Mr Justice Ramsey, the judge in charge of Jackson implementation, has removed any lingering traces of the 2008 Carver ruling in finding that a £1m part 36 offer that was less than £4,000 short of the court’s award should not influence the final costs order.
He said that CPR 44.2(4)(c) – which allows the court when making a costs award to take into account offers that do not have part 36 consequences – should not be allowed to introduce a “near miss” rule by the back door.
In Hammersmatch Properties (Welwyn) Ltd v Saint Gobain Ceramics and Plastics Ltd & Anor  EWHC 2227 (TCC), it was accepted that since the introduction of CPR 36.14(1A) in October 2011 to counter Carver, the fact of beating an offer, by however small a margin, was enough.
However, the defendant argued that by rejecting the part 36 offer and pressing ahead without making a realistic counter offer (the claimant’s part 36 offer was £3.2m), the claimant was no better off than it would have been if it had accepted the offer and that carrying on the litigation after the £1m offer was wholly disproportionate and a waste of time and resources.
Ramsey J said: “The part 36 offer made in this case could be said, in principle, to come within the wording of CPR 44.2(4)(c). It is an admissible offer to settle and is not an offer to which costs consequences under part 36 apply.
“However I do not consider, even in a case such as this, where Hammersmatch has only received a very small amount more than the sum which Saint-Gobain offered in its part 36 offer, the court should approach CPR 44.2(4)(c) on the basis that this could lead to an order that a claimant should pay the defendants' costs.
“In my judgment, to do so would be to seek to use the provisions of CPR44.2(4)(c) to give a similar effect to a part 36 offer and thereby introduce the same uncertainty into part 36 offers which are near to but below the sum awarded, as led to the criticism of Carver and the subsequent amendment introduced in CPR 36.14(1A).”
Though with the benefit of hindsight, Saint-Gobain should have offered a very small amount more and Hammersmatch should have reasonably accepted that offer if made, the judge said the court “should resist invitations to speculate whether offers to settle litigation which are not in fact made might or might not have been accepted if they had been made”.
The judge said that whilst CPR 44.2(4)(c) will apply where there is an open offer made for more than is recovered or an offer purportedly under part 36 for a sum in excess of the sum recovered but where, for some reason it does not have the part 36 costs consequences, “I do not consider that it should alter the costs consequences in a case such as this”.
“Here Saint-Gobain made a part 36 offer which was too low. There was a mediation indicating, on its face, that there was no unreasonable refusal to negotiate. In the event, neither party sought to negotiate after Saint-Gobain’s second part 36 offer.”
Mr Justice Ramsey referred to the ruling of Mr Justice Jackson, as he then was, in Multiplex Construction (UK) v Cleveland Bridge UK  EWHC 2280 (TCC), in which he said that “if (a) one party makes an offer under part 36 or an admissible offer within rule 44.3(4)(c) which is nearly but not quite sufficient, and (b) the other party rejects that offer outright without any attempt to negotiate, then it might be appropriate to penalise the second party in costs”.
He said this was “evidently taken from Carver” and is no longer a principle which applies to part 36 and should not be applied as a special ‘near miss’ rule through CPR 44.2(4)(c).
“If there is an unreasonable refusal to negotiate, then that is a matter which comes within the circumstances which the court can take into account under CPR 44.2(4) and sub-paragraph (a) in particular.
“I am doubtful that, on analysis, a ‘near miss’ offer can generally add anything to what otherwise would be conduct in the form of unreasonable refusal to negotiate. To do so would raise the difficulties in [the Court of Appeal ruling of Johnsey Estates (1990) Ltd v Secretary of State for the Environment, Transport and the Regions  EWCA Civ 535] and seek to base an exercise in discretion on offers which neither party made at the time but which, with the benefit of hindsight, one party should have made and the other party should have accepted.”