Shortly after I completed the post on Part 36 offers after the costs budget has been confined to court fees Professor Dominic Regan reminded me that there is another example in Ali & Anor v Channel 5 Broadcast Ltd [2018] EWHC 840 (Ch). Not only is this case another example it contains a salutary tale.  The claimants in that case were successful.   The were litigating against a party who had not filed a costs budget. However they failed to beat the Part 36 offer and ended up paying (50%) of the defendant’s costs at trial and (presumably) 100% of the defendant’s costs of the unsuccessful appeal.


The claimants had failed to beat a Part 36 offer.  The defendant, however, had never filed a costs budget. The question was whether the defendant’s costs should be confined to court fees.  The Part 36 offer was made on the 27th September 2017, the trial took place in in February 2018. The case was not budgeted until the 19th December 2017.  The defendant did not provide a budget at all. The defendant beat its own Part 36 offer.  The judge was considering the issue of whether the defendant was entitled to costs and whether those costs should be restricted to 50% of the costs.


The consequences of Channel 5’s failure to file or serve any costs budget
  1. As noted above, Channel 5 failed to file or serve any costs budget. In those circumstances, the Claimants contend that Channel 5 should be treated as having filed a budget comprising only the applicable court fees pursuant to rule 3.14, with the consequences specified in rule 36.23(2)(a), namely that Channel 5 can only recover 50% of its assessed costs. Counsel for Channel 5 somewhat tentatively suggested that the Court should make a different order pursuant to rule 3.14. As counsel for the Claimants pointed out, however, Channel 5 neither made any application for relief from sanction nor filed evidence of the kind which would be required to address the relevant factors so as to enable the Court to consider them under rule 3.14 (see Mitchell v News Group Newspapers Ltd [2013] EWCA Civ 1537[2014] 1 WLR 795 at [32]). In those circumstances I consider that there is no basis for an order disapplying rule 3.14, and therefore rule 36.23(2)(a) applies.
  2. Channel 5 contends that, even if it is subject to the sanction in rule 3.14, and hence the restriction to 50% of its assessed costs in rule 36.23(2)(a), the sanction and restriction do not apply to the period prior to 19 December 2017 when the costs management hearing before took place before Master Shuman. In support of this submission, counsel for Channel 5 submitted that the costs subject to the restriction in rule 36.23(2)(a) were not incurred costs (which were not subject to costs management), but only budgeted costs (which were).
  3. I do not accept this contention for the following reasons. The Court of Appeal held in Mitchell v News Group at [30] that the sanction in rule 3.14 applied not only where a party failed to file a costs budget at all, but also where a party filed a cost budget after the time prescribed in rule 3.13. In the present case, the parties were directed to file costs budgets by 2 December 2016. The Claimants did so, but Channel 5 did not.Accordingly, at that point in time Channel 5 became subject to the sanction in rule 3.14 unless it obtained relief from that sanction (whether by way of an application under rule 3.9 or an application under rule 3.14 itself). It is immaterial that the costs management hearing did not take place until 19 December 2017. It is true that, at the costs management hearing, Master Shuman could only approve budgets for prospective costs, and not costs which had already been incurred by then. But it would undermine the purpose of rule 3.14 to treat it as having no effect with regard to costs incurred between the date on which costs budgets should have been filed and the date on which the court approved such budgets. This is particularly so given that Channel 5 could have applied for relief from the sanction at that hearing, but did not do so.
  4. Accordingly, I conclude that Channel 5 is only entitled to 50% of its assessed costs after 8 November 2017.