13 August 2014Print This Post

High Court: making defendant pay 10% more for rejecting part 36 offer would add “penal element”

Royal Courts of Justice

Warby J: “Unduly harsh” to criticise defendant for failing to accept offer promptly

A High Court judge has ruled that making a defendant who rejected a part 36 offer pay an additional 10% of the sum awarded for costs would introduce a “penal element” and be unjust.

Mr Justice Warby said that “in some cases it would be just to impose such a liability on a defendant”, for example where an offer “ought to have been seen immediately as at least equal to the best outcome the defendant could reasonably expect”.

However, in the case before him, Warby J said the defendant had a “legitimate argument” for a shorter period of restraint under an injunction preventing him working for another company.

“Moreover, it would be unduly harsh to criticise the defendant for failing to accept the offer promptly given the pace with which the proceedings were advancing, the pressures imposed by that pace, and the late stage during the 21 days at which he obtained sight of the claimant’s statements.”

Warby J was ruling in Elsevier v Munro (supplementary judgment) [2014] EWHC 2728 (QB), after he had granted Elsevier an injunction restraining Robert Munro from joining another company before the end of his 12-month notice period.

The claim was issued on 4 June 2014, with Elsevier making a part 36 offer on 9 June which would have seen Mr Munro work for a new firm on 1 January 2015, three months before the end of his notice period.

Mr Munro allowed the 21-day time limit for accepting the offer to expire on 30 June. At the trial, which concluded on 16 July, Warby J ruled that Elsevier was entitled to an injunction restraining Mr Munro from working for another employer until 11 April 2015.

Under CPR 36.14, Elsevier could claim, following the Jackson reforms, an additional 10% to the amount awarded to it by way of costs, in the case of an injunction. In the case of a money claim, the additional amount would have been 10% of damages.

Warby J said it had already been agreed that Mr Munro would pay costs on an indemnity basis and interest on those costs from 1 July at 4.5% above the base rate.

Mr Munro argued that the part 36 offer was made close to trial, there was little time for negotiation and he did not have the claimant’s witness statements until the last day for acceptance of the offer.

Warby J added that the imposition of the additional 10% would impose a liability in respect of some costs incurred before any offer was even made.

He concluded: “The imposition of an additional liability would therefore involve an element of penalty that I do not consider it just to impose on this defendant, and I decline to make an order for an additional amount.”

 

By Nick Hilborne

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