Costs Update #30

Two consequential rulings from this summer deal with Part 36 offers that the trial outcome vindicated. In Timokhin v Timokhina the court upheld a Claimant’s offer at over 90% of the claim and applied the full consequences of r.36.17(4). In Hoffman v Finalto the Defendants had withdrawn their offer after trial, and the court weighed it under its general discretion instead.

Timokhin v Timokhina: a near-total offer upheld

The offer

Timokhin v Timokhina [2026] EWHC 1194 (KB) is Dexter Dias J’s consequential ruling following his judgment enforcing two Russian judgments ([2026] EWHC 439 (KB)). On 20 May 2025 the Claimant offered to accept £380,000 against a debt that came out at £417,416.67, a discount of about 9%. The relevant period expired on 10 June 2025. The Claimant won in full.

The challenge

Because the offer was beaten, r.36.17(4) applied, and it fell to the Defendant to show that its consequences would be unjust. Briggs J called that a “formidable obstacle” in Smith v Trafford Housing Trust [2012] EWHC 3320 (Ch). The Defendant’s argument relied on r.36.17(5)(e): an offer at over 90% of the claim was no genuine attempt to settle.

The judge disagreed. What mattered was the strength of the Claimant’s case, and on that footing an offer “in the early 90s” was “sober and realistic” (para 28). He also rejected the argument that recognition and enforcement, being a yes/no question, made a near-total offer inappropriate: “Binariness is inherent in recognition and enforcement claims.” The same objection could be raised against any ‘all or nothing’ liability issue and would fare no better there.

The order

Enhanced interest came in at 6% above base, against the 8% the Claimant sought and the 10% ceiling. Two reasons were given. Some of the Defendant’s points, though bad, were not “fundamentally flawed or highly likely to fail”, and the disruption to the Claimant in the three months between offer and trial was less acute than he claimed (para 31).

The rest of the order followed the rule. The Claimant had standard basis costs to expiry and indemnity costs after it, enhanced interest on the debt and on the post-expiry costs, and a 10% additional amount. About 70% of his costs fell on the indemnity side of the line. The judge ordered a payment on account of 65%, reasoning that the indemnity basis and the interest award gave good prospects of recovering that much on assessment (para 40).

Practice points

• An offer conceding only a narrow margin can be a genuine attempt to settle where the strength of the case justifies it, and binary claims are no exception. The genuineness objection has traction only where the discount is illusory against the real risks in the claim.

• On enhanced interest, ask high but advise on the middle. The reasons for the reduction here, the quality of the other side’s points and the disruption suffered, are matters to address in evidence.

• An offeree weighing acceptance should price the full consequences against the discount on offer: indemnity costs from expiry, enhanced interest on the debt and costs, the additional amount and the cash-flow effect of a payment on account.

Hoffman v Finalto: an offer withdrawn after trial

The offer

Hoffman & Anor v Finalto Group Ltd & Anor [2026] EWHC 1702 (Comm) is Butcher J’s consequential ruling in the Finalto acquisition dispute ([2026] EWHC 921 (Comm)). On 27 August 2025 the Defendants offered £3.5 million for the whole proceedings, expressed to expire on 29 September 2025. They withdrew it on 11 February 2026, after trial and with judgment reserved.

The outcome

Butcher J held that the Equity Term Sheet was binding and had been repudiated, but no loss was proved: equity claims put at the equivalent of £22.8 million produced nominal damages of £2. The First Claimant succeeded in part on his employment claims and Mr Greenbaum failed on his. The counterclaim, worth US$90–100 million on the pleaded case, failed entirely. Applying Roache v News Group Newspapers Ltd [1998] EMLR 161, the judge said that, leaving the offer aside, he would have regarded the Claimants as the successful party, “not without some hesitation”, because it was “to them that a cheque would be written”. He would also have cut their recovery significantly for the issues they lost.

The withdrawn offer

Withdrawal removed Part 36’s automatic consequences (r.36.17(7)(a)), as the Defendants accepted. The offer remained an admissible offer to settle, to which the court must have regard under r.44.2(4)(c), and the judge gave it “considerable importance”. Had it been accepted, the Claimants would have recovered significantly more than the judgment gave them, and the counterclaim would have been withdrawn. “In my judgment it was unreasonable to carry on with the litigation, when that offer had been made.”

Findings that blunt usually bring an order to match. Not here. The Defendants asked for their costs from 30 September 2025 and were refused, because the Claimants’ pursuit of the action after that date had still established the binding term sheet, its repudiation, Mr Hoffman’s employment entitlements and the defeat of the counterclaim. Butcher J made no order as to costs from 30 September. For the period before it, the Claimants had two-thirds of their costs on the standard basis. Found to have litigated unreasonably, they bore their own costs of the most expensive phase of the case, trial included, but were not ordered to pay the Defendants’.

Had the offer not been withdrawn, r.36.17(3) would presumptively have given the Defendants their costs from expiry, with interest, and the Claimants would have had to show that this was unjust. Under r.44.2 the Defendants recovered nothing for the period. The withdrawn offer did cost the Claimants post-offer costs they would otherwise have recovered, subject to the discount the judge would have applied anyway, and on a case of this size that is a considerable sum. It fell a long way short of an order that the Claimants pay.

Why withdraw after trial?

For Part 36 purposes a trial is in progress until judgment is handed down (r.36.3(d)). While it is, an offer can be accepted only with the court’s permission (r.36.11(3)(d)), and the courts have little sympathy for offerees who wait to see how a trial has gone before deciding to settle. In Houghton v PB Donoghue (Haulage & Plant Hire) Ltd [2017] EWHC 1738 (Ch) permission was refused on the second day of trial. An application made after the evidence had closed to the judge writing the judgment, would have faced longer odds still. Had permission somehow been given, the court could have applied r.36.13 (r.36.11(4)), which would presumptively have given the Defendants their costs from expiry, trial included.

The offeror needs nobody’s permission. Once the relevant period has expired, a Part 36 offer can be withdrawn by written notice (r.36.9(4)(a)). On 11 February, then, the Defendants held an offer the Claimants could not realistically accept, with r.36.17(3) consequences that were theirs to keep. Withdrawal added little protection they did not already have, and it gave up the presumption over some nine months of costs from 30 September 2025, including the trial.

The judgment does not say why the offer was withdrawn, and there may have been reasons that are not visible from outside, such as a revised offer in contemplation or the views of a funder or insurer. On what is visible, the trade looks poor. Withdrawal moves the question from presumption to discretion, and discretion is where good facts stop guaranteeing good orders.

Practice points

• Once trial has begun, the permission requirement already guards against a late acceptance. Withdrawing at that stage surrenders the r.36.17 consequences in return for protection the offeror largely has.

• A withdrawn offer still counts under r.44.2(4)(c) and can carry real weight. Expect it to reduce the other side’s recovery. Do not rely on it to produce an order in your favour.

• For offerees, the time to accept is before trial. After that, acceptance needs permission, which the courts are reluctant to give an offeree who waited to see how the evidence went.

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