http://www.bailii.org/ew/cases/EWCA/Civ/2015/1292.html

The claimant in this case failed to beat the defendant's Part 36 offer. However, the judge held that it would be "unjust" to order the usual costs consequences and instead made no order as to costs. The defendant appealed that decision on two grounds:

  1. It was argued that the judge had applied the wrong test in finding that the usual order would be unjust. It was suggested that the judge had not considered whether it would be unjust but instead had determined that justice could be met by some other order. The Court of Appeal rejected that argument, finding that the judge had implicitly found that there would be unjustness.
  2. It was argued that the judge had wrongly taken account of certain circumstances (eg the defendant's failure to make unlimited admissions), when considering if the normal consequences would be unjust. The Court of Appeal held that the judge's approach had been correct and that CPR r36.17(5) requires a judge to look at "all the circumstances" of a case (including the terms and circumstances of the offer itself) when considering if the normal consequences would be unjust. The Court of Appeal gave the following example: "Suppose that a person to whom a Part 36 offer had been made had asked for clarification or more relevant information and been refused it or the answer misrepresented the position. If that information was material and might reasonably have altered his view on whether to accept the offer, and was information within the offeror's organisation, the court might well find that it would be unjust to order that the Normal Consequences should follow from non-acceptance". However, it is not enough just to show that a party acted reasonably in not accepting an offer – instead, it must be shown that the normal consequences would be unjust.

The Court of Appeal dismissed the appeal.

COMMENT: Prior caselaw has stressed that a finding that the normal costs consequences would be unjust will be exceptional. For example, in Ted Baker v Axa (see Weekly Update 47/14) Eder J held (adopting the observations by Briggs J in Smith v Trafford Housing (2010)) that the burden of showing such injustice is a "formidable obstacle". Although the Court of Appeal in this case agreed that the normal order would be unjust, it did not suggest that the test is no longer as strict.