Transocean Drilling UK Ltd v Providence Resources Plc

For deciding whether a claimant has beaten a Part 36 offer, the comparison is between the substantive judgment and the offer. Costs are excluded. If Part 36 is engaged, the court considers whether its consequences would be unjust, having regard to all the circumstances. In exceptional cases, commercial costs consequences may be relevant at that discretionary stage. The court may modify, rather than wholly apply or disapply, the usual consequences. Litigation conduct, protective counter-offers, and the costs and court resources saved by settlement may all be relevant.

The claimant succeeded at trial on a substantial commercial claim, but the court made no order as to costs because the defendant had succeeded on most issues by costs expenditure. The Court of Appeal later increased the judgment to approximately US$13.86 million. The claimant then sought the enhanced consequences of a Part 36 offer to accept US$13 million inclusive of interest.

The issues were whether the claimant had obtained a judgment at least as advantageous as the offer and, if so, whether imposing the usual Part 36 consequences would be unjust.

1. Part 36 was engaged. The comparison under CPR 36.14(1)(b) was between the substantive money judgment and the monetary proposals in the offer. Costs were excluded. The judgment of Mitchell v James [2004] 1 WLR 158 supported that approach. The claimant’s judgment exceeded the US$13 million offer.
2. Under CPR 36.14(3) and (4), the question was whether the usual consequences would be unjust. The court considered all the circumstances. The burden of showing injustice was formidable, given Part 36’s settlement purpose. The principles in Webb v Liverpool Women’s NHS Foundation Trust [2016] 1 WLR 3899 were adopted.
3. Although costs were excluded from the engagement comparison, they could exceptionally be considered at the discretionary stage because the unusual procedural history made the hypothetical costs position readily ascertainable. The offer was too ambitious when costs were included, but the defendant would nevertheless have been better off accepting it and could have made a protective counter-offer.
4. The claimant’s dishonest conduct in parts of the technical case justified some disapplication. Ordinary changes or abandoned points in complex litigation did not. The defendant was ordered to pay the claimant’s costs from 30 August 2014 on the standard basis. There was no enhanced interest and no surcharge.

• Court of Appeal: allowed the claimant’s appeal on a contractual construction issue, [2016] EWCA Civ 372.
• High Court (Commercial Court): following the trial judgment, [2014] EWHC 4260 (Comm), and the consequential costs judgment, [2015] EWHC 1136 (Comm), held that Part 36 was engaged but modified its consequences.