Key takeaways
Costs liability is assessed by substantive, not technical, success
Courts will consider the overall outcome when awarding costs.
Failure to beat a Part 36 offer triggers significant costs consequences
Rejecting reasonable offers can result in adverse costs orders.
Part 36 offers require ongoing reassessment as litigation risks evolve
Settlement positions should be reviewed throughout proceedings.
Part 36
The CPR Part 36 regime provides a powerful mechanism for encouraging settlement and can have significant costs consequences where a party fails to accept a reasonable offer. Potential consequences may include an order for costs from the expiry of the relevant period of an offer, together with interest on those costs. The recent case of The Wine Enterprise Investment Scheme Ltd (in liquidation) -v- Crowe UK LLP [2026] EWHC 1662 (Ch) provides a useful reminder of those consequences, particularly where a claimant technically succeeds in recovering damages but achieves only a small proportion of what was claimed.
The Wine Enterprise Investment Scheme Ltd (in liquidation) -v- Crowe UK LLP [2026] EWHC 1662 (Ch)
The High Court considered the costs consequences following a professional negligence claim brought against the claimant’s auditors.
The claimant’s claims were valued between approximately £3.35 million and £8.42 million. It ultimately recovered just £139,000 including interest – approximately 1.6% of £8.42million.
Before trial, the defendant had made a Part 36 offer of £3.175 million plus costs. The claimant did not accept the offer and proceeded with the litigation.
The subsequent costs dispute raised two related questions:
Who was the successful party for the purposes of the general costs rule? and
What effect should the defendant’s Part 36 offer have on the costs incurred after its expiry?
1. Who was the successful party?
Pursuant to CPR 44.2(2) the general rule is that the unsuccessful party will be ordered to pay the successful party's costs, but the court may make a different order.
The claimant argued that, because it had recovered damages, it should be regarded as the successful party.
The court rejected that approach. In determining who was successful, the judge considered it necessary to look at the litigation ‘in substance’ and ask who had essentially won.
The claimant had recovered only a small fraction of the sum claimed, had failed on numerous issues and had incurred significant costs in pursuing those unsuccessful aspects of its case. The judge therefore concluded that the defendant was, in substance, the successful party.
The court nevertheless recognised that the defendant had not been entirely successful in its defence. The claimant was therefore ordered to pay 85% of the defendant’s costs up to expiry of the Part 36 offer and all of the costs thereafter under CPR 36.17(3) because it had failed to beat the offer.
2. Costs’ consequences
Under CPR 36.17, where a claimant fails to obtain a judgment more advantageous than a defendant’s Part 36 offer, the court must, unless it considers it unjust to do so, order that the defendant is entitled to its costs from expiry of the relevant period and interest on those costs.
In Wine Enterprise, the judge concluded that there was no injustice in applying those consequences. The offer was considered realistic and a genuine attempt to settle the proceedings, it had been made well before trial, and the claimant had the necessary information available to evaluate it.
The defendant was therefore entitled to its costs from expiry of the Part 36 offer, together with interest. The court did not go so far as to award indemnity costs. The judge concluded that, although the claimant’s conduct and rejection of the offer were relevant, the circumstances did not take the case outside the norm so as to justify an indemnity costs order.
Practical implications
The decision provides a useful reminder of the importance of Part 36 offers in litigation.
First, a party should not assume that obtaining judgment means that it has necessarily ’won’ for costs purposes. The court will look at the substance and reality of the outcome, including the extent to which the successful party achieved what it set out to achieve.
Secondly, the consequences of rejecting a reasonable Part 36 offer can extend beyond the amount of the judgment itself. The costs consequences can significantly outweigh the value of the judgment ultimately obtained and substantially alter the overall financial outcome of the litigation.
Thirdly, Part 36 offers should be kept under review throughout proceedings. The value of a claim, the strength of the evidence and the risks associated with proceeding to trial may change as litigation develops. A reasonable offer which appears unattractive at one stage may look very different as trial approaches.
Find out more about our Commercial Dispute Resolution team or contact us today to discuss how we can help.
This article was co-authored by Trainee Solicitor, Josh Evans.
