COSTS: “ROLLED UP” OFFER OF SETTLEMENT, INCLUDING COSTS DID NOT GIVE A DEFENDANT ANY PROTECTION

The judgment of Mr Justice Freedman in Comberg v VivoPower International Services Ltd & Anor [2020] EWHC 2787 (QB) contains many interesting observations in relation to damages, mitigation and costs.  Here I want to isolate one element – the fact that offers had been made did not have an impact on the overall award of costs. In particular a defendant’s offer that was said to be inclusive of costs had no impact on the judge’s determination of the appropriate basis for assessment of costs.  It shows the difficulties of making offers “inclusive of costs”.  Clearly these have attractions for clients (who prefer certainty), warnings have to be given that such offers may offer no real protection.

“… it made no Part 36 offer. It also made no Calderbank offer in which the amount of the claim was offered plus costs. By making a costs inclusive offer, it is not possible readily to show whether Dr Comberg has advanced his position by rejecting or not accepting the offers. The most pertinent to consider was an offer of £1.5 million inclusive of costs, shortly prior to the trial. It now appears likely that Dr Comberg has done better than that by going on to trial in that he has an award of damages of close to one half of that amount and on the basis that he has the majority of his costs, this is likely to exceed the costs which were offered in the rolled up order. The fact that the offer was rolled up with costs means that it does not provide costs protection.”

 

THE CASE

The claimant had been successful in a claim for damages for wrongful dismissal.  The judge was considering the appropriate basis upon which costs should be awarded. One of the factors being considered was whether offers from the claimant (which were for sums higher than those awarded at trial) should be taken into account. The judge decided they should not.

THE JUDGMENT ON THIS ISSUE
  1. It is next necessary to consider offers to settle by Dr Comberg. First, there is no relevant offer under the Part 36 regime which provided Part 36 protection in the events which have occurred. Such offers as have been made by Dr Comberg have been for a far larger sum than the sums awarded.
  2. Secondly, whilst the court in its discretion is entitled to treat a Calderbank offer as relevant in terms of conduct, the offers in this case of Dr Comberg were not offers where Dr Comberg could say demonstrably that he did better than the offer at trial. There was an offer by Dr Comberg made on 10 November 2017 in a sum of just over one million pounds plus costs. The breakdown of the offer was by reference to the now successful claims (notice period salary, expressed as a clean break, and deferred remuneration). Nevertheless, it failed to allow anything for mitigation: it is not an answer that this could not arise because the time for mitigation had not yet arisen in that there was nothing at all that was provided for future reduction of the loss.
  3. An offer was made on 10 February 2020 which was only a partial offer in respect of certain parts of the claim. It was an offer in respect of the claims to notice period, holiday pay and bonus of £1.2 million inclusive of costs to comprise 70% of the costs of the claim. It did not include the remaining claims including the shares and the three oral fee agreements and the remaining 30% of the costs. Whilst it might be said that with hindsight the offer had attractions, it is not possible to test it because the offer was inclusive of costs. Further, the offer left the trial still to be fought including the misconduct/incompetence allegations which were relevant at least to the share claim, and possibly to the oral fee agreements. In the exercise of the Court’s discretion, the Calderbank offer did not offer a costs protection because the offer was inclusive of costs. Further, the offer was a partial offer which involved the continuation of the litigation. It does not seem unreasonable to refuse such an offer which would still keep the trial open.
  4. Thirdly, there is a question about the stage of the negotiations before Hausfeld & Co LLP was instructed. In my judgment, neither were they put into the form of a Part 36 offer or a Calderbank offer nor were they analogous to offers. At the time, they were without prejudice offers, and it would not have been appreciated that they could be opened up. They were never intended to be in full and final settlement of all claims. In any event, it is not even apparent that they were offers. They were more likely to be a precursor to an offer. They do not therefore provide costs protection.
  5. As regards offers from VivoPower, it made no Part 36 offer. It also made no Calderbank offer in which the amount of the claim was offered plus costs. By making a costs inclusive offer, it is not possible readily to show whether Dr Comberg has advanced his position by rejecting or not accepting the offers. The most pertinent to consider was an offer of £1.5 million inclusive of costs, shortly prior to the trial. It now appears likely that Dr Comberg has done better than that by going on to trial in that he has an award of damages of close to one half of that amount and on the basis that he has the majority of his costs, this is likely to exceed the costs which were offered in the rolled up order. The fact that the offer was rolled up with costs means that it does not provide costs protection.
  6. It has been said that Dr Comberg made unreasonable Part 36 offers of sums over £2 million plus costs which affected the ability to settle this matter. They did not have the advantageous consequences to a claimant of an effective Part 36 offer, but nor did they prevent VivoPower from providing its own protection.
  7. It therefore follows that there is no reason to adjust the order of costs to take into account the offers of settlement. There was no effective costs protection made by either party. There is nothing about the conduct of the case as regards settlement of the case that should be reflected in the order as to costs.