Raymond Allen James v (1) Karen James

Hearing date: 19 January 2018

Judgment on Costs

This is my judgment on costs arising out of the trial of this claim and counterclaim. The main judgment was handed down on 19 January 2018, when the parties appeared before me by counsel to discuss the terms of the order. There was argument before me about costs, but we ran out of time and the submissions were continued in writing, being received on 31 January 2018 and 7 February 2018.

There were 2 main issues at the trial. One was whether the testator had had capacity to make his will, and the other was whether a proprietary estoppel equity had been raised in favour of the claimant. On both issues the claimant failed and the defendants succeeded. On any view, the defendants are the successful party for the purposes of any costs order I might make.

However, the matter is complicated because there is an offer in writing made by letter dated 24 August 2017 sent by Burges Salmon on behalf of the defendants to Wilsons on behalf of the claimant. The defendants say that this amounts to a CPR Part 36 offer, and the consequences that flow are those provided for under that Part. The claimant however says that this letter does not qualify as a CPR Part 36 offer, and that the general principles on costs therefore apply, subject (in the case of the challenge to the will) to certain special rules in probate claims.

The letter of 24 August 2017 divides the two parts of the case into the “Intestacy Claim” (the challenge to the will based on lack of capacity) and the “Estoppel Claim” (the claim to a proprietary estoppel equity). Together these are referred to as the “Claims”. It also defines “Counterclaim” to mean the defendants' counterclaim that the testator had capacity to make the will.

Paragraph 2.1 of the letter states in part:

“We are, therefore, authorised to make your client the following offer to settle under Part 36 (the “Offer”).”

And paragraph 2.2 of the letter states:

“The Offer is made pursuant to Part 36 of the Civil Procedure Rules and it is intended to be a claimant's Part 36 offer. Accordingly, if your client accepts the Offer within 21 days (the “Relevant Period”) your client will be liable for our client's costs, in accordance with CPR 36.13.”

Then paragraph 3 of the letter states as follows, so far as material:

“The Offer is to settle the whole of the Counterclaim and the Claims on the following terms:

[…]

Your client is to be liable to pay our client's costs of the Claim and the Counterclaim on the standard basis, to be assessed if not agreed, up to the end of the Relevant Period or, if later, the date of service of notice of acceptance of this Offer.”

The claimant makes two points in relation to this letter. The first is that the letter is expressed in terms of constituting a claimant's Part 36 offer, but the defendants are defendants, and not claimants, and although they made a counterclaim in relation to the will challenge, they made no counterclaim in relation to the proprietary estoppel claim. A defendant's Part 36 offer must be for a sum of money: see rule 36.6 (1). This offer is not. Hence the offer is not a Part 36 offer at all.

I reject this submission. It is clear from rule 20.2 (2) (a) and rule 20.3 (1) that a counterclaim is to be treated as a claim for the purposes of the CPR, with certain exceptions, of which Part 36 is not one. Rule 36.5 (1) (e) requires that a Part 36 offer must “state whether it takes into account any counterclaim”. It is quite clear from paragraph 3 of the letter that the offer contained in it takes into account the defendant's counterclaim.

In AF v BG [2009] EWCA Civ 757, the Court of Appeal held that an earlier version of Part 36 in materially the same terms as the present enabled a counterclaiming defendant to make a claimant's Part 36 offer in relation to the counterclaim which took account of the claim (as if that were the counterclaim). This was so, even where the defendant had not yet made a counterclaim, but intended to do so in the future, for Part 36 was expressed and intended to apply even before any claim had ever been made but an offer was put forward to settle the dispute between the parties.

The second point taken by the claimant is that the terms of the offer made in the letter contain a term as to costs, which is inconsistent with the effect of Part 36 itself. In Mitchell v James [2004] 1 WLR 158, the Court of Appeal held that where terms as to costs were included in an offer, it could not be a Part 36 offer. Peter Gibson LJ (with whom Potter LJ and Sir Murray Stuart-Smith agreed) said:

“34. I therefore conclude that a term as to costs is not within the scope of a Part 36 offer. That does not of course mean that a claimant cannot make an offer which includes a term as to costs; the court will have regard to that in exercising its usual discretion in relation to inter partes costs at the end of the case.”

CPR rule 36.13 (1) provides that

“… where a Part 36 offer is accepted within the relevant period the claimant will be entitled to the costs of the proceedings … up to the date on which notice of acceptance was served on the offeror.”

But, as noted above, paragraph 3 of the letter offered to settle on terms which included a term that the claimant was to be liable to pay the defendants' costs of the Claims and the Counterclaim

“up to the end of the Relevant Period or, if later, the date of service of notice of acceptance of this Offer.”

So, not only is this a term on costs, it is also a term which provides differently (albeit not by very much) from what rule 36.13 provides to be the effect of accepting the offer. Essentially, if the offer were accepted, the claimant would pay the defendants' costs up to the end of the Relevant Period, whereas by rule 36.13 the claimant would pay the defendants' costs only up to the date of acceptance within the Relevant Period.

The defendants say that the inconsistency is between paragraphs 2.2 and 3 of the letter. That is literally, but not substantively, correct. Paragraph 2.2 makes clear that the claimant's liability for costs will be “in accordance with CPR 36.13”. It is the inconsistency with rule 36.13 that matters. The defendants refer me to cases on the interpretation of contracts, such as Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896, HL, and then to C v D [2012] 1 All ER 302, for the proposition that

“where an offer clearly expresses an intention that it is intended to comply with Part 36, the court should hold it to do so if at all possible”.

Accordingly, the defendants submit that the phrase “or, if later,” should be construed as meaning “or, if sooner”.

Yet, as the claimant points out, in C v D Rimer LJ said:

“75. … It [ ie the offer] was expressly stated to be an ‘Offer to Settle under CPR Part 36’ that was ‘intended to have the consequences set out in Part 36’. Of course, that does not mean that it did in fact comply with Part 36 and therefore must, come what may, somehow be shoehorned into the confines of its four corners: a stated bid to attain a particular goal does not also mean that the goal has been attained.”

He then went on to say this:

“The answer to the critical question still turns on how the reasonable man would read the offer. The relevance, however, of the...