Courts must consider “all the circumstances” before deciding whether it would be unjust to impose costs penalties on claimants who fail to beat offers made under part 36, appeal judges have ruled.
Lady Justice Arden said judges could not “put some factors on one side”, particularly circumstances “so obvious” as those relating to the defendant’s offer.
She went on: “Suppose that a person to whom a Part 36 offer had been made had asked for clarification or more relevant information and been refused it, or the answer misrepresented the position.
“If that information was material and might reasonably have altered his view on whether to accept the offer, and was information within the offeror’s organisation, the court might well find that it would be unjust to order that the normal consequences should follow from non-acceptance.”
Arden LJ said she accepted that the purpose of part 36 was to provide an incentive for parties to make offers and settle cases, but said a “subsidiary purpose must be to prevent injustice from the normal consequences as a result of non-acceptance of a Part 36 offer”.
She was ruling a challenge by MGN (Mirror Group Newspapers) to a costs ruling by Mr Justice Mann, who decided to make no order for costs following a phone-hacking trial involving Alan Yentob, former creative director of the BBC.
Mann J held that, despite obtaining a judgment which found that MGN’s wrongdoing was “far more extensive” than it had admitted, Mr Yentob had not beaten MGN’s offer by obtaining a damages award of £85,000.
Delivering judgment in Yentob v MGN  EWCA Civ 1292, Arden LJ said the trial judge “applied the right test” and the factors he took into account were “circumstances to which he was bound to have regard”.
Mann J held that, under CPR 36.17(5), the relevant circumstances could include a comparison between the terms of the offer and the terms of the judgment, and there might be cases where a party was justified in continuing to trial even though he had received a favourable offer.
Arden LJ said Mr Yentob’s counsel, Simon Browne QC, directed his submissions to the question of discretion.
“He emphasises the procedural history and submits that Mr Yentob was justified in pursuing his claim. For example, MGN had admitted that hacking took place over a two and a half year period as opposed to the period of seven years found by the judge.
“Moreover it only emerged during the trial, from, we are told, the judge’s own questions to a former employee of MGN, Mr Evans (the claimants’ witness), that vital documents, such as private investigator faxes and journalists’ notebooks, had been destroyed.
“Only then did it become clear that Mr Yentob would not be able to have a clear statement of the extent of the hacking he had suffered or obtain an order for post-trial disclosure.”
Agreeing with Mr Browne that Mann J was entitled to look at all the circumstances, including those “pertaining to the offer”, Arden LJ granted permission to appeal, but dismissed MGN’s appeal.
Lady Justice Rafferty and Lord Justice Kitchin agreed.