Invista Textiles (UK) Ltd and another company v Botes and others  EWHC 1086 (Ch) (12 April 2019) (unrep)
In a recent High Court costs judgment, it was determined that a claimant's Part 36 offer was not a genuine attempt to settle, despite the claimant receiving a better outcome at trial. It would therefore have been 'unjust' to award the claimant the usual costs benefits under CPR 36.17(4).
Employers (Invista Textiles (UK) Limited and Invista Technologies SARL (Invista)) alleged breach of confidence and contractual breaches against former employees (Dr Botes et al. and Dr Botes' company, VideraBio). Two of the defendants left Invista and set up VideraBio; however, in January 2017 files relating to VideraBio were found on the work computer of a third defendant who had also recently left Invista. As a result of Invista bringing proceedings for breach of contract, misuse of confidential information and inducing a third party into breach of contract, disclosure of materials on the defendants' various devices and accounts was ordered. This yielded several thousand deleted files, which the defendants' claimed were not the claimants' property.
In June 2018, Invista sent the defendants a Part 36 offer asking them for 1,367 documents of over 7,000 documents in issue and to pay the entirety of Invista’s costs on the standard basis if the offer was accepted. The offer was not accepted.
Birss J held that the defendants were correct to refuse to pay all of the claimants' costs. This approach had been 'vindicated by the judgment'.
Birss J went on to note that when assessing whether the usual Part 36 offer consequences should be triggered, all circumstances must be considered. In this case, CPR 36.17(1)(b) was technically satisfied as a result of the claimants' offer to abandon everything claimed except for the return of 1,367 documents. This was because in July 2018 the vast majority of the documents contained in the Part 36 offer were admitted by the defendants as belonging to Invista. Accordingly, following the defendants' admissions ‘the claimants had achieved a more advantageous position than what had been offered in the Part 36 offer.’ After the admissions the claimants were able to obtain relief in relation to those documents and some other minor causes of action at trial, thereby achieving a more advantageous outcome than their offer.
Nonetheless, Birss J noted that had the defendants accepted the claimants' offer they would have been required to pay all of the claimants' costs up to that date, including costs relating to all of the other issues abandoned by the claimants. Indeed, Birss J noted that 'A reasonable litigant and litigation team in [Invista’s] position will have known when it made that offer that that aspect would make it wholly unacceptable.’
Birss J concluded that it would be ‘unjust’ to enforce the usual consequences of the Part 36 Offer because the offer was not a genuine attempt to settle. Instead, he held that the offer had been a barrier to settlement of this dispute with the claimants thereafter approaching the case as if they were entirely protected as to costs'.
While Part 36 offers remain an important tactical step in litigation, a party proposing to protect itself on costs by using the Part 36 regime should carefully consider whether their offer will be treated as a genuine offer to settle. That may not be the case if accepting it would result in injustice for the recipient.