Costs News

29 June 2017
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Judge refuses to order costs while in the dark about part 36 offers

A High Court judge has rejected an application to make a costs order, after some of the issues in a case were determined, because he knew that three part 36 offers had been made but not what they contained.

In Interactive Technology Corporation Ltd v Ferster & Ors [2017] EWHC 1510 (Ch), Mr Justice Morgan was required to consider the provisions of CPR 36.16, which restricts the disclosure of part 36 offers, after the claimant sought its costs following a liability trial.

He found that:

(1) The case had not "been decided", for the purposes of rule 36.16(2), because there are issues in the case which remain to be decided;

(2) Although the claimant was content for the court to be told the terms of the three part 36 offers, the defendants were not, and so the case was not within rule 36.16(3)(c);

(3) A part of the case had been decided within rule 36.16(3)(d)(i);

(4) The part 36 offers do not relate only to parts or issues that have been decided and so the case was not within rule 36.16(3)(d)(ii);

(5) He had been told of the existence of the part 36 offers, in accordance with rule 36.16(4)(a); and

(6) He had not been told the terms of the part 36 offers, in accordance with rule 36.16(4)(b).

All he knew, he continued, was that the offers did not relate only to the issues which he had decided. The defendants submitted that the appropriate course was to reserve the costs until the stage was later reached when the court could be told the terms of the part 36 offers and then take them into account.

They referred the judge to the Court of Appeal ruling in HSS Group plc v BMB Ltd [2005] 1 WLR 3158, part of which Morgan J said was relevant even though it concerned an earlier version of part 36. In it, Lord Justice Waller LJ said that in a case where the issue of damages remained to be decided then “in any but perhaps the most exceptional case”, the judge could not do otherwise than to reserve the question of costs until after the damages were quantified.

The claimant put forward a number of arguments as to why it was appropriate for Morgan J to determine the costs of the liability issues at this stage. Among them were that the defendants could have conceded the liability issues and avoided the claimant’s costs.

Morgan J said: “I do not accept that argument as a reason for determining an issue as to costs whilst I am in the dark as to the terms of the part 36 offers which might be relevant. Her argument is similar to the argument which was held to be wrong in principle in HSS.”

The claimant also argued that the defendants could have made a part 36 offer just in relation to the liability issues, and because they did not, the court could proceed on the basis that there was no part 36 offer in relation to them.

“I do not accept that argument,” said Morgan J. “Even where there is a direction which splits the trial between issues of liability and quantum, or in some other way directs the trial of specified issues, it is open to a defendant to make a part 36 offer which deals with the whole case and to expect the court to take that part 36 offer into account when the court eventually deals with all of the costs of the action including the costs of the trial on liability, or on specified issues only.”

In all, the judge concluded, the right order at this stage was that the costs should be reserved.

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