The Court addressed a number of issues in this relating to the validity of Part 36 offers, costs consequences applying to Part 36 offers and sanctions for failing to file or serve a budget.
On the 22 February 2018, Arnold J gave judgment in the favour of the Claimants on their claim against the Defendant (Channel 5) for misuse of private information and awarded them each damages of £10,000.
On the 27 September 2017, Channel 5 made a Part 36 offer (which was omitted from the judgment on account of the Claimant’s having permission to appeal quantum, however the Court did note that it exceeded the amount allowed by the Court at the subsequent trial).
Prior to this, the matter had been allocated to the Multi-track and the parties were required to file and serve costs budgets by December 2016. Channel 5 failed to do this therefore they were subject to the sanctions implied in CPR 3.14 which states:-
Unless the court otherwise orders, any party which fails to file a budget despite being required to do so will be treated as having filed a budget comprising only the applicable court fees.
It is important to note that Channel 5 had beaten their own Part 36, the consequences specified in CPR 36.23(2)(a) applied which state:-
(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 meant that Channel 5 were able to recover 50% of it assessed costs. Counsel for the Claimant pointed out that the Defendant at no point made an Application for relief from sanctions nor filed evidence which would be required to address the relevant factors so as to enable the Court consider them under rule 3.14. On these grounds the Court, having reference to Mitchell v News Group Newspapers Ltd (2013) EWCA Civ 1537 found there was no basis for an order disapplying rule 3.14 and therefore rule 36.23(2)(a) applied.
The Defendant made two submissions, firstly that the restriction applied to budgeted costs (which were subject to costs management), not incurred costs and secondly even if it was subject to the sanction in rule 3.14 and rule 36.23(2)(a), then the sanction and restriction would not apply prior to 19 December 2017 (the date of the costs management hearing).
The Court rejected both of the Defendant’s submissions. Firstly, Arnold J concluded that the purpose of 3.14 would be undermined if the Court were to treat rule 3.14 as having no effect regarding costs incurred by then. In addition it was immaterial that the CCMC did not take place until a year after the budgets were to be filed. The rule required the Defendant to file a budget by 2 December 2016 and they had failed to do so therefore rule 3.14 (subject to a successful relief from sanctions application) applied.
Accordingly Channel 5 were limited to 50% of its assessed costs after November 2017. Whilst this is a good example of rule 36.23(2)(a), it is apparent that Defendants should heed the warning here and ensure that costs budgets are filed and served in accordance with rule 3.14.