Smithstone v Tranmoor Primary School [2026] EWCA Civ 13: clarification on liability-only Part 36 offers

Introduction

On 16 January 2026, the Court of Appeal (Bean, Phillips, and Stuart-Smith LJJ) handed down judgment in Smithstone v Tranmoor Primary School [2026] EWCA Civ 13, providing fresh guidance on when Part 36 costs consequences will bite with respect to liability-only Part 36 offers.

The judgment explicitly overturned the position as enshrined in Mundy v TUI UK Ltd [2023] EWHC 385 (Ch) (‘Mundy’), which considered that a 90%/10% liability offer could not, as a matter of principle, engage CPR 36.17.

 

Factual and Procedural Background  

The Claimant was a child who brought a low-value personal injury claim after he sustained a minor injury at school.

The Claimant made two offers: a Part 36 offer to settle liability 90/10 (pre-issue), and a without prejudice offer to settle for £3,500 (post-issue). Neither were accepted.

The claim was listed for a Fast Track trial, but settled at the door of court for £2,650.

As the Claimant was a child, the settlement went before the court for the purposes of approval pursuant to CPR r 21.10. DDJ Khan duly approved the sum of £2,650.

DDJ Khan was then addressed on whether the Claimant’s solicitors should recover fixed costs (as the Defendant contended) or costs pursuant to CPR 36.17 (as the Claimant contended, in light of the split-liability offer). It was determined that fixed costs applied; the Part 36 regime was not engaged.

The court subsequently sealed a document in Form N24, “General Form of Judgment or Order”, which approved the settlement and directed payment of damages and costs.

 

First Appeal

The Claimant appealed against the costs decision.

HHJ Baddeley heard the appeal, but, determining that he was bound by the judgment in Mundy, dismissed the appeal.

In Mundy, Collins-Rice J had considered that the provisions of CPR 36.17 were fundamentally incompatible with liability-only offers. It was considered that the Part 36 costs consequences could only bite where there was an offer that was quantifiable in money terms.

 

Court of Appeal Decision

The Claimant appealed again, arguing the following:

1. DDJ Khan erred in law in not allowing the Claimant the costs consequences set out in Part 36.17(4);
2. Mundy was per incuriam and should be overruled;
3. Confining the Claimant to fixed costs was unjust [23].

 

The Court of Appeal identified four discrete questions for determination, of which the second (whether a liability-only 90/10 offer could in principle engage CPR 36.17) was the key issue on appeal [27]:

i)    Was there a ‘judgment’ for the purpose of CPR 36.17(1)?

ii)   If so, can a 90:10 offer engage the provisions of CPR 36.17(4)?

iii)  If so, on the facts of this case, was the outcome “at least as advantageous to the Claimant as the proposals contained in the Claimant’s Part 36 offer”?

iv)   If not, is it unjust to confine the Claimant’s solicitors to recovering fixed costs?

 

Was there a ‘judgment’ for the purpose of CPR 36.17(1)?

The Court answered the first question in the affirmative. There was “no doubt” that DDJ Khan’s “General Form of Judgment or Order” was “both a judgment and an order and any attempt to distinguish between the two terms in describing it is misconceived” [30].

 

Can a 90:10 offer engage the provisions of CPR 36.17(4)?

The second question was identified as “the key dispute which has brought the present appeal to this court” [31]. The Court of Appeal disagreed with the “obiter” comments made by Collins-Rice J in Mundy that a 90/10 liability offer is ineffective to engage CPR 36.17 [34].

It was observed to be “unfortunate” that two highly relevant authorities had not been cited in Mundy [34]:

1. Huck v Robson [2002] EWCA Civ 398, which held that a 95:5 liability offer was effective for entitling the Claimant to indemnity costs where the Defendant was eventually held 100% liable [32];
2. Broadhurst v Tan [2016] EWCA Civ 94, in which Lord Dyson MR observed that the policy underpinning what is now CPR 36.17 aims to provide claimants with “generous incentives to make offers” and defendants“with countervailing incentives to accept them” [31].

Thus Mundy was expressly overruled “on the issue of principle”; Collins-Rice J was deemed to have erred in the suggestion that a liability-only offer was incompatible with CPR 36.17 [35].

 

On the facts of this case, was the outcome “at least as advantageous to the Claimant as the proposals contained in the Claimant’s Part 36 offer”?

Of course, the Court’s finding on the second question was not enough to get the Claimant home on the appeal. Turning to the third question, the Court considered that the “difficulty” for Claimant solicitors in this case was that liability was never determined, the case having settled without any finding on liability (either through admission by the Defendant or by judicial finding). Consequently, the Court was unable to meaningfully compare the outcome to the Claimant’s split-liability offer such that the Part 36 costs consequences could bite:

“If the Defendant had admitted liability or DDJ Khan had tried the case and found the Defendant 100% liable, there would be a case for awarding the Claimant, pursuant to CPR 36.17, costs relating to the issue of liability from the date of the Claimant’s 90:10 offer. But that is not what happened. It cannot be said that the outcome of the case was a finding, even on liability, more advantageous to the Claimant than a 90:10 apportionment of liability. I therefore consider that CPR 36.17(4) does not apply on the facts of this case and that DDJ Khan was right to decide that the Claimant’s solicitors were limited to recovering fixed costs” [36].

The Claimant’s appeal therefore failed at this hurdle.

 

Is it unjust to confine the Claimant’s solicitors to recovering fixed costs?

On the fourth and final question, the Court of Appeal concluded that confining the Claimant’s solicitors to recovering fixed costs was not an unjust result, and there were no other reasons to depart from the fixed costs regime [37].

Hence, though the Court held that in principle, liability-only offers can engage CPR 36.17, the appeal was dismissed on its facts.

 

Comment

This judgment resolved the uncertainty following Mundy, and has now clarified the costs position vis-à-vis liability-only Part 36 offers: split-liability Part 36 offers are effective for engaging Part 36 costs consequences. The purpose of Part 36 is to encourage and incentivise settlement; the Court’s decision was concordant with, and firmly rooted in, this policy consideration.

In practice, it is likely that this decision may result in an increase in parties making split-liability Part 36 offers. However, practitioners should note that these types of offers may be toothless if liability is never ultimately determined (either by admission or judgment).

Another point of interest is that a judgment / order in consequence of the provisions of CPR r.21.10 (approval of a settlement for a child or protected party) counts for the purposes of CPR r. 36.17. Liability-only Part 36 offers, therefore, have particular importance in cases where there is a child or protected party as a party to proceedings, as these invariably result in a judgment or order (in contrast to settlements between adults with capacity, where a judgment/order will not always follow).

 

Analysis and review produced by Olivia Kirk, Pupil at Farrar’s Building. 

 

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