Lilleyman v Lilleyman and Another (No 2)

Hearing date: 4 April 2012

This is my judgment in relation to the costs of and occasioned by Mrs Lilleyman's claim for reasonable financial provision from the net estate of her late husband. I handed down my judgment on the main claim on 4 April 2012, and then heard extended submissions as to costs for most of the remainder of that morning. I make no criticism of the length, indeed thoroughness, of counsel's submissions, bearing in mind the very substantial consequences of any order for costs against Mrs Lilleyman upon her financial needs and resources. In paragraph 71 of my main judgment I recorded counsel's agreement that I could not at that stage make any assumptions as to the incidence or amount of any contingent costs liabilities arising from these proceedings, either for the estate or for Mrs Lilleyman, and would therefore have to leave them entirely out of account "however unrealistic in the real world that might prove to be." As will appear, my apprehensions about the unreality of doing so have proved to be fully justified.

In order to explain the order which I have decided to make, it is necessary for me to describe what has now (after judgment) been revealed to be the history of the without prejudice negotiations between the parties, of which I was, of course, wholly unaware when giving judgment. The claim was issued, together with the claimant's evidence, on 24 February 2011. She supplemented her evidence in March, shortly before an unsuccessful mediation on 21 March. On 1 April the claimant made a Part 36 offer to take a transfer of Water Meadows, and Lea Court, a lump sum of £600,000, to release her interest in Dunhome and to release the deceased's chattels to the defendants. The term of the offer was payment to her of her then costs of £37,000. I should add that the claimant has litigated throughout with the benefit of a Contingency Fee Agreement, providing for a 40 per cent uplift.

There followed the first round of the defendants' evidence, taking detailed issue with large parts of the factual basis of the claimant's claim and making what turned out to be irrelevant assertions about the claimant's conduct which were not, in the event, pursued at trial. In May the claimant responded with her third witness statement which also included unfortunate and irrelevant allegations about the deceased's first marriage. This exchange no doubt reflected and unnecessarily exacerbated what were I assume already hostile relations between the parties, to no useful purpose.

On 27 July the defendants by their solicitors made two simultaneous written offers. The first ("the July Part 36 Offer") proposed a transfer of Water Meadows and Lea Court, together with a lump sum of £450,000, and a separate offer of £18,000 should the claimant wish to receive it in exchange for the deceased's chattels. Pursuant to Part 36.2 (2)(c) the offer was stated to have the consequence that, if accepted within 21 days, the defendants would be liable for the claimant's costs until then.

The second offer ("the July Without Prejudice Offer") contained two parts. First, it offered to buy the claimant's occupation rights in relation to Dunhome Manor for £30,000 in addition to the amount offered in the July Part 36 Offer. Secondly, it offered a simple global sum, inclusive of costs, (then assumed between the solicitors to be £66,000 including uplift) of £550,000 or £568,000 depending upon whether the claimant wished to retain or sell the chattels. It included the £30,000 for the claimant's rights in Dunhome.

The claimant did not accept either of those offers, and the 21 day period specified in the July Part 36 Offer expired on 17 August 2011.

On 18 November 2011 the claimant made a further without prejudice offer to take Water Meadows, Lea Court and £535,000, together with all her costs, while releasing her interest in Dunhome and in the deceased's chattels, provided that the estate write off a loan of £15,000 to Jean King. On 16 December the claimant made a further without prejudice offer to take Water Meadows, Lea Court and £498,000, upon the basis of the same additional terms as proposed in November.

On 6 January 2012 the defendants by their solicitors made a further without prejudice offer which, because of the dispute as to its effect, I must set out in full:

"We refer to our without prejudice letter of the 22 ^nd July 2011 and our clients' offer to settle your client's claim in the sum of either £550,000 or £568,000 (depending upon whether or not your client wished to retain the chattels referred to in our Part 36 Offer of the same date) to include your client's costs at a figure of £66,000.

We are now instructed to advise you that our clients withdraw that offer, but replace it with an amended offer of paying your client the sum of £520,000 or £538,000 dependent upon which basis as to chattels the offer is accepted, to include your client's costs now quantified at £40,000 and on the basis also that your client will meet our clients' costs incurred since the expiry of the Part 36 offer to be subject to assessment on the standard basis if not agreed. In all other respects, the offer is on the same terms."

By this time the parties were engaged in preparing to give each other standard disclosure, but not a great deal of other work had been done by either side on the case, following 17 August.

The claimant made a final Part 36 offer on 14 February to take a transfer of Water Meadows and Lea Court, and a lump sum of £498,000, while releasing her interest in Dunhome, provided her then costs were paid in full. There, so far as I have been informed, negotations rested.

I must first decide whether, within the meaning of Part 36.14 (6)(a), the defendants' July Part 36 Offer had been withdrawn prior to judgment, by the terms of the defendants' January 2012 offer. Mr Sartin for the claimant submitted that, read as a whole, it withdrew and replaced both the simultaneous offers made by the defendants in July. Miss Evans-Gordon for the defendants submitted that, by its plain language, it merely withdrew and replaced the July Without Prejudice Offer, leaving the July Part 36 Offer in place. I bear in mind in construing that letter, passing between experienced solicitors, the useful summary of the purpose and effect of Part 36 in Gibbon v Manchester City Council [2011] 2 All ER 258, per Moore-Bick LJ, in particular at paragraphs 4 to 6, 16 to18 and 32.

In my judgment the January 2012 offer did not withdraw the July Part 36 Offer. The subject matter of the letter was clearly expressed to be the July Without Prejudice Offer and the expression "that offer" in the second paragraph of the letter was plainly a reference to it, and not to the July Part 36 Offer. Part 36 is, as Moore-Bick LJ said, a highly technical code, and I consider that the January 2012 offer was designed to, and did, take full advantage of the ability of a party to keep on foot a Part 36 offer, while at the same time negotiating without prejudice on different terms, however different a conclusion might have been reached by a purely common law analysis. It is fair comment that the latter part of the second paragraph of the January letter describes the Part 36 offer as having "expired" some time previously, but Part 36 offers do not expire merely because the date specified for the purposes of Part 36.2 (2)(c) has passed. They are either withdrawn by notice pursuant to Part 36.9 (2) or they remain open for acceptance at any time, and continue to have the consequences specified in Part 36.14(2), subject to the exceptions in paragraph (6).

Mr Sartin submitted in the alternative that Part 36.14 (6)(b) applied, upon the basis that the defendants' January without prejudice offer had amounted to a less advantageous change in the terms of the July Part 36 Offer, which his client had beaten. The short answer to that submission is that my award did not, on any view, "beat" the...