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It was somewhat inevitable that the Part 36 provisions would be tested before the court at some point, given the conflicting interpretations as to how they apply where a Part 36 offer is accepted late by a Claimant and what fixed recoverable costs are ultimately payable (and to who).
In a non-fixed costs matter the general rule is that the Claimant, in such circumstances would be entitled to the costs to expiry of the relevant period of the Part 36 offer whilst the Defendant would be entitled to costs from expiry of the relevant period to acceptance. This concept, however, does not translate into fixed recoverable costs with work tied to a stage rather than a specific period of time.
The High Court has considered this issue in the matter of Lintern v Haven Insurance Company Ltd [2026] EWHC 2478 (KB) (28 July 2026). Permission to appeal is currently sought so it is likely this issue will come before the Court of Appeal.
It is essential reading for any litigators dealing with cases where fixed recoverable costs may apply.
Speed Read
For those wanting a speed read:
The Claimant accepted the Defendant’s Part 36 offer, 11 months late on the first day of trial, before opening.
A dispute arose as to what costs the Defendant was entitled to.
The Claimant accepted that the Defendant was entitled to costs. It was conceded that the quantification of those costs would be undertaken by calculating the adverse costs by identifying the applicable costs for the stage where acceptance took place then subtracting the fixed costs to which the Claimant was entitled (i.e. the costs applicable at the expiry of the relevant period).
The court initially allowed £6,091 plus VAT for the Defendant’s costs then subtracted the Claimant’s entitlement of £2,168 plus VAT, awarding the Defendant costs of £3,923 plus VAT.
The Claimant, however, contended that they were also entitled separately to their Fixed Recoverable Costs. Their position was that the Defendant was entitled to costs of £3,923 plus VAT less the Claimant’s entitlement of £2,168 plus VAT.
The Claimant’s position was effectively that the Defendant should not get the whole of the Fixed Costs in the same way that late acceptance in a non-fixed costs matter would not see a Defendant get costs of the whole of the claim.
The Defendant’s position was that the wording of the rules led to no other interpretation. They stated that what happens is that “the court fixes the Defendant's costs at the date of acceptance – in this case B3 – and then takes away the costs that the Claimant would otherwise be entitled to under subparagraph 3 – in this case B1 – and makes a single costs order in favour of the Defendant.”
The High Court rejected the Claimant’s appeal though accepted that either interpretation was rational. It also accepted that the outcome would be tougher on the Claimant than they would like.
In terms of the differing scenarios the Judgment details the following:
Part 36 offer accepted by the Claimant within the relevant period - It is recorded that the parties agreed the Claimant would receive its fixed recoverable costs and the Defendant would receive nothing.
Part 36 offer accepted late by the Claimant in the same stage it was made - It is recorded that the parties agreed that the Claimant gets its costs and the Defendant gets its costs. In effect it becomes costs neutral.
Part 36 offer accepted late by the Claimant in a subsequent stage - No costs order is made in favour of the Claimant, the Defendant gets a costs order which is the fixed costs applicable at acceptance less the fixed costs the Claimant would have been entitled to.
Background
The claim arose from a credit hire claim which had been allocated to the Fast Track. The Defendant made a Part 36 offer shortly after the issue of proceedings. The Claimant sought to accept the offer 11 months later, on the first day of trial, before opening. The parties could not agree on costs.
The initial decision
The court initially held that there would be no costs order in favour of the Claimant at all, even though they had to issue proceedings before they received the Part 36 offer. The upshot was that the Defendant was entitled to:
The fixed costs for the stage at acceptance.
The advocacy fee.
The Claimant was entitled to:
The fixed costs at the expiry of the relevant period.
Here this was the applicable FRC for post-issue but prior to allocation.
The Defendant was therefore entitled to £6,091 plus VAT less the Claimant’s costs entitlement of £2,168 plus VAT. The net result was that the Defendant was awarded FRC of £3,923 plus VAT.
The Appeal
The Claimant appealed this decision contending that the court had misinterpreted CPR r36.23.
It was accepted that late acceptance would trigger adverse costs consequences but the Claimant’s position was that:
The rules governing the Defendant’s costs entitlement pertained to quantification only.
The Claimant’s costs entitlement was to be paid separately after quantification.
Rather than the Defendant receiving an entitlement to the full fixed costs of £6,091 plus VAT less the Claimant’s entitlement of £2,168 plus VAT, the correct approach was to quantify the Defendant’s entitlement as £3,923 plus VAT less the Claimant’s entitlement of £2,168 plus VAT. This would mean the Defendant's costs entitlement was £1,755 plus VAT rather than £3,923 plus VAT.
The Defendant contended that:
The court had interpreted the CPR correctly and that these stated that the Defendant’s costs were based on the stage the offer was accepted “less the fixed costs to which the Claimant is entitled”
The proper way to interpret the rules was to consider them as they were written which is that “the court fixes the Defendant's costs at the date of acceptance – in this case B3 – and then takes away the costs that the Claimant would otherwise be entitled to under subparagraph 3 – in this case B1 – and makes a single costs order in favour of the Defendant.”
Analysis and Conclusion
The High Court considered the rules and submissions of the parties:
“23.This is a tricky issue. I accept that the purposes of these rules are in accordance with the summary by Appellant's counsel, but I also take into account the background of the Part 36 rules generally and the requirements of the Courts and the Civil Procedure Rules for parties to do their very best to settle their litigation as early as reasonably possible.
24.I take into account the principles behind CPR Part 36, which included: (1) the need to set up a structure for parties to make official offers with clear rules about when they should be accepted; (2) to encourage settlement; (3) to provide cost consequences which should bear down on the parties to encourage early settlement if possible; and (4) to provide penalties if the parties fail to settle when they should have settled after a reasonable Part 36 offer. There are, for instance, substantial penalties in Part 36 by way of additional damages and interest in the normal course of cases.
25.Running those general Part 36 principles through into the fixed costs Part 36 provisions is not necessarily a correct approach because they are a self-contained code. However, I will look at the effects of the two interpretations put forwards by the parties to see whether the principles will assist me on the correct interpretation.
26.Under the Appellant's interpretation, this is the way the rules operate. Under subrule (1), if a Part 36 offer is made and accepted in time, the Claimant wins its fixed costs in Table 12 in the appropriate stage and the Defendant gets nothing. Under subrule (9), where a Part 36 is accepted late but in the same stage, the Claimant gets its costs at that stage under Table 12, and the Defendant gets its costs at that stage under Table 12. Both sets of lawyers are paid under the fixed costs regime. For very late acceptance under subrule (8), under the Appellant's interpretation, the Claimant gets a costs order, but only up until the stage when the Part 36 offer was made - therefore, there is a penalty for going on another one or two stages, because they do not get paid for that – and the Defendant gets its costs, but only for the stages after it made its Part 36 offer. Namely, in this case, the Defendant gets B3 costs less stage B1 costs. That penalises the Defendant for making the Part 36 offer after issue, but it does not penalise the Defendant for the cost after making the Part 36 offer. In other words, the Defendant gets paid for all of the costs after the stage in which the Part 36 offer was made. That interpretation seems to me to be wholly within the purpose of Part 36 generally and is understandable within general structure of the Part 36 approach.
27.The Respondent's interpretation is the same for "on time" acceptance and for "same stage late acceptance", but it is completely different for "very late acceptance". Under the Respondent's interpretation, the Claimant does not get any costs at all for very late acceptance and the Defendant gets only its stage B3 fixed costs less its B1 fixed. Therefore, the Defendant is in exactly the same position but the Claimant is punished severely with no costs award at all. The unfairness identified by the Appellant is that he had to issue to get the offer and will not be paid for the costs of doing so. However, he should have taken the offer in time and did not do so.
28.Both of these approaches, it seems to me, are wholly within purposes of the Part 36 regime generally and could well have been within the contemplation of the rules committee. Neither is so outlandish as to be inappropriate or in breach of purpose or principle. Certainly, the Respondent's interpretation is tougher on Claimant lawyers, but, the Claimant lawyers did accept very late, so they are being penalised to such an extent that they get no cost award at all. That is a heavy inducement to claimants to carefully consider accepting Part 36 offers on time.”
The High Court concluded thus:
“29.I am not prepared, when construing the words of CPR Part 36.23(8), to say that the Recorder was wrong. The words say what they say and they are slightly backed up by the words in subparagraph (1), in which only a Claimant's costs order is provided for. No defence costs order is allowed at all. In subparagraph (9), it provides expressly for two costs order; (a) a costs order in favour of the Claimant under subparagraph (3); and (b) a costs order in favour of the Defendant. However, when one looks at subparagraph (8), there is no provision expressly there for a costs order in favour of the Claimant at all. That at least slightly supports the Recorder's interpretation in making no costs order in favour of the Claimant.
30.The matter which determines the appeal in my judgment is the use of the words "less the fixed costs to which the Claimant is entitled under paragraph 3(a)(1)". What the rules committee could have said is that the Defendant would get the fixed costs under B3 of Table 12, the stage at which Part 36 was accepted, less the fixed costs that the Defendant would have received, as at the date they made the Part 36 offer; in this case, B1 (that is the Appellant's interpretation) however, the Rule does not say that. It is my responsibility to interpret the words in their normal English context. I consider that I can properly do so within the relevant purposes which the case law makes clear were behind the Rules. I consider that the Recorder interpreted the relevant rules correctly. I realise this is tougher on the Claimant than the Appellant would like, but I do not consider that the Recorder was wrong in his interpretation. Therefore, I dismiss the appeal.”
Consequences
This is the first reported decision on the construction of Part 36 under the post-October 2023 rules. It highlights one particular area of ambiguity around how costs entitlements work where there is late acceptance in a subsequent stage by a Claimant.
The Judgment clearly records that there is ambiguity and sense in both interpretations. The decision leads to the outcome that a Claimant will not receive a costs order where it accepts a Part 36 offer late in a subsequent stage. It is already reported that permission to appeal has been sought and this reinforces the ambiguity. It is highly likely the matter will proceed for consideration by the Court of Appeal.
In any event, practitioners need to recognise that Part 36 in Fixed Costs matters operates differently and is arguably tougher than in a non-fixed costs case, where the costs awarded to both sides bear a relationship to the work actually undertaken.
Here the issue as to late acceptance under the same stage was not in dispute and was interestingly agreed between the parties. The common position between the parties was that this would result in a costs order for both sides, with the net effect being that the outcome is costs neutral. This position though remains uncertain. There are contentions that the construction of CPR 36.23(9) is such that a Claimant would receive no entitlement for the stage late acceptance occurs, whilst others contend (as appears to have been agreed here) that there are two separate costs entitlements, one for the Claimant and one for the Defendant.
The judgment raises some legitimate questions as to whether Part 36 operates equitably in fixed costs matters. Is it right for instance that late acceptance by one day by a Claimant could wipe-out any costs entitlement, whilst late acceptance by a Defendant over an extended period would see the starting position be the applicable Fixed Recoverable Costs. In an Intermediate Track matter, for example,a Claimant Part 36 offer made pre-issue but accepted post-issue, pre-service of the Defence, would see the starting point remain the same fixed recoverable costs because the stage would not have changed. This could see significant time and expense spent by a Claimant solicitor, likely passed on to the lay client, who absent an order for costs exceeding FRC or unreasonable behaviour would not receive a penny more in costs terms (save for disbursements).
The key takeaway for practitioners is that where a Part 36 offer is made, it must be given serious consideration. The system appears to be designed to encourage early settlements. For Defendants a strong early Part 36 offer will always give the strongest possible costs protections, whilst for a Claimant an early Part 36 offer from a Defendant will give rise to the greatest costs risk.
We are always happy to discuss any aspect of costs. If you have any issues or concerns over the court fee changes then please get in touch for an informal chat - call 01482 534567 or email info@carterburnett.co.uk