In circumstances where a defendant accepts a Part 36 offer beyond the expiry of the relevant period, a claimant might expect to be paid more than the prescribed limit for fixed costs claims and ask for costs to be paid on an indemnity basis. However, in the case of Hislop v Perde, the Court of Appeal ruled that fixed costs should still apply.

The defendant accepted the claimant’s Part 36 offer out of time, and a mere week before the case was listed for trial. The judge in first instance held that because the offer was accepted out of time, the claimant should be entitled to either standard or indemnity costs, rather than be subject to fixed costs.

Lord Justice Coulson in the Court of Appeal concluded that the delay in the defendant’s acceptance did not trigger an “exceptional circumstance” for the purposes of CPR 45. It was therefore held that the defendant should only pay fixed costs – up to the time when the offer was accepted.

There is now a period of potential uncertainty for claimant lawyers as this decision gives defendants an opportunity to abuse the fixed costs regime as a litigation tactic. The decision could potentially result in a flurry of late acceptances of Part 36 offers and raise significant economic viability issues for claimant lawyers.