Part 36 Offers & The Court's Discretion As To Costs (CPR 44.3)

In the case of Phi Group Ltd v Robert West Consulting, [2012] EWCA Civ 588, the Court of Appeal considered the requirements of Part 36 offers and overturned a costs decision in the Technology & Construction Court ('TCC').

The Facts:

M40 Trains Limited engaged Carillion JM Ltd ('Carillion') to design and build a train servicing deport to the west of Wembley Football Stadium. Carillion engaged Phi Group Limited ('Phi') as its specialist design and build contractor for what is known as the "soil nailing work" and Robert West Consulting Ltd ('RWC') as its consulting engineer and lead consultant for the overall works.

In 2009 Carillion commenced proceedings against Phi for damages due to the instability and slips in the London Clay. The proceedings against Phi were settled - Phi paid Carillion £3.45 million plus costs; however, the proceedings Carillion commenced in 2010 against RWC and the Part 20 proceedings (contribution proceedings) between Phi and RWC remained unresolved. In June 2011 Mr Justice Akenhead in the TCC found that RWC had been negligent and that Carillion's overall loss was some £6.7 million. He ordered RWC to pay Carillion £3.23 million. He also found that Phi was 60% responsible and RWC 40% responsible for the negligence and accordingly ordered Phi to pay RWC approximately £570,000 so as bear 60% of the responsibility.

An order for costs had been agreed by consent between Carillion and RWC. The Judge ordered Phi to pay 20% of Carillion's costs which RWC had been ordered to pay. He also ordered Phi to pay 30% of RWC's costs of the contribution proceedings against it and made no order as to costs of the Phi's contribution proceedings. Phi appealed seeking an order that RWC should pay Phi's costs of both sets of contribution proceedings and that RWC should bear its own costs of both those proceedings.

The basis of Phi's appeal was that its solicitor's letter sent in February 2010 constituted a Part 36 offer or, in the alternative, even if it was not a Part 36 offer, then even so it was a better offer for RWC than the result they achieved, and accordingly it should have all or most of the consequences of a Part 36 offer. Mr Justice Akenhead held that the February 2010 offer was not a Part 36 offer and rejected Phi's argument for at least two reasons:

The February 2010 offer had been withdrawn implicitly, by subsequent November 2010 offers; and The February 2010 offer only related to liability in the 2009 claim which concerned...