A corporate claimant that accepted a part 36 offer late should not get its costs up to the point where the offer expired because its conduct meant the usual rule should not apply, the High Court has ruled.
Mr Justice Warby penalised high street retailer Optical Express for not elaborating its claim for special damages as quickly as it should have done, and for drawing out a claim that it eventually settled for a fraction of the damages sought.
The claimants sued for libel over an article published by the Daily Mail and Mail Online on eye surgery carried out by Optical Express.
The claim form was issued in January 2015, seeking damages, including special damages. In February 2015, the defendant publisher, Associated Newspapers, made a qualified offer of amends in respect of the libel claims and a £25,000 Calderbank offer. The former was accepted but not the latter.
The particulars of claim put the loss in January alone at £3.7m, saying there was further and continuing financial loss. In October 2015, the defendant sought details of this, which were not provided until just over six months later, at which point the value of the claim had risen to £21.5m.
On 27 May 2016, the defendant made a £125,000 part 36 offer, made up of £25,000 in general damages and £100,000 in special damages.
This was initially rejected as “wholly derisory” but eventually accepted on 21 February 2017.
The claimants’ costs up to 17 June 2016, when the offer period expired, were £549,000. The defendant’s costs from 18 June to the date of acceptance were just shy of £500,000.
The defendant said it would be unjust to apply the normal consequences of a late part 36 acceptance.
While Warby J rejected some of the grounds for this, he found “real force in the contention that the claimants failed to provide the defendant with a timely elaboration of their case on special damages”. There was evidence that the claimants were keeping a running total.
He said: “I find that the claimants could and should reasonably have provided an elaboration of their case on quantum by October or November 2015 at the latest, on similar lines to the information provided the following May.
“Had they done so, the defendant would in all probability had made its offer some three weeks later, in November or December of that year…
“For these reasons, I have been persuaded that the normal order as to costs would be unjust. It would be unfair in the circumstances to allow the claimants to recover costs right up to the expiry of the validity of the offer actually made.”
He arrived at 11 January 2016 as “a fair point” from which the part 36 consequences should run.
“This is on the basis that if the claimants had acted reasonably in the provision of information the defendant’s offer would have been made in late December 2015 and the time for acceptance would have expired 21 days later.”
However, he qualified the defendant’s entitlement to costs after 11 January 2016 by awarding the claimants the costs of and caused by the preparation and service of the further information sent on 8 May 2016.
“Those are categories of costs which the claimants would have incurred and been entitled, in principle, to recover had they acted promptly in providing full details of their claims, thereby prompting an earlier part 36 offer which they in due course accepted.”
Warby J also awarded indemnity costs from the June date when the offer expired. There had been no explanation as to why an offered that was “spurned for many months” was then accepted, and for a sum “so vastly less than the claim as pleaded”.
He said: “Sometimes there may be valid reasons for such a change of stance. Here, in the absence of any explanation, it is permissible to infer that the belated acceptance was prompted by a re-assessment of the claim which could and should have been made earlier; or by some external factor which meant that it happened to suit the claimants to bring an end to the claim at that time.
“In any case, it is legitimate to describe the claimants’ conduct as highly unreasonable and such as to justify an order for assessment on the indemnity basis.
“The continued pursuit of the pleaded claim after time for acceptance of the Part 36 offer expired can properly be characterised as wholly disproportionate to the value of the claim. It is fair to say that the claimants have forfeited their right to the benefit of a proportionate assessment of the defendant’s costs, and to the benefit of the doubt on reasonableness.”
Warby J added that the each side’s costs could be set off against the other’s, but not against the damages payment.
“Libel damages serve to compensate and to vindicate the claimant’s reputation. An award of damages, or an agreed sum in settlement, will serve that purpose less well if the money is withheld pending the assessment of costs.”