Effect of a Part 36 offer which was not beaten/”near miss” offers

http://www.bailii.org/ew/cases/EWHC/Comm/2014/3775.html

The claimants’ claim for business  interruption losses was upheld (see Weekly Update 39/14) and in this case the judge decided costs. One of the issues was the effect of the defendant’s Part 36 offer, which was  not beaten at trial (but only narrowly missed the amount awarded by the judge) and hence fell to be  considered under CPR r44 instead. The offer had been based on a figure for lost profit (GBP  600,000) which the defendant thought was some GBP 250,000 lower than its losses. Eder J held that it had not been reasonable for the claimants to pursue their claim for  BI losses in the amount being sought, which he described as “very much exaggerated”  (notwithstanding that the defendant had not chosen to   make a separate Part 36 offer to settle the  claim for BI losses). Accordingly, although the claimants were the winning party, they were not  entitled to their costs from the end of the relevant period for the Part 36 offer.

The judge denied that he was re-introducing a “near-miss”   rule by the back door (in Hammersmatch  Properties v Saint  Gobain Ceramics (see Weekly Update 28/13) the claimant narrowly failed to beat  the defendants’ Part 36 offer at trial. The claimant had sought to rely on the decision in  Multiplex Construction v Cleveland (see Weekly Update 40/08), in which Jackson J held that if a  party makes a Part 36 offer which is “nearly but not quite sufficient” and the other party rejects  the offer outright without any attempt to negotiate, then it might be appropriate to penalise the  other party in costs. Ramsey J held that that was no longer a principle which applies to Part 36  offers and there is no special “near miss” rule under CPR r44).

Eder J held that: (1) this case was different from Hammersmatch because, unlike Ramsey J, he had  the benefit of “full information” as to the negotiations between the parties; and (2) the Part 36  offer itself made it clear that it was based on the GBP 600,000 figure: “Although that offer was  not rejected out of hand and there was no refusal to negotiate as such, the claimants’ response was one which, in effect, insisted unreasonably on a much higher  figure”. Eder J added that he fully agreed with Ramsey J’s decision.