No order for costs after defendant withdraws part 36 offer

Underwater power cables: Cartel finding meant only quantum was at issue

A High Court judge has made no order for costs after a defendant withdrew its part 36 offer after trial but before judgment.

Mr Justice Marcus Smith said withdrawal meant the offer would not “automatically” have the costs consequences laid down in part 36, but it was a “relevant factor” to be taken into account.

He was ruling in BritNed Development v ABB AB and another [2018] EWHC 3142 (Ch), which followed a European Commission finding that the Swiss engineering defendants were involved in a decade-long cartel in relation to high-voltage submarine and underground power cable projects.

There were four issues before the court and the claimant, which operates the subsea electricity link between the UK and the Netherlands, succeeded in part on its overcharging claim, recovering €13m.

The judge said the question was the extent to which the withdrawn part 36 offer was enough “to turn the tables and cause the incidence of costs to shift”.

He continued: “Settlements out of court are to be encouraged, and ABB put in an offer that backed its expert’s judgment regarding the level of the overcharge, and which proved to be more than BritNed recovered. It would be entirely wrong to leave this offer out of account.

“But I also have to have regard to the fact that CPR 36 is a self-contained procedural code, and that had ABB wanted to ensure a costs outcome in its favour, it should not have withdrawn the offer.

“By withdrawing the offer it made, ABB, as it accepts, put itself (or, rather, put its offer) outside the CPR 36 regime.”

Marcus Smith J said BritNed argued that success was “not a difficult concept” because “the party who writes the cheque at the end of the day” was the unsuccessful one.

The judge said he was not sure that the definition of success was so easy a concept in this case because there was a “binding finding” against ABB about its involvement in the cartel.

“In a very real sense, therefore, quantum was substantially the only issue before the court.”

Marcus Smith J said BritNed was the winner in terms of who wrote the cheque, but in terms of expectation was “substantially the loser”, as it had recovered just under 10% of its own part 36 offer of €135m.

He said ABB had made a part 36 offer, which remained open throughout the trial, and which BritNed failed to beat.

The judge said it would not be possible to allocate costs issue by issue, but BritNed’s had “substantially failed” on the two of the four issues, had lost on the third and achieved only a “score draw” on the remaining one.

ABB argued it should have its costs, plus interest, from the latest time its part 36 offer could have been accepted, without the permission of the court, by BritNed.

BritNed argued that although it had failed to recover “anything like the amounts it sought” and ABB had made a part 36 offer, “these factors were not enough to displace the starting point, which was that BritNed, as the successful party, as the recipient of the cheque, should have its costs”.

Marcus Smith J said BritNed placed “great reliance” on the “informational imbalance” between the parties in cartel cases, where the cartelist generally knew far more about the operation and impact of the cartel than the “innocent claimant seeking recompense” for harm suffered.

The judge said he agreed that quantification could be difficult, but that was a “regrettable fact of quantification in all cases”.

Marcus Smith J concluded that the existence of ABB’s part 36 offer was not enough to reverse the incidence of costs.

“So I do not consider that ABB should have a costs order in its favour. But I do consider that the making of a commercial offer early on that was not beaten by BritNed does mean that it would be unjust for ABB to pay any of BritNed’s costs.

“Looking, then, at the overall justice of this case, as I must, the order that I make is that there be no order as to costs.”

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