Court Costs Office in Udogaranya v Nwagw [2010] EWHC 90186, which is not referred to in KT v Bruce.

If the approach in KT v Bruce is followed in other cases, a claimant will be entitled to costs where an offer is accepted pre-action. However, given the conflicting views expressed at first instance, claimants in these circumstances may wish to put the matter beyond doubt by ensuring that their entitlement to pre-action costs is agreed expressly in writing.