An automatic entitlement to costs under part 36 only arises if the offer is accepted within the ‘relevant period’, the High Court has ruled.
Mr Justice Mann said that, in a case where the defendant accepted the offer a day after it expired, costs could then be argued before the court.
Barrister blogger Gordon Exall suggested that the ruling “may well lead to claimants deciding that part 36 offers are extremely unattractive.
The ruling came in a phone-hacking claim brought by the actress Roxanne Pallett against MGN Ltd, which accepted her offer of £99,500 the day after the 21-day relevant period expired – seemingly deliberately, the court said – on the basis that it intended to challenge her costs.
Where an offer is accepted outside the relevant period, rule 36.13(4) provides that “the liability for costs must be determined by the court” in the absence of agreement between the parties.
Rule 36.13(5) says the court must, unless it considers it unjust to do so, order that the claimant be awarded costs up to end of the relevant period and the offeree pay the offeror’s costs from then to the date of acceptance.
MGN said this entitled it to invite the court to deprive Ms Pallett of her costs from the date of service of the defence, 20 months before the relevant period expired. This was on the basis that she unreasonably refused to engage in settlement discussions.
Mann J said a claimant offeror would not expect that the defendant could wait until the relevant period has passed, accept the offer, 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).”
But he found this interpretation consistent with previous case law.
Nonetheless, the judge awarded Ms Pallett her costs to the date of acceptance, finding that she had no acted unreasonably.
During some of the period of the claim, MGN was refusing generally to comply with an early disclosure step introduced for phone-hacking litigation that was aimed at helping claimants form a better view of the strength of their cases.
It did so on the basis that, in some unspecified case, it would risk revealing a confidential source. Mann J, upheld by the Court of Appeal, eventually said it could not do this.
In part because of this, he decided that Ms Pallett had “reasons, which cannot be dismissed as unreasonable, for not engaging in horse-trading over figures from the outset”.
The judge added: “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.
Mann J said: “It is not possible to say that that view is unreasonable; it is a sensible view to adopt.”
As a result, it was not unjust to allow the normal consequences of late acceptance of a part 36 offer.
The ruling ended with a “word of caution” from the judge, however, 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.”