PART 36: A NEAR MISS IS NOT ENOUGH
A recent case emphasises that a “near miss” with a Part 36 offer is not relevant to the court’s assessment of costs after a trial.
There was, for a time, a developing jurisprudence around “near miss” offers and Part 36. In Carver –v- BAA Plc  EWCA Civ 412 http://www.bailii.org/cgi-bin/markup.cgi?doc=/ew/cases/EWCA/Civ/2008/412.html&query=carver&method=boolean the Court of Appeal held that a near miss on Part 36 offer could be a relevant factor in deciding costs.
That decision was subject to a number of criticisms, including by Lord Jackson at paragraph 2.9 of the Final Report of the Review of Civil Litigation. As a result Part 36 was amended to introduce a new Part 36. 14 (1A)
THE AMENDED RULE
Rule 36.14 – COSTS CONSEQUENCES FOLLOWING JUDGMENT
(1) Subject to Rule 36.14A, this rule applies where upon judgment being entered-
(a) a claimant fails to obtain a judgment more advantageous than a defendant’s Part 36 offer; or
(b) judgment against the defendant is at least as advantageous to the claimant as the proposals contained in a claimant’s Part 36 offer.
(1A) For the purposes of paragraph (1), in relation to any money claim or money element of a claim, “more advantageous” means better in money terms by any amount, however small, and “at least as advantageous” shall be construed accordingly.
RECENT DISCUSSION IN HAMMERSMITH PROPERTIES –v- SAINT-GOBAIN AND PLASTICS LTD
This rule was considered on the 24th July 2013 by Mr Justice Ramsey in Hammersmatch Properties Ltd –v- Saint-Gobain Ceramics and Plastics Limited & Saint-Gobain Abrasives Inc  EWHC 2227 (TCC).
Hammersmatch was a dilapidations case where the claimant obtained judgment for £1,058.768 beating a Part 36 offer by £3,637.90.
The defendant made a number of specific criticisms of the claimant’s conduct of the case and argued that carrying on the litigation after the Part 36 offer was wholly disproportionate and a waste of time and resources.
THE JUDGE’S DECISION ON THE PART 36 OFFER
The judge rejected an argument that the court should follow the rationale in Multiplex Construction (UK) –v- Cleveland Bridge UK  EWHC 2280 http://www.bailii.org/cgi-bin/markup.cgi?doc=/ew/cases/EWHC/TCC/2008/2220.html&query=muliplex&method=boole
that a judge could have regard to a Part 36 offer which was “nearly sufficient”. That case was based on the decision in Carver a case that had been subject to criticism. Part 36 had been amended specifically to oust the decision in Carver.
The court should reject invitations to speculate.
“29. Whilst in this case, standing back with the benefit of hindsight, Saint-Gobain should have offered a very small amount more and Hammersmatch should have reasonably accepted that offer if made, I consider that, as Chadwick LJ said in Johnsey, the court should resist invitations to speculate whether offers to settle litigation which are not in fact made might or might not have been accepted if they had been made. 30. In reality where a Part 36 offer is not sufficient to give rise to the automatic cost consequences of Part 36, an argument can always be made that if the parties had negotiated the matter could have been resolved. However that presumes that, for instance, in this case, Saint-Gobain would have offered a little more and Hammersmatch would have accepted it. Of course, if the parties had known the outcome, they would have made and accepted such an offer. However the negotiations would have been carried out without that knowledge. In those circumstances, it is mere speculation what Saint-Gobain would have done. A party who has made an offer frequently stands on the offer when the other party seeks to negotiate. Equally, while it might be argued that, given the sum in Hammersmatch’s Part 36 offer, Hammersmatch would never have accepted any sum near SaintGobain’s Part 36 offer, that superficially attractive argument was rejected in Johnsey. The reasoning in that case, referred to above, applies equally here: “a court should resist invitations to speculate whether offers to settle litigation which were not in fact made might or might not have been accepted if they had been made.”
31. Further whilst a failure to negotiate argument has a superficial attraction in a situation where an offer is a “near miss”, experience shows that this is a dangerous path to tread. First, most negotiations are conducted on a without prejudice basis and therefore are not admissible in relation to costs”
(The reference to Johnsey is a reference to Johnsey Estates (1990) Limited –v- Secretary of State for the Environment Transport and Regions  EWCA Civ 535
THE COURT WOULD NOT USE CPR 44.2 IN THE ALTERNATIVE
The judge also rejected the argument that the court should use CPR 44.2(4)(c) as a mechanism to award the defendant costs. There was a back route argument that the claimant had acted unreasonably in refusing to accept the Part 36 offer and this should be reflected in the costs order. The court rejected this argument because to adopt it would be using CPR 44 as a means of giving similar effect to a Part 36 offer. This would introduce into the law the same uncertainty as Carver had done and which the introduction of CPR 36.14(1A) was designed to end.
THE COSTS ORDER MADE
The claimant had not succeeded on several issues and the court made a broad brush issues based order with the defendant being ordered to pay 80% of the claimant’s costs. The judge made it clear that the “near miss” Part 36 offer played no part at all in the making of the costs order.
WHAT IS A LITIGANT TO DO?
The immense frustration of missing out a £1 million claim by £3,600 is understandable. With the immense wisdom given by hindsight we can see that another £4,000 in court would have been a wise investment.
However it appears that the courts are determined to put an end to the Carver type arguments. Being “near” is not enough. A Part 36 offer has to be successful.
Since there are now major benefits to claimants who make successful Part 36 offers all of those involved in litigation have to consider making realistic offers prior to trial. See http://civillitigationbrief.wordpress.com/2013/06/27/thanks-for-the-500000-now-wheres-the-extra-50000-you-owe-me/