November 3, 2017

Part 36 Offers - Optical Express v Associated Newspapers

Court decides not to order the usual costs consequences for accepting a Part 36 offer outside the relevant period

Where a Part 36 offer is accepted after the end of the relevant period, the defendant will pay the claimant's costs of the proceedings up to the expiry date of the relevant period and the offeree will pay the offeror's costs from the expiry date of the relevant period to the date of acceptance (unless the court orders otherwise because it considers those costs consequences to be unjust).

In this case, the claimant accepted the defendant's Part 36 offer after the end of the relevant period and the defendant argued that it should be entitled to its costs from an earlier period and should also get its costs from the end of the relevant period on an indemnity basis. Warby J held as follows:

(1) When considering whether the ordinary costs consequences would be unjust, the court should bear in mind that the exercise is different where an offer has been accepted rather than beaten at trial: "not least because in this situation the defendant has decided that it is willing to pay the claimant's pre-offer costs, as the price of settlement. The defendant has gone further and made an explicit commitment to the claimant that it will pay those costs, if the offer is accepted. .. That is one good reason why the hurdle for the defendant is a formidable one here".

It could not be said that the costs consequences should be different just because the offer is accepted after the end of the relevant period. The defendant could have withdrawn its offer or made a Calderbank offer if it wanted a different outcome (and although it may not have known the exact amount of the claimant's costs at the time, "the costs budgeting process, experience, and the fact that it would know its own costs must mean that it had a pretty fair idea").

(2) The defendant could not be said to have been the successful party just because the recovery by the claimant was a fraction of its claim: "It seems to me a recipe for confusion to treat the case as if the outcome was one achieved by going to trial, and to adopt the approach that might be appropriate in that event".

(3) However, the claimant's conduct had been such that the ordinary costs consequences would be unjust in this case. Had it acted reasonably in supplying certain information, the defendant's offer would have been made earlier and so the claimant was entitled to its costs only up to the end of the relevant period for such a hypothetical offer (and some 4 months earlier than the date when the Part 36 offer had in fact been made). The defendant was also entitled to its costs on the indemnity basis from the date when the claimant's solicitors had responded that the offer was "wholly derisory" and rejected (it was accepted about 7 months later).