A Counterclaiming Defendant Can Make A Valid "claimant's" Part 36 Offer

• Published date: 03 February 2022
• Subject Matter: Litigation, Mediation & Arbitration, Arbitration & Dispute Resolution, Trials & Appeals & Compensation
• Law Firm: Herbert Smith Freehills
• Author: Ms Anna Pertoldi, Maura McIntosh and Caroline Tuckwell

In a recent decision, the High Court has confirmed that a party can obtain the costs benefits of making a "claimant's" Part 36 offer in relation to its counterclaim, even though it is not formally the claimant in the litigation. The party's role in making the offer and the terms of the offer are more important than its title in proceedings: The Huntsworth Wine Company Ltd v London City Bond Ltd [2022] EWHC 97 (Comm).

Under CPR 36.17, where a claimant obtains a judgment that is at least as advantageous as its own Part 36 offer, the court must (unless it considers it unjust to do so) award the claimant costs on the more favourable indemnity basis from the date on which the relevant offer period expired, together with certain other favourable consequences. On the other hand, if a defendant has made a Part 36 offer that the claimant fails to beat, the defendant is entitled to its costs on the standard rather than indemnity basis from the expiry of the relevant period (reversing from that point the usual position that a claimant who is awarded damages is entitled to an award of costs in its favour). Further, on acceptance of a Part 36 offer (whether a claimant's or defendant's offer) the claimant is entitled to its costs.

This case is a reminder that the question as to who is entitled to make a claimant's Part 36 offer, with its potentially more attractive consequences, cannot be determined simply by looking at who issued the proceedings or who made the first "claimant's offer": instead a court must consider the substance of the Part 36 offer. This follows the decision of the Court of Appeal in the case of AF v BG [2009] EWCA Civ 75 (considered here), where it was held that a defendant could be treated as a claimant in respect of its counterclaim even in circumstances where the counterclaim had not yet been pleaded, and indeed CPR Part 36 has since been amended to make it clearer that a Part 36 offer can be made in respect of a counterclaim.

As this decision illustrates, in a case where there are claims in both directions, parties should consider carefully how to frame any Part 36 offer and whether they may be able to benefit from making a claimant's Part 36 offer, regardless of their formal status in the proceedings.

Background

Huntsworth Wine Company Limited ("Huntsworth") brought a claim in the London Circuit Commercial Court for '125,000 in respect of losses suffered after its wine was stolen from a warehouse owned and operated by London City Bond Limited...