Why you should always file a Costs Budget & can an invalid Part 36 be a valid Part 36?
The case relates to the judgement delivered on 22nd February 2018 whereby Mr Justice Arnold ordered Channel 5 to pay damages for misuse of private information to a couple, Ali & Anor, who had fallen into rent arears. The couple’s eviction from their home was broadcast by Channel 5 on its show ‘Can’t Pay? We’ll Take it Away’. The Claimants succeeded in recovering damages of £10,000.00 each at Trial.
The Court considered the appropriate Order for costs where the Claimants succeeded at Trial, but failed to beat the Defendant’s Part 36 Offer. The Defendant, however, had never filed a Cost Budget. The Part 36 offer was made on 27 September 2017. The case was not budgeted until 19 December 2017.
The Claimants contended that it would be unjust for the Claimants to be ordered to pay the Defendant’s costs from the date on which the Part 36 Offer expired, on the basis that the Defendant had failed to disclose relevant viewing figures until 17 October 2017, and the Defendant had failed to offer an apology or agree to a statement in open Court. The Claimant sought to rely on the decision in Yentob v MGN Ltd  EWCA Civ 1292,  6 Costs LR 1103. The Judge was not persuaded by this argument. He noted that, ordinarily, claims for misuse of private information are not settled on terms that entitle the Claimant to an apology or statement in open Court.
The Claimant also contended that the Defendant, having failed to file or serve any costs budget, should be treated as having filed a budget comprising only the applicable Court fees pursuant to rule 3.14, with the consequences specified in rule 36.23(2)(a), that the Defendant can only recover 50% of its assessed costs.
The Court held that it was not unjust to impose the ordinary costs consequences of failing to beat a Part 36 Offer on the Claimants, stating that the offer said “if you think that this offer is defective or non-compliant with Part 36, you must let us know promptly”. The Claimants did not do so and therefore treated the offer as valid in later correspondence. The Claimants was ordered to pay the Defendant’s costs after the date of expiry of the relevant period, the costs to be set off against those payable to the Claimant by the Defendant. It was also ordered that the Defendant’s costs be reduced to 50% of its assessed costs, to reflect the failure to file and serve their costs budget. Mr Justice Arnold said that it would undermine the budgeting regime to allow Channel 5 to benefit from the fact that there was a year between the deadline for filing budgets and the cost management hearing.
THE “NEW” RULE
Cases in which the offeror’s costs have been limited to court fees
36.23.—(1) This rule applies in any case where the offeror is treated as having filed a costs budget limited to applicable court fees, or is otherwise limited in their recovery of costs to such fees.
(Rule 3.14 provides that a litigant may be treated as having filed a budget limited to court fees for failure to file a budget.)
(2) “Costs” in rules 36.13(5)(b), 36.17(3)(a) and 36.17(4)(b) shall mean—
(a) in respect of those costs subject to any such limitation, 50% of the costs assessed without reference to the limitation; together with
(b) any other recoverable costs.”
This means, in essence, that a party subject to a nil costs budget can still recover 50% of their fees for the period after a Part 36 offer, if the offer is not beaten. This is a beneficial rule however, it highlights the fact that if the Defendant had in fact filed a budget, they would have recovered their costs in full.
This decision reminds Claimants of the need to carefully consider any Part 36 offers received and their terms. In this case the Court held an invalid Part 36 offer to be valid due to the Claimant not challenging the same. Despite Part 36 being a self-contained code, the Court went behind this. Therefore, if an invalid offer is made then this ought to be raised as soon as the offer is received to protect the Claimants’ position.
If you are ever unsure on the validity of a Defendants’ Part 36 offer then seek specialist advice.
The case also shows the importance of always complying with an Order and filing a Cost Budget as the impact of not doing so may result in losing most, if not all costs.