Part 36 Liability-Only Percentage Offers Can Engage CPR 36.17 in Principle (Overruling Mundy), But Not Where Liability Is Never Determined

1) Introduction

Smithstone v Tranmoor Primary School [2026] EWCA Civ 13 is a costs appeal arising out of a low-value, fast track personal injury claim brought by a child claimant against his school following a minor door-trapping injury. The central dispute was not damages (which ultimately settled for £2,650 and required court approval under CPR r 21.10), but whether the claimant’s solicitors were entitled to the enhanced Part 36 consequences under CPR 36.17(4) (in particular indemnity costs etc.) by reason of an earlier claimant’s Part 36 offer to settle liability on a 90/10 basis, or whether the case remained within the fixed costs regime.

The appeal required the Court of Appeal to address four linked questions:

Was there a “judgment” for the purposes of CPR 36.17 where the court approved a settlement and made payment and costs orders?
Can a 90/10 liability-only Part 36 offer ever engage CPR 36.17(4) as a matter of principle?
If yes, was the outcome here “at least as advantageous” as the claimant’s liability offer?
If Part 36 did not apply on the facts, was it nevertheless “unjust” to confine recovery to fixed costs?

2) Summary of the Judgment

The Court of Appeal (Bean LJ, Phillips LJ, Stuart-Smith LJ) dismissed the appeal.

Judgment point: The order approving the child settlement and directing payment of damages and costs was both a “judgment” and an “order” for CPR purposes.
Principle point (key precedent): The court held that a 90/10 liability-only Part 36 offer can, in principle, be effective for CPR 36.17—and the court expressly overruled Mundy v TUI UK Ltd [2023] EWHC 385 (Ch) insofar as it suggested otherwise.
Application to the facts: CPR 36.17(4) was not engaged because liability was never admitted or determined; a global monetary settlement did not amount to an outcome “at least as advantageous” as a 90/10 liability split.
Unjustness/fixed costs: It was not “unjust” to confine the claimant to fixed costs merely because the defendant maintained a liability defence and the case settled at the door of court.

3) Analysis

3.1 Precedents Cited

(a) Vanden Recycling Limited v Kras Recycling BV [2017] EWCA Civ 354 (meaning of “judgment”)

The respondent argued there was no “judgment” because the parties presented an agreed settlement for approval under CPR r 21.10. Bean LJ rejected that formalism by relying on Vanden Recycling Limited v Kras Recycling BV [2017] EWCA Civ 354, where Hamblen LJ treated a consent order requiring payment of a specified sum as a “judgment” in substance because it finally disposed of the claim and operated like an order that would have followed a trial judgment.

Applying that approach, the court held the N24 “General Form of Judgment or Order” here—ordering acceptance/payment of the settlement sum and payment of costs—was plainly a final court disposition and thus a “judgment” for CPR 36.17 purposes.

(b) Huck v Robson [2002] EWCA Civ 398; [2003] 1 WLR 1340 (liability-percentage Part 36 offers)

This was the cornerstone authority. In Huck v Robson, a claimant’s offer to accept a 95:5 apportionment of liability was held effective; when the claimant later succeeded on 100% liability, the claimant obtained favourable costs consequences. Tuckey LJ emphasised that such offers reflect a real-world discount for litigation risk and certainty, not necessarily a predicted judicial apportionment.

Bean LJ treated Huck v Robson as directly supportive of the proposition that a claimant can make a genuine, incentivising Part 36 offer addressing liability by percentage without putting a money figure on the table.

(c) Broadhurst v Tan [2016] EWCA Civ 94; [2016] 1 WLR 1928 (policy of generous Part 36 incentives)

Bean LJ reinforced the policy dimension through Broadhurst v Tan, where Lord Dyson MR acknowledged that Part 36 can produce “generous” outcomes for claimants, consistent with the rule’s purpose: encouraging early settlement by providing meaningful incentives and risks. That policy lens supported treating liability-only offers as part of the settlement-encouraging machinery rather than excluding them as a class.

(d) Mundy v TUI UK Ltd [2023] EWHC 385 (Ch); [2023] Costs L.R. 153 (overruled on principle)

The lower court appeal judge (HHJ Baddeley) felt bound by Mundy v TUI UK Ltd [2023] EWHC 385 (Ch), where Collins-Rice J had held that a 90:10 liability offer was fundamentally incompatible with CPR 36.17 because it allegedly cut across the binary structure of 36.17(1), and because the rule was said to require a straightforward “money terms” comparison.

Bean LJ criticised the analysis in Mundy on two related bases:

Authority gap: Key appellate authorities—particularly Huck v Robson—were not cited or discussed.
Over-broad principle: Whatever the facts of Mundy, excluding liability-percentage offers “as a matter of principle” was inconsistent with Part 36’s function of encouraging settlement of issues, including where full settlement is not achievable.

The court therefore overruled Mundy “on the issue of principle” (i.e., its broader suggestion that 90:10 liability offers are inherently ineffective for CPR 36.17).

(e) Chapman v Mid and South Essex NHS Foundation Trust (re costs) [2023] EWCA 1871 (KB); [2023] Costs LR 1145 (context matters)

Bean LJ used Chapman v Mid and South Essex NHS Foundation Trust (re costs) to underline that context matters. In Mundy, the claimant had also made a very high global monetary Part 36 offer (£20,000) and the defendant had made a far lower offer (£4,000), with the claimant ultimately recovering about £3,805.60. Those facts made it unsurprising that the court in Mundy was reluctant to grant claimant-favourable Part 36 cost consequences. But that factual discomfort did not justify a categorical legal rule invalidating 90/10 offers.

(f) AB v CD [2011] EWHC 602 (Ch) (genuine attempt to settle)

The respondent relied on AB v CD [2011] EWHC 602 (Ch), where Henderson J stated that a Part 36 offer must contain a “genuine element of concession” with significant value in the litigation context. Although the Court of Appeal did not need to decide “genuineness” as a determinative point here, Bean LJ’s acceptance that a 90/10 offer can be a “genuine offer to compromise” aligns with the AB v CD approach: a meaningful percentage concession can be valuable even without a quantified sum.

(g) Webb v Liverpool Women's NHS Foundation Trust [2016] EWCA Civ 365 (the “unjust” threshold)

On the claimant’s fallback argument (“unjust” to confine to fixed costs), Bean LJ relied on Webb v Liverpool Women's NHS Foundation Trust [2016] EWCA Civ 365, where Stanley Burnton LJ described the burden of showing that the usual Part 36 consequences would be “unjust” as a “formidable obstacle”. Here, mere non-engagement in settlement discussions and running a liability defence to trial was not enough.

3.2 Legal Reasoning

(1) “Judgment” includes court orders approving settlement and directing payment

The court adopted a substance-over-form approach: if the court makes a final order disposing of the claim and requiring payment, it is properly characterised as a “judgment” for CPR 36.17. This prevents parties from evading Part 36 consequences by characterising outcomes as approvals or consent orders rather than “judgments”.

(2) Liability-only percentage Part 36 offers are not inherently incompatible with CPR 36.17

The Court of Appeal restored doctrinal continuity with Huck v Robson and the policy orientation in Broadhurst v Tan:

Part 36 is designed to encourage settlement, including settlement of discrete issues where the whole case cannot be settled.
A claimant may rationally offer a discount on liability (e.g., accept 90% recovery) to buy certainty and avoid trial risk.
Courts retain safeguards: where an offer is plainly tactical (e.g. the 99.9% example noted in Huck v Robson), consequences may be refused as “unjust” or for lack of genuine concession.

(3) But CPR 36.17(4) requires an outcome that can be compared with the offer—here, liability was never determined

Having held that a 90/10 liability offer can in principle engage CPR 36.17, the court still dismissed the appeal because the claimant could not satisfy the factual comparator required by CPR 36.17(1)(b): the case settled globally for money without any admission or finding of liability.

Bean LJ’s reasoning is effectively:

A liability-only offer can trigger CPR 36.17(4) where the case outcome includes a liability determination (admission or judgment).
Where liability is not determined at all, a monetary settlement does not establish that the claimant did “at least as well” as a 90/10 liability compromise.
Accordingly, the claimant cannot say the “judgment” was “at least as advantageous” as the liability proposal.

This is a crucial practical qualification: the court vindicated the legitimacy of liability-only Part 36 offers, but insisted on a meaningful apples-to-apples comparison in the particular litigation pathway.

(4) No “escape” from fixed costs on “unjustness” grounds

The court rejected the argument that the defendant’s approach to liability and negotiations made it “unjust” to confine the claimant to fixed costs. Fast track cases commonly settle at court doors; defending liability to trial is not, without more, blameworthy. The “unjust” exception remains narrow and fact-sensitive, with a high threshold.

3.3 Impact

(1) Restoring the availability of liability-percentage Part 36 offers

The explicit overruling of Mundy v TUI UK Ltd [2023] EWHC 385 (Ch) on principle reopens a tactical and settlement-promoting tool: claimants (and, by analogy, defendants) can deploy percentage-based issue offers without those offers being dismissed as legally incapable of engaging CPR 36.17.

(2) A practical warning: liability-only offers may be toothless if liability is never decided

The judgment draws a sharp distinction between:

Cases where liability is adjudicated/admitted (liability-only offers may trigger CPR 36.17 enhancements for the relevant period/issue); and
Cases resolved by global settlement without liability determination (the offer may not “bite” because the comparison required by CPR 36.17(1)(b) cannot be made).

This is likely to influence how parties structure offers in fast track and other “single-hearing” cases: a party seeking Part 36 protection/incentives may prefer a realistic global monetary Part 36 offer (or a carefully framed issue offer coupled with a mechanism to secure a liability determination).

(3) Reduced scope for arguing “no judgment” where settlements are approved or embodied in final orders

By confirming that a final court order approving settlement and directing payment is a “judgment”, the court limits technical attempts to avoid Part 36 consequences through formality.

(4) Reinforcement of the high bar for “unjust” arguments

The court’s reliance on Webb v Liverpool Women's NHS Foundation Trust [2016] EWCA Civ 365 signals continued judicial resistance to using “unjustness” as a broad equitable override, particularly in routine, low-value litigation and fixed-cost environments.

4) Complex Concepts Simplified

Part 36 offer: A formal settlement offer under CPR Part 36 carrying automatic costs consequences if not accepted and later “beaten” at the outcome.
CPR 36.17(4) consequences: If a claimant does at least as well as their own Part 36 offer, the court must (unless unjust) award enhancements such as indemnity costs from the offer’s effective date and potentially additional amounts/interest.
Indemnity costs: A more generous costs basis than “standard” costs; doubts are resolved in favour of the receiving party.
Fixed costs regime: In certain lower value cases, recoverable legal costs are set by rule/scale rather than assessed item-by-item.
“At least as advantageous”: A comparison test—did the final outcome match or exceed the offer? For money outcomes this is usually a straightforward arithmetic comparison; for issue offers, this judgment shows the comparison depends on whether the relevant issue was actually determined.
CPR r 21.10 approval: Where a claimant is a child, the court must approve a settlement to protect the child’s interests.
Per incuriam / overruled: “Per incuriam” suggests a decision was made without considering binding authority. “Overruled” means a higher court has determined that a legal proposition in an earlier case is wrong and should no longer be followed.

5) Conclusion

Smithstone delivers a clear appellate correction and practical clarification in Part 36 jurisprudence:

A 90/10 liability-only Part 36 offer is not inherently invalid; it can, in principle, engage CPR 36.17—consistent with Huck v Robson and the settlement incentives affirmed in Broadhurst v Tan.
The court overruled Mundy v TUI UK Ltd [2023] EWHC 385 (Ch) on the point of principle to the extent it suggested categorical incompatibility.
However, a party relying on such an offer must still show the final outcome is comparable to the offer: where liability is never determined and the dispute ends in a global money settlement, CPR 36.17(4) may not apply.
The “unjust” escape route remains narrow; routine litigation conduct and late settlement will rarely justify departure from fixed costs.