Unjust to impose new part 36 sanction on defendant, High Court rules

RCJ: Jackson rulings

The first known High Court ruling on the new costs sanction payable when a claimant beats their own part 36 offer has come down in favour of the defendant.

Charles Hollander QC, sitting as a deputy High Court judge in the Chancery Division, found that it would be “unjust” to order the otherwise automatic penalty, which in this case would have been close to the maximum £75,000.

The sanction is calculated as 10% of the first £500,000 in awarded damages, and 5% of the next £500,000.

Rule 36.14(4) lays out the kinds of circumstances that can render an order unjust, such as the terms of the offer, the stage in the proceedings when the offer was made, the information available to the parties at the time of the offer, and the conduct of the parties in giving or refusing to give information for the purposes of enabling the offer to be made or evaluated.

In Feltham v Bouskell [2013] EWHC 3086 (Ch), Mr Hollander took account of three key facts: it was a last-minute offer that expired just before the trial began; the principal (but not only) ground on which he decided liability only became an issue when raised in opening; and important documents were only disclosed by the claimant on the eve of the trial.

However, the fact that the claimant only just beat the offer was not a relevant consideration, the judge said.

In light of these matters – particularly the second one – “I consider that it would be unuust to make an order for £75,000 and I decline to do so”.

Mr Hollander went on to say that but for this, he would have reduced the claimant’s entitlement to costs. However, he said it would be unfair to penalise her a second time over the same conduct.

In other Jackson-related rulings, Mr Justice Akenhead emphasised the importance of revised overriding objective in refusing permission for a claimant to re-amend its particulars of claim where it could have done so more than a year earlier.

Among the reasons he cited in Co-Operative Group Ltd v Birse Developments Ltd [2013] EWHC 3145 (TCC) were the likely prejudice granting permission would cause to the defendants and the impact on judicial resources.

In Kesabo & Ors v African Barrick Gold Plc & Anor [2013] EWHC 3198 (QB), Mr Justice Simon granted relief from sanctions “with some hesitation” after the claimant solicitors failed to serve the particulars of claim in time. He expressly did so by reference to “the overriding objective of dealing with cases justly, and particularly (by reference to rule 3.9) the need to conduct litigation efficiently and at proportionate cost, while giving due weight to the importance of compliance with the rules”.

As with Mr Justice Andrew Smith in the recent Raayan case, he said that some of the criteria in the old version of rule 3.9 “may be relevant to the exercise of the court’s discretion, although they should plainly not be applied in a formulaic way”.