Original Beauty Technology Company Ltd & Ors v G4k Fashion Ltd & Ors

Where liability and quantum are tried separately and a genuine Part 36 offer concerns issues not yet determined, costs ordinarily must be reserved until the quantum stage is complete. CPR 36.17 operates only when judgment has been entered and it is known whether the claimant has obtained a judgment more advantageous than the offer. The court must then consider the mandatory factors in rule 36.17(5), many of which cannot properly be assessed while the offer’s terms and circumstances remain confidential. General litigation conduct, including allegedly egregious conduct, does not permit the court to bypass those requirements. Earlier authorities based on materially different wording do not establish a continuing discretion to award costs before quantum.

Following a liability judgment concerning alleged infringement of UK and Community unregistered design rights, the court found infringement in seven of 20 selected garments and directed that the remaining garments be agreed or adjudicated. An account of profits or damages inquiry remained outstanding.

The first and second claimants sought substantial costs and a payment on account, relying on the defendants’ alleged dishonest and unreasonable conduct. The defendants relied on a genuine Part 36 offer whose terms were unavailable to the court and submitted that costs should be reserved. The issue was whether the court could determine costs before the outcome on quantum was known.

1. Costs reserved. The court held that costs must be reserved until the remaining liability issues and the damages inquiry or account of profits had been determined.
2. Operation of Part 36. Rule 36.17 applies where judgment has been entered and the claimant has failed to obtain a judgment more advantageous than the defendant’s offer. Those conditions could not yet be established because liability for 71 garments and quantum remained unresolved.
3. Mandatory considerations. If rule 36.17(3) later applies, the court must consider the factors in rule 36.17(5), including the offer’s terms, timing, available information, the parties’ provision of information, and whether the offer was a genuine attempt to settle. At this stage the court knew only that the offer existed. It therefore lacked the information required for a proper assessment.
4. Conduct and earlier authority. The court accepted that other conduct might be relevant when the costs decision was ultimately made, but it could not override the express structure of Part 36. Multiplex Constructions concerned materially different wording and did not preserve a general discretion to ignore rule 36.17(5). The approaches in Lilleyman and Lifestyle Equities supported reserving costs in these circumstances.
5. Even if a discretion existed, the judge would not have exercised it. An interim costs order would be disproportionate and unsatisfactory, and the unresolved liability issues could materially affect the overall costs result.