AB v CD & Ors

Part 36 is a self-contained procedural code. An offer must be a genuine settlement proposal containing a concession of significant value. A request for total capitulation, dressed in formal limitations having no practical effect, is not a Part 36 offer. Failure to provide information may affect the later costs discretion, but does not invalidate an otherwise compliant offer. Where a valid offer covers the whole claim and counterclaim, its costs consequences cannot be assessed until unresolved quantum is known, so costs may be reserved. An invalid offer may still be considered under the general costs discretion. The court also indicated, without deciding, that the disclosure rule for split trials may require further construction.

This was a first-instance costs ruling in a split trial concerning alleged trade mark infringement. The claimant had succeeded on aspects of liability, although its claim concerning one UK mark was dismissed, and the defendants’ counterclaim challenging the validity of the marks was dismissed. Quantum remained outstanding.

Each side had made a Part 36 offer. The claimant’s offer sought undertakings, an inquiry or account, costs and discontinuance of the counterclaim. The defendants’ amended offer included undertakings, a monetary payment, costs and discontinuance. Neither offer was accepted. The principal issues were whether either offer was valid, whether the defendants’ failure to provide financial information affected validity, and how costs should be dealt with before the quantum stage.

Mr Justice Henderson held as follows.

1. The claimant’s proposal was not a valid Part 36 offer. It contained no specific sum for the monetary claims and merely replicated the standard order following determination of liability in a split intellectual property trial. Its apparent limitations concerning marks and signs had no practical significance. The proposal therefore contained no genuine concession of significant value. The incidental benefits of delivery up, publicity and a certificate of contested validity did not alter that conclusion. The claimant could not obtain the special consequences of rule 36.14, although the proposal remained relevant under the general discretion in rule 44.3.

2. A Part 36 offer must involve genuine give and take. The court must examine practical substance and value rather than formal wording. A concession may concern relief available only at or after trial, but it must be valuable and more than an empty gesture. This approach was informed by Roache v News Group Newspapers Ltd [1998] E.M.L.R. 161 and the principles stated in Gibbon v Manchester City Council [2010] EWCA Civ 726.

3. The defendants’ amended offer was valid. The failure to provide financial information did not invalidate an offer which otherwise complied with Part 36. The rules provide a mechanism for clarification and make the refusal to provide information relevant when deciding whether the usual costs consequences would be unjust. Parties should provide sufficient information to enable an informed assessment, but the consequence of inadequate disclosure is ordinarily addressed at the costs stage, not through invalidity.

4. The defendants’ offer covered the whole claim and counterclaim and was indivisible. Because quantum remained unresolved, it was premature to decide whether the claimant had obtained a judgment at least as advantageous as the offer. Costs incurred from 20 August 2010 therefore had to be reserved until the quantum stage.

5. It was also preferable to reserve costs incurred before that date, including the costs of the counterclaim, so that the court determining the final costs order could review the litigation as a whole and retain a free hand.

6. The discussion of disclosure of Part 36 offers in split trials was expressly provisional. The court suggested that the words concerning disclosure until the case had been decided might, in an appropriate case, refer to the conclusion of the first stage, but made no final ruling because the issue had not been fully argued.