DSN v Blackpool Football Club Ltd (Rev 1)

Where a claimant beats an effective Part 36 offer, indemnity costs are the usual consequence unless it would be unjust to order them. The absence of proportionality on assessment is an inherent feature of that consequence and does not itself make indemnity costs unjust.

A party’s belief in the strength of its defence does not, by itself, justify refusing to engage with reasonable settlement proposals or alternative dispute resolution. Persistent refusal to engage, particularly in breach of a case-management direction, may take the conduct of proceedings outside the norm and justify indemnity costs from an appropriate date, although not necessarily for the whole action.

Following a trial in which the claimant succeeded, the parties agreed damages and most consequential orders. Three issues remained for determination: whether costs should be assessed on the standard or indemnity basis, the amount of an interim payment on account of costs, and permission to appeal.

The claimant had made several Part 36 offers, including an offer which the judgment exceeded. The defendant also declined to engage in settlement discussions or alternative dispute resolution despite a direction requiring the parties to consider it and to give reasons for non-engagement. The court therefore considered the effect of the Part 36 regime, the defendant’s litigation conduct, the appropriate costs period, and whether the proposed appeal had a real prospect of success.

1. Part 36 offer. The claimant’s effective offer was beaten at trial. Under CPR 36.17, the specified consequences therefore applied unless unjust. The circumstances identified in rule 36.17(5) did not make indemnity costs unjust. The removal of proportionality from the standard of assessment under CPR 44.3 is an inherent feature of indemnity costs and forms part of the incentive to make and accept Part 36 offers. Indemnity costs were ordered from 24 December 2019.
2. Alternative dispute resolution. A strong defence does not, by itself, justify refusing every form of settlement discussion or ADR. Parties must make reasonable efforts to settle, respond properly to Part 36 offers, and engage constructively in settlement processes. The defendant’s repeated refusal to engage, and its inadequate reasons for non-engagement despite the order requiring consideration of ADR, was conduct outside the norm. It independently justified indemnity costs, but not for the whole proceedings. Costs were standard until 30 November 2018 and indemnity from 1 December 2018.
3. Interim payment. The approved costs budget was the starting point for an interim payment on account, together with incurred costs and appropriate allowance for detailed-assessment arguments. An interim payment of £200,000 was ordered.
4. Permission to appeal. The proposed grounds challenged factual findings and had no real prospect of success under CPR 52.6. Permission to appeal was refused.

This was a first-instance costs and permission-to-appeal judgment following the claimant’s successful trial claim. The earlier trial judgment is identified as [2020] EWHC 595 (QB). No appellate decision is stated in the judgment.