Smith v Trafford Housing Trust

Under CPR Part 36.14, the question is whether the usual costs order would be unjust in all the circumstances. It is not whether the claimant acted reasonably in refusing the offer. The listed circumstances are not exhaustive, but the burden of establishing injustice is formidable because Part 36 promotes settlement and avoids unnecessary costs.

An offer may be beaten in neither money nor form, yet it may be unjust to impose its usual costs consequences where the litigation was properly tried to resolve the parties’ real, non-monetary dispute. The court must assess who was substantively successful and whether a settlement would have left the central dispute unresolved.

This was a further judgment on damages and costs after the claimant succeeded at trial in establishing that his demotion breached his contract of employment. His earlier claim for a declaration based on Convention rights had been struck out because the defendant was not shown to be a public authority. That order was not appealed.

The defendant had made a compliant £1,000 Part 36 offer. The claimant obtained only £98 damages and £4.10 interest, since damages were limited to the loss during a deemed 12-week notice period. The issue was whether the usual costs consequences under CPR Part 36.14 should nevertheless be displaced as unjust.

1. No order for costs. The claimant recovered damages and interest of £98 and £4.10 respectively. The separate costs order on the striking-out of the Convention claim remained in force.

2. The judge held that the proper inquiry under CPR Part 36.14 was whether a costs order against the claimant would be unjust in all the circumstances, viewed as affecting both parties. Reasonableness in refusing the offer was not the test. The matters listed in rule 36.14(4) did not exhaust the relevant circumstances, but the claimant bore a formidable burden because Part 36 serves settlement and the avoidance of unnecessary costs.

3. That burden was met. The dispute was not primarily about the small sum recoverable. It concerned the contractual correctness of the disciplinary process and the claimant’s effort to restore his reputation after a gross-misconduct finding. A £1,000 settlement would have left the substantive employment dispute unresolved while the relationship continued.

4. The claimant was, in substance, the successful party on liability. However, it would also have been unfair to expose the defendant to the claimant’s costs: the claimant failed on his proposed broader measure of damages and had not pursued an Employment Tribunal claim in time. Justice was therefore served by costs lying where they fell.

not stated in the judgment.