Pallett v MGN Ltd

Part 36 is a self-contained procedural code. An offer accepted after the relevant period may be accepted subject to the court determining liability for costs under CPR 36.13(4). The court must normally apply the prescribed costs consequences unless doing so would be unjust.

The burden of establishing injustice is substantial. A claimant’s decision to await disclosure before negotiating is not culpable where the defendant has withheld information relevant to valuation and has made unattractive or combative offers. The assessment is fact-sensitive. A failure to negotiate will justify departure from the normal order only where it caused, or culpably lost, a realistic settlement opportunity, or otherwise makes the ordinary consequences unjust.

The claimant brought a privacy claim against the defendant arising from voicemail interception and other unlawful information-gathering techniques. The claim settled for £99,500 after the claimant made a Part 36 offer on 20 October 2020. The defendant accepted on the 22nd day, but stated that it would ask the court to determine the extent of its liability for costs.

The defendant argued that the claimant had failed to engage in settlement discussions and should receive costs only up to 26 March 2019, when the Defence was served. The claimant relied on the absence of early disclosure, the inadequacy and changing terms of the defendant’s offers, and the need for disclosure to value the claim. The issues were whether the defendant could accept the offer in that manner and whether the normal Part 36 costs consequences should be displaced.

1. Acceptance of the Part 36 offer. The defendant was entitled to accept the offer after expiry of the 21-day relevant period while reserving its position on costs. Part 36 is a self-contained procedural code. Traditional contractual rules of offer and acceptance do not govern the regime except where clearly intended. Under CPR 36.13(4)(b), the court therefore had to determine liability for costs.
2. Costs discretion. The starting point under CPR 36.13(5) was that the claimant should receive costs up to expiry of the relevant period and pay the defendant’s costs thereafter. The court could depart from that order only if it would be unjust. The burden was a formidable one, consistent with the authorities including Smith v Trafford Housing Trust, OMV Petrom SA v Glencore International and Optical Express Ltd v Associated Newspapers.
3. The claimant’s failure to negotiate before receiving better information was reasonable in the circumstances. The defendant had withheld associate disclosure contrary to the applicable regime, and that information was intended to assist claimants in assessing their cases. The defendant’s early offers were materially below the eventual settlement, excluded significant categories of costs, were sometimes open for very short periods, and did not create a promising basis for negotiation.
4. The case was unlike Optical Express Ltd v Associated Newspapers. It could not be shown that an earlier negotiation would probably have produced the eventual settlement. Nor was the claimant’s conduct a culpably lost opportunity of the kind contemplated in Thakkar v Patel. The later disclosure materially strengthened the claimant’s valuation of her claim.
5. The ordinary Part 36 consequences were therefore applied. The claimant was awarded all the costs of the proceedings in accordance with the normal template order. The judge cautioned that the decision was fact-sensitive and did not give claimants a general licence to refuse negotiations until disclosure was complete.

The judgment was a first-instance decision concerning costs after settlement. It records that an earlier disclosure ruling had been confirmed by the Court of Appeal in [2019] EWCA Civ 350, but that ruling was not under appeal in this decision.