SUCCESSFUL CLAIMANT’S PART 36 OFFER: “PART OF THE POINT OF THE PENAL CONSEQUENCES OF PART 36 IS TO PREVENT THE SORT OF COSTS ARGUMENT THAT MIGHT OTHERWISE BE MADE”

In Green v White Lantern Film (Britannica) Ltd [2023] EWHC 1391 (Ch) Mr Justice Michael Green considered arguments as to conducts 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.

“ 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 CASE

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.

THE PART 36 OFFER

Costs

1. 1. The issue of costs is, however, live before me, although, in broad terms, there is not much dispute between the parties. The Defendants agree that they lost and they must pay Ms Green’s costs. Furthermore, a Part 36 offer was made by Ms Green, or on her behalf, on 28 July 2022, whereby she offered to settle the whole of the proceedings on the basis that she would receive a payment of $900,000 out of the Escrow Funds and the Defendants would receive the balance. The period for acceptance of the offer expired on 18 August 2022, but it was not accepted by the Defendants. They do, however, accept that the judgment was more advantageous to Ms Green than the offer, and that, therefore, the consequences set out in Part 36 apply.

1. 1. Therefore, in accordance with CPR Part 36.17:

(i) Ms Green is entitled to her costs after 18 August 2022 on the indemnity basis;

(ii) she is entitled to interest on her costs incurred after 18 August 2022 at the rate of 10 per cent over base rate; and

(iii) she is entitled to the payment of an additional amount of £75,000 from the Defendants.

Whilst the Defendants accept this, they do say that there should be some adjustment to that by reference to the late disclosure that happened shortly before and during the trial that they say was the fault of Ms Green’s side. I will deal with that in due course.

1. As to the further common ground between the parties, the Defendants agree that, prior to 18 August 2022, Ms Green is entitled to her costs. But they say it should be assessed on the standard basis, whereas Ms Green says it should be on the indemnity basis. The Defendants also agree that, prior to 18 August 2022, Ms Green is entitled to interest on her costs at the rate of 2 per cent over base rate. Finally, the parties are also agreed that there should be an interim payment on account, although they are quite far apart on the amount.

ARGUMENTS AS TO CONDUCT

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.

Mr Merrifield’s late disclosure of the recordings

1. 1. I turn now to the first issue of late disclosure. As I recorded in the judgment, there was late disclosure of Mr Merrifield’s recordings of conversations. These proved to be of very great importance. The Defendants say that the late disclosure caused a delay to the start of the trial — it was actually pushed back to the end of the window — and that the costs of dealing with the late disclosure, including obtaining all the relevant recordings from Mr Merrifield, transcribing the same and analysing their significance fell on the Defendants.

1. 1. A complication is that Mr Merrifield was one of Ms Green’s witnesses, but he was a former director of White Lantern and was one of its custodians for disclosure purposes.

1. 1. Mr Goodwin says that the fault probably lies with Mr Merrifield, not the parties, but that the Defendants were disproportionately affected. In reliance on Walton v Gardner [2001] EWCA Civ 1788, Mr Goodwin asked that Ms Green’s costs in relation to the late disclosure be disallowed. Alternatively, he said that one-third of the costs should be costs in the case, and in respect of the other two-thirds, there should be no order as to costs.

1. 1. In my view, that is wholly inappropriate and inconsistent with the Part 36 regime that is in play for this period.

1. 1. By CPR 36.17(4)(b), “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 these all relate to the rejected offer.

1. 1. Mr Cullen referred to Smith v Trafford Housing Trust [2012] EWHC 3320 (Ch), a decision of Mr Justice Briggs, as he then was, which was quoted from with approval by the Court of Appeal in Webb v Liverpool Women’s NHS Foundation Trust [2016] EWCA Civ 365, that there is not an unfettered discretion to depart from the ordinary costs consequences of Part 36, and that 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”.

1. 1. In my view, the Defendants have not shown injustice and have not overcome that formidable obstacle.

(1) First, Mr Merrifield was in that odd position but, for the purposes of disclosure, he was on the Defendants’ side and they should have ensured that everything was disclosed. In any event, I do not understand why a failure by a third party who was giving evidence for a party should result in that party being deprived of costs that they would otherwise be entitled to. A fortiori, in the context of CPR Part 36 and the issue of injustice.

(2) Second, I found that there was no deliberate concealment by Mr Merrifield of this evidence and that the evidence largely supported his evidence and Ms Green’s case.

(3) Third, 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.

(4) Fourth, the costs would have had to have been incurred anyway at some point. I understand that the timing of the disclosure may have led to increased costs of having to transcribe and analyse in very short order, but the actual costs of the adjournment itself are minimal.

(5) Finally, it is 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.

1. 1. I am, therefore, going to refuse to make any deduction to the costs award as a result of the late disclosure of the recordings by Mr Merrifield.

Late disclosure of Ms Green’s and Tavistock Wood communications

1. 1. As to the late disclosure of Ms Green’s communications with Mr Collier and Tavistock Wood, the Defendants have called this aspect the costs of the second adjournment. This was the adjournment of the closing submissions as a result of the late disclosure, at the end of the evidence, of telephone logs and messages between Ms Green, Mr Collier and others at Tavistock Wood. In [10] of the judgment, I said as follows:

“Towards the end of the evidence, and as a result of something said in the oral evidence of Mr Charles Collier, who is Ms Green’s agent, in relation to telephone calls that he said he had with Ms Green on 23 September 2019, the Defendants sought disclosure of his telephone logs and any other relevant messages passing between Mr Collier or any other members of his team at Tavistock Wood and Ms Green. It emerged that there had been a serious failure in the disclosure process on behalf of Ms Green and a substantial number of additional WhatsApp, text and voicemail messages have been disclosed. This necessitated a delay to the end of the trial to ensure that full disclosure was given and the Defendants had a good opportunity to review that disclosure and decide whether they wished to recall any witnesses for further cross-examination.In the event, they decided not to apply for such a recall and the trial’s closing submissions proceeded thereafter. The effect was a serious disruption to the trial timetable and the use of the court’s resources. As it has turned out, the further disclosure may have little impact on the issues I have to decide, in particular, whether there was a renunciation, but Mr Cullen KC properly apologised on behalf of his client and those involved in the disclosure process for their failures and the unfortunate impact it has had on the trial process. I will consider the new disclosure insofar as it is relevant in the course of setting out my factual findings below.”

1. 1. This was unfortunate and entirely of Ms Green’s side’s own making. I think it is in a different category to Mr Merrifield’s late disclosure. The costs occasioned by the late disclosure were specifically reserved in my order of 15 February 2023. Of course, I did not know about the Part 36 offer at the time. In my view, the court should express its disapproval in some way of the failures of disclosure by Ms Green. The Defendants say that they should have their costs of, and occasioned by, the late disclosure, the further late disclosure, the adjourned written closings and the adjourned oral closings, as defined in my order of 15 February 2023. Alternatively, they suggest that Ms Green’s costs in such respect should be disallowed.

1. 1. I think it is a bit ridiculous to suggest that the entire costs of the written and oral closings should be paid by Ms Green or that her costs should be disallowed in that respect. Those would have had to have been incurred anyway and the late disclosure has hardly added to those costs. The late disclosure costs, even though some costs would have been incurred in relation to earlier disclosure, should attract some adjustment to the costs order to reflect the court’s disapproval. In my judgment, that can adequately be done by depriving Ms Green of her own costs incurred in relation to the provision of the late and further late disclosure in accordance with the order of 15 February 2023.

1. In accordance with CPR 36.17(4), I think it would be unjust for the Defendants to have to pay those costs.