Smithstone v Tranmoor Primary School [2026] EWCA Civ 13

Smithstone v Tranmoor Primary School [2026] EWCA Civ 13

On 16 January 2026, the Court of Appeal handed down judgment in the case of Smithstone v Tranmoor Primary School, a decision on costs recovery under CPR 36.17 when a party beats a liability-only Part 36 offer. The decision broadly spells the end of the road for arguments based upon the decision in Mundy v TUI UK Ltd [2023] EWHC 385 (Ch), in which Collins-Rice J noted that the application of CPR 36.17(1) was incompatible with liability-only Part 36 offers.

CPR 36.17(1)

CPR 36.17(1) provides that the costs consequences under CPR 36.17 apply where upon judgment being entered:

(a) a claimant fails to obtain a judgment more advantageous than a defendant’s Part 36 offer; or
(b) judgment against the defendant is at least as advantageous to the claimant as the proposals contained in a claimant’s Part 36 offer.

CPR 36.17(2) clarifies how “more advantageous” and “at least as advantageous” are to be construed:

(2) For the purposes of paragraph (1), in relation to any money claim or money element of a claim, “more advantageous” means better in money terms by any amount, however small, and “at least as advantageous” shall be construed accordingly.

The Facts in Smithstone

Long before the claim reached the Court of Appeal, it began as a modest low value claim brought by a child who suffered personal injury when his fingers became trapped in a door. The claim was caught by the Low Value Fixed Costs regime.

The claim was listed for a Fast Track Trial, but settled at the door of the Court in the sum of £2,650. As the claim involved a child, the Court’s approval was required; the Deputy District Judge approved the agreed settlement and ordered payment of the same.

The Claimant had previously made a Part 36 offer to settle liability on a 90/10 basis, which had been rejected by the Defendant. The Claimant contended that the case should be treated as falling outside the fixed costs regime by virtue of CPR 36.17. However, the Judge agreed with the Defendant’s contention that CPR 36.17 did not bite; fixed costs were awarded.

More than three years later, the Claimant was granted permission to appeal against this costs decision, however HHJ Baddeley dismissed the appeal, concluding that he was bound by the decision of Collins-Rice J in Mundy v TUI UK Ltd [2023] EWHC 385 (Ch).

The Decision in Mundy

Mundy was a holiday sickness claim where the Claimant had made an offer to settle liability only on a 90:10 basis, one of a number of Part 36 offers made by the parties, which also included an offer of £20,000 by the Claimant, and an offer of £4,000 by the Defendant.

At trial, the Judge found for the Claimant, but awarded damages totalling less than £4,000; the claimant was awarded costs up to the expiry of the Defendant’s offer, but was ordered to pay the defendant’s costs thereafter.

On appeal, the Claimant argued that winning 100% on liability was more advantageous than the 90:10 liability offer rejected by the Defendant, such that the adverse consequences under CPR 36.17 should bite. Collins-Rice J dismissed this appeal; 90:10 liability offers were fundamentally incompatible with CPR 36.17, as she held at [42]:

“I am unpersuaded this rejected 90:10 liability offer can be fitted into the terms of CPR 36.17(1)(b) consistently with the wording, integrity and practicality of the CPR 36.17 mechanism. Trying to do so strains the language of the provision, undermines its careful balance, and introduces a degree of complexity and uncertainty which I am not persuaded is within its contemplation. It is a provision that relies on its clarity, simplicity and predictability for the incentivising effects which put it at the heart of the Part 36 code.”

Smithstone in the Court of Appeal

The key issue on appeal was whether a liability-only 90:10 settlement offer could in principle be effective for the purposes of CPR 36.17. The Court of Appeal unanimously held that that such an offer could be effective.

Bean LJ referred to two previous Court of Appeal decisions (neither of which had been cited in Mundy), which supported this approach:

• Huck v Robson [2002] EWCA Civ 398, in which a claimant’s offer to accept a 95:5 split on liability was effective so as to entitle the claimant to indemnity costs when the defendant was eventually held 100% liable; and
• Broadhurst v Tan [2016] EWCA Civ 94, where the fact a claimant obtained a “generous outcome” from the making of a successful Part 36 Offer was consistent with the policy of (what is now) CPR 36.17, and was not “surprising or so unfair to the Defendant that it requires the court to equate fixed costs with costs assessed on the indemnity basis”.

The Court of Appeal expressly disagreed with and overruled Mundy as a matter of principle; Collin-Rice J’s remarks that a 90:10 liability offer was ineffective to engage CPR 36.17 was held to be obiter and wrong. As Bean LJ put it at [34]:

“Whether litigation is complex and of high value, or straightforward and of relatively modest value, the courts should, and the Civil Procedure Rules do, encourage settlement of specific issues where the case as a whole cannot be settled. In a case where liability is to be tried before quantum the benefits of a liability-only offer in saving costs and court time are obvious. But even in a fast track case where all contested issues will be resolved by a district judge or deputy district judge in the course of a single hearing, liability-only or quantum-only offers are still to be encouraged. The policy considerations identified in Huck v Robson and Broadhurst v Tan remain to this day. The 90:10 offer was in my view to be treated as a genuine offer to compromise, just as the 95:5 offer was treated in Huck v Robson.”

However, despite getting over the line on this point, the Claimant’s appeal failed at the next hurdle: liability had never been determined and so it could not 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. This would have required the Defendant to have admitted liability, or the Judge to have tried the case and found the Defendant 100% liable, in which there would have been case for awarding costs relating to the issue of liability from the date of the Claimant’s 90:10 offer pursuant to CPR 36.17(4).

The Court of Appeal also rejected the Claimant’s argument on appeal that the Defendant’s conduct in refusing to admit liability or to engage in settlement negotiations before reaching the door of the court was, in itself, a reason for departing from the fixed costs regime.

An addition question: what is a “judgment”?

A preliminary issue considered in the appeal was whether the “General Form of Judgment or Order” in which the Deputy District Judge had approved the settlement sum amounted to a “judgment” for the purpose of CPR 36.17(1), it being suggested by the Claimant that this was an “order” but not a “judgment”. This argument was roundly rejected by the Court of Appeal, who had “no doubt” that the document in which this decision was set out was “both a judgment and an order and any attempt to distinguish between the two terms in describing it [was] misconceived”.

A new lease of life to liability-only Part 36 offers

The debates and uncertainty following the decision in Mundy have now been answered by the Court of Appeal; split liability Part 36 Offers can be effective for the purpose of CPR 36.17(1); a resurgence of such split liability offers may well be the practical effect of this decision.

Article by Mark Erridge