Costs News

21 January 2021
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Accepting part 36 offer one day late allows party to argue liability for costs

A defendant that accepted a part 36 offer one day outside the 21-day ‘relevant period’ can then invite the court to consider its liability for costs and is not bound to pay the costs it would have faced had it accepted within the 21 days, the High Court has ruled.

Mr Justice Mann accepted that this “may seem odd” in the context of the case, a phone hacking claim brought by the actress Roxanne Pallett against MGN Ltd, where the offer of £99,500 was accepted expressly on that basis.

Barrister blogger Gordon Exall suggested that the ruling “may well lead to claimants deciding that part 36 offers are extremely unattractive”,

Mann J said: “In making an offer, an offeror is likely to make it on the basis that the monetary offer proposed is acceptable provided that the costs are also paid. That is what the offer says, and that is the effect of an offer accepted within the 21 days.

“The offeror (if a claimant) might well expect that if the offer is not accepted, it is open to the offeror to continue with the action and see if he/she can better the offer and still get costs. The one thing that an offeror would not expect is that the offeree can wait until the relevant period (usually 21 days in practice) has passed, accept the offer (and thus bind the offeror) and then seek to avoid the costs by asking the court to determine them.

“The offeror will usually not think that that is an appealing option to have forced on him or her; otherwise it would have been offered in the first place. Yet that seems to be the effect of CPR 36.13(4).”

He added that this was consistent with decisions of Mr Justice Warby in Optical Express Ltd v Associated Newspapers [2017] 6 Costs LR 803, and the Court of Appeal in Dutton v Minards [2015] 6 Costs LR 1047, “which accepted that position without demur”.

This meant it was a valid acceptance, but the court went on to reject the defendant’s argument that it should disallow the claimant's costs from 26 March 2019 – the date the defence was served and some 20 months before the part 36 offer – on the basis that the claimant did not engage properly in a settlement process.

The phone hacking claims have included an early disclosure step to enable claimants to form a better view of the strength of their cases, with the possibility of producing an earlier settlement being one of the objectives.

However, during some of the period of this claim, MGN was generally refusing to provide this early disclosure on the basis that, in some unspecified case, it would risk revealing a confidential source. Mann J, upheld by the Court of Appeal, said in 2019 that it could not do this.

In the present case, he decided that Ms Pallett had “reasons, which cannot be dismissed as unreasonable, for not engaging in horse-trading over figures from the outset”.

He continued: “In my view, the claimant's attitude of declining to negotiate until she was better informed was an entirely reasonable one, bearing in mind the one-sided nature of the possession of information in all these cases and, in this one, the failure of the defendant to comply with the early disclosure regime.

“In a real sense, the defendant brought the claimant's attitude on itself by persisting in its failure to comply with the early disclosure regime, both informal (pre-issue) and formal (post-issue).”

By the time she received the early disclosure, the claimant had decided she wanted to get full disclosure in order to value her claim. “It is not possible to say that that view is unreasonable; it is a sensible view to adopt,” the judge found.

He concluded: “In all those circumstances, while it can be said that the claimant was not engaging in a negotiation prior to October 2020, it cannot be said that in the circumstances she should have been, and certainly not that the absence of a negotiating stance was culpable (in the manner identified in the authorities) to an extent which makes it unjust to allow the normal consequences of the late acceptance of a part 36 offer.”

The ruling ended with a “word of caution” from Mann J, in which he said the case “should not be taken as a green light for all claimants to decline to enter into negotiations before disclosure is complete. Such a posture would not be correct in every case”.

He added: “The defendant will no doubt be concerned that every case will now go to disclosure. That would be regrettable, and should not be the case, and in any event the defendant can always seek to protect itself by making early offers which are more generous and less combative than they were in this case. Claimants should not seek to apply this case too generally.”

David Sherborne, Sara Mansoori and Julian Santos (instructed by Hamlins) for the claimant. Benjamin Williams QC and Richard Munden (instructed by RPC) for the defendant.

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