The defendant made a Part 36 offer in September 2017 and then made another Part 36 offer in October 2017 (in which it additionally offered an undertaking not to broadcast part of a TV programme). The claimants won at trial but failed to beat those offers and Arnold J considered various costs issues including the following:
(1) The claimants were entitled to their costs before the Part 36 offer was made. They had responded to an offer to enter into an ADR procedure by advising that they did not consider that ADR would work at that stage, but that they would keep this option under review. That had therefore not amounted to a wrongful refusal to engage in ADR.
(2) The claimants were also entitled to their costs up until the expiry of the relevant period for the second Part 36 offer in October (and not the first offer in September) because this had been an improved Part 36 offer and so a new 21-day period had started to run again (pursuant to CPR r36.9(5)).
(3) The judge rejected an argument that the September offer was not a valid Part 36 offer because it offered to pay the two claimants jointly. The judge rejected that argument because the claimants had not had distinct individual claims. In any event, the offer had contained the following wording: "If you think that this offer is defective or non-compliant with Part 36, you must let us know promptly". The judge held that the failure to challenge the validity of the offer at the time, and the claimants' acceptance at the time that the offer was a valid Part 36 offer, meant that the claimants were estopped from challenging its validity later on.
(4) Finally, the defendant failed to serve a costs budget and so was only entitled to recover 50% of its assessed costs (pursuant to CPR r36.23(2)(a)). The judge rejected an argument that this restriction did not apply to the period before the costs management hearing. Although the Master at that hearing could only approve budgets for prospective costs (and not incurred costs, as incurred costs are not subject to costs management), "it would undermine the purpose of rule 3.14 to treat it as having no effect with regard to costs incurred between the date on which costs budgets should have been filed and the date on which the court approved such budgets".
COMMENT: The reference to an estoppel argument where the Part 36 offer was not challenged at the time (in light of an express request in the offer for the offeree to do so) is of interest. The judge sought to rely on an earlier Court of Appeal decision in Seeff v Ho , but he accepted that the Court of Appeal had not expressly referred to estoppel and the offer in Seeff v Ho had in any event been held to be a valid Part 36 offer (as it was in this case). Nevertheless, offerors would be well advised to include, as a matter of course, the wording used in the offer in this case when making a Part 36 offer.
More generally, this is the latest in a general trend in recent cases for parties in default to raise an estoppel/duty to warn argument, with varying degrees of success (see, for example, the recent service of a claim form case, Woodward v Phoenix).