A recent case has got me thinking, can a party make a part 36 offer and refuse to mediate? Normally refusal to mediate would be unreasonable conduct but what if a party refuses to mediate but beats a part 36 offer? Can the other party argue the normal part 36 rules shouldn’t apply because there was a refusal to mediate?
The short answer is I think they could still argue that there should be some sanction for the successful party having refused to mediate.
I have recently written about situations where parties have made a part 36 offer which wasn’t a genuine offer to settle. This shows that the Court can look behind the part 36 rules and look at conduct.
In the recent case of Green v White Lantern Film (Britannica) Ltd (https://www.bailii.org/ew/cases/EWHC/Ch/2023/1391.html) [2023] EWHC 1391 (Ch) the Court considered arguments as to conduct and costs in a case where the claimant had beaten her own Part 36 offer. The normal Part 36 consequences were held to apply. The judge held that it was “unjust” for the defendant to pay for one element relating to the claimant’s late disclosure of certain documents. Otherwise the defendant’s arguments as to costs being reduced were rejected.
The judge held that the point of the penal consequences of a rejection of a Part 36 offer is to prevent the sort of costs arguments that might otherwise be made in the normal situation under CPR Part 44.”
The claimant had succeeded in obtaining an award for $1 million at trial. The money had been payment for a film (“A Patriot”) that was not, in fact, made. She had made a Part 36 offer of $900,000 which was effective. The defendants conceded that the claimant had beaten her offer. There were arguments as to whether the claimant’s post-offer conduct should reduce the recoverable costs. The judge held that a failure of disclosure by a third party (who was actually a defendant’s witness) had no impact on the costs order. The claimant’s failure to give disclosure of certain phone records meant that the claimant should bear her own costs of that (limited) part of the action.
In my view if she had also refused to mediate, by analogy with the disclosure conduct, the Claimant probably would have received some reduction in costs or disapplication of the Part 36 costs consequences, but admittedly there is no decision on the point.
he Defendants accepted that the judgment was more advantageous to the Claimant than the offer, and that, therefore, the consequences set out in Part 36 apply. The Claimant was entitled to:
(ii) interest on her costs incurred after 18 August 2022 at the rate of 10 per cent over base rate; and
(iii) an additional amount of £75,000 from the Defendant.
Whilst the Defendants accepted this, they said that there should be some adjustment to that by reference to the late disclosure that happened shortly before and during the trial that they said was the Claimant’s fault.
The defendant argued that there had been late disclosure and this meant that it was unjust for the normal costs consequences to apply. The judge only accepted this in one limited respect.
The judge held that CPR 36.17(4)(b) applied:
“The court must, unless it considers it unjust to do so” order costs on the indemnity basis. It is clear that this means all of the winning party’s costs. In considering whether the order would be unjust, CPR 36.17(5) requires the court to consider “all the circumstances of the case“. It then seeks to delineate certain specific matters to take into account, but the Court found that there is not an unfettered discretion to depart from the ordinary costs consequences of Part 36, and the burden of the party seeking to rely on the injustice of such an order is a “formidable obstacle” as “if that were not so, then the salutary purpose of Part 36 in promoting compromise and the avoidance of unnecessary expenditure of costs and court time would be undermined”.
In the judge’s view, the Defendants had not shown injustice and had not overcome that formidable obstacle.
The judge said that part of the point of the penal consequences of a rejection of a Part 36 offer is to prevent the sort of costs arguments that might otherwise be made in the normal situation under CPR Part 44.
The judge also said it was very difficult to understand what costs are actually being sought to be carved out and how the costs of reviewing the late disclosure will be disentangled from all the other costs being incurred at that time in preparation for the beginning of the trial
However the judge said that in his view, the court should express its disapproval in some way of the failures of disclosure by the Claimant.
I think that if a refusal to mediate had occurred the judge might have also tried to express the Court’s disapproval in some way. My advice is to consider all options to settle including part 36 offers and mediation. Parties quite often mediate and if it fails they make a part 36 offer afterwards based upon the last offer made in the mediation.
With grateful thanks to Gordon Exall and the Civil Litigation Brief which has informed this article: