Optical Express Ltd & Ors v Associated Newspapers Ltd

Late acceptance of a Part 36 offer does not, by itself, justify departing from the default costs order or awarding indemnity costs. The offeror bears a formidable burden of showing that the prescribed order would be unjust, having regard to all the circumstances. The context of late acceptance differs from failure to beat an offer at trial because the offeror expressly committed itself to paying the offeree’s pre-offer costs as part of the settlement bargain. Relevant conduct may nevertheless justify adjusting the costs period, particularly where the claimant unreasonably delayed providing information needed to evaluate the claim. Proportionality and conduct are ordinarily addressed at detailed assessment. Indemnity costs require conduct or circumstances outside the norm. Costs may be set off against costs, but agreed damages should not generally be withheld pending costs assessment.

The claimants brought libel and malicious falsehood proceedings concerning an article about refractive eye surgery. The defendant made an Offer of Amends and a separate damages offer, followed by a Part 36 offer of £125,000. The claimants accepted the Part 36 offer after the relevant period had expired, bringing the substantive claims to an end.

The parties disputed the resulting costs order. The defendant sought costs for part of the pre-offer period, indemnity costs after expiry of the relevant period, and set-off against damages. The principal issues were whether the prescribed order under CPR 36.13 should be displaced as unjust, whether indemnity costs were justified, and whether costs should be set off against damages.

1. Late acceptance. The court must make the ordinary orders under CPR 36.13(5) unless satisfied that they would be unjust. The burden lies on the offeror. The applicable principles in SG v Hewitt [2012] EWCA Civ 1053, Tiuta Plc v Rawlinson & Hunter (A Firm) [2016] EWHC 3480 (QB) and Smith v Trafford Housing Trust [2012] EWHC 3320 (Ch) apply, but the context of late acceptance makes the burden particularly substantial because the offer includes a commitment to pay pre-offer costs.
2. The defendant was not entitled to treat the claimants as unsuccessful merely because the settlement sum was a small fraction of the pleaded claim. The claimants obtained substantial damages and a significant improvement on the earlier offer. The approach in Walker Construction (UK) Ltd v Quayside Homes Ltd [2014] EWCA Civ 93 concerned a different costs exercise after trial and was not applicable. Proportionality and conduct could be considered at detailed assessment.
3. The claimants’ delay in providing information about special damages materially affected the timing of the Part 36 offer. It would therefore be unjust to apply the default dates without modification. The claimants were awarded costs up to 11 January 2016 and the costs of and caused by preparing and serving the further information. The defendant was awarded costs from 12 January 2016, on the standard basis until 17 June 2016 and the indemnity basis thereafter.
4. Acceptance out of time alone cannot justify indemnity costs. Here, however, the continued pursuit of a very large claim after expiry of the offer, followed by unexplained acceptance of a vastly smaller sum, was highly unreasonable and outside the norm.
5. Costs could be set off against costs under the court’s procedural and inherent jurisdiction. Costs were not set off against the agreed damages because withholding damages would undermine their compensatory and vindicatory purpose.