The Court of Appeal has overturned the decision of a High Court judge who was wrongly told by counsel that indemnity costs were the default order when a claimant failed to beat a part 36 offer.
It said Mr Justice Andrew Baker “did not receive the assistance” from the defendant’s counsel that he should have done “and therefore fell into error”.
Shalaby v London North West Healthcare NHS Trust  EWCA Civ 1323  saw Andrew Baker J dismiss the claimant’s breach of contract claim. He also awarded the defendant indemnity costs as it had made a part 36 offer of nearly £11,000.
However, part 36.17 only makes indemnity costs the default order if the claimant beats an offer, and not if he fails to.
Lord Justice Singh said: “Before this court, [defendant counsel David] Cunnington fairly and candidly accepted that the judge did not receive the assistance from him that he should have done and therefore fell into error.
“The judge appears to have thought that the provision relating to costs on an indemnity basis also applied to the present sort of case, when judgment is entered against a claimant.”
But, he continued, the Court of Appeal in 2002  said that the significance of the absence of any reference to an indemnity basis in what is now CPR 36.17(3) was that the court would make an order on the standard basis unless it considers it unjust to do so.
In that ruling, Lord Woolf, the then Lord Chief Justice, added: “That means that if the court is going to make an order for indemnity costs, as it can… it should do so on the assumption that there must be some circumstance which justifies such an order being made… there must be conduct or (I add) some circumstance which takes the case out of the norm.”
Though he dismissed the appeal against the substantive ruling, Singh LJ allowed the appeal on the costs order.
“The only basis on which costs were ordered to be on an indemnity basis was that this was required by CPR part 36. That was wrong as a matter of law, as is now conceded by the respondent.
“Accordingly I would substitute an order that the costs had to be paid on the standard basis.”