August 29, 2019

Costs: Nil damages offer is a valid Part 36 offer

The High Court recently ruled that an offer to settle for nil damages can be considered a genuine Part 36 offer and subject to the usual costs consequences.

The decision is significant as it recognises that a Part 36 offer can be genuine even without a damages element. Giving up the damages entitlement was found to be a significant concession, despite reasonable costs being sought as part of the offer.

In cases where the claimant is seeking an admission of liability / apology, defendants are able to ensure some costs protection by making an offer to admit liability, even if the offer does not include any damages.

Background

The Claimant was arrested on suspicion of harassment, but was released without charge.  Nonetheless the Claimant, upon entering certain countries, would have been required to declare the arrest. This would have caused disruption to his business activities.

The Claimant issued a claim for false imprisonment and assault. The Defendant made an initial Part 36 offer to settle in the sum of £4,000 whilst also providing a letter of apology. This was rejected as it did not contain an admission of liability.

Subsequent Part 36 offers were made by the Claimant on condition the Defendant admitted liability for the unlawful arrest and removed all information about him from all police records. The Defendant rejected these offers.

The relevant Part 36 offer to settle the claim sought no damages, but only an admission of liability, with costs to be assessed. This was not accepted. In response, the Defendant offered to provide the Claimant with a letter he could use when travelling.

First instance

At trial, the Claimant was successful and was awarded damages of £2,750. On the issue of costs, the judge found the Claimant's whole purpose in the litigation was to establish the unlawfulness of the arrest, and that the trial was therefore inevitable.

Despite the damages award being lower than the Defendant’s offer, HHJ Baucher held the Claimant could not have accepted the Defendant's offer as what he wanted was an admission (rather than financial compensation). Therefore, the Claimant was the successful party. However, it would also be unjust for the Defendant to pay the Claimant's costs, and HHJ Baucher therefore made no order in respect of costs. The Claimant appealed.

Appeal

The Claimant submitted that HHJ Baucher had failed to resolve whether the Claimant's offer of nil damages was a valid Part 36 offer. The Defendant argued the offer did not "contain some genuine element of concession" because costs were still sought.

The appeal was granted. The High Court held that "Giving up any and all claim to a financial remedy is… a significant concession and therefore is a genuine Part 36 offer". The offer engaged the provisions of CPR 36.17 and therefore the Claimant was entitled to his costs from the expiry of the relevant period. No costs up to the relevant date were ordered.

With regards to the Claimant's failure to respond to the offer of a without prejudice discussion, the judge considered it did not have any direct effect on the course of the litigation, as the Defendant had no intention of making the admission sought.