The recent case of Jordan v MGN Ltd [2017] EWHC 1937 (Ch) is a case whereby the Claimant incurred a double penalty as a result of the late acceptance of a Defendant’s Part 36 offer. That being, not only was the Claimant penalised by way of the usual method of being deprived of all of the costs which were incurred after the expiry of the date for accepting the Part 36 offer, they were also ordered to pay the losing Defendant’s costs on an indemnity basis from the expiry of the date of accident.

The decision from the outside looking in is an extremely harsh one, although once the facts are considered further the reasoning for the same becomes apparent.

The facts of the case briefly, are that the Claimant, a figure well known to Formula 1 enthusiasts, sought remedies in respect of phone hacking and other unlawful activities said to have been carried out by the defendant’s newspapers, some of which are alleged to have resulted in the publication of articles based on or containing private information gathered unlawfully. Following proceedings being issued in August 2014, matters progressed and the case was listed for a Trial to be heard in the week commencing 3rd July 2017.

In the intervening almost 3 year period, between the issuing of proceedings and the trial date, there were several Part 36 offers, and offers headed Without Prejudice Save as to Costs (WPSAC) made by the parties, albeit mainly the Defendant, and a joint settlement meeting which took place between the parties with an offer of £100,000.00 made. The Claimant during this period did not acknowledge or respond to most of the offers which were made by the Defendant.

The first of these offers was made on 24th September 2014, by way of Part 36 in the sum of £15,000.00. Over the weekend prior to the Trial, the Claimant sought to negotiate settlement of the matter, and accept a previous offer made by the Defendant which had been expressly rejected. It was highlighted at this stage by the Defendant that the offer had been expressly rejected by the Claimant and therefore was no longer capable of acceptance. Nonetheless the Claimant made an initial application to accept such offer, however the first 2 limbs of the application were conceded, and the Claimant instead sought acceptance of the Defendant’s Part 36 offer in the sum of £15,000.00, made almost 3 years earlier.

The detailed of the case go beyond the brief synopsis provided and it is highlighted that the same are extremely complex. When delivering his judgement, Mr Justice Mann Stated

The bottom line is that Mr Jordan did not advance any explanation, let alone a good one, why, having run his case for 2½ years, having failed to respond properly to a number of offers, one of which was close to his own proposed financial settlement, having caused himself and the other side to run up significant amounts of costs, and having exposed the defendant to the prospect of having to pay the CFA uplift and ATE premiums (which I am satisfied is a powerful threat to a defendant), should at the last minute do the equivalent of walking away from the action. I consider that all those factors, and the other matters referred to in this section, are good reasons for ruling that the costs be paid on the indemnity basis, and I so order.

At the heart of the Judge’s decision it can be seen that the fact the Claimant was operating under a CFA, and had no direct costs liability himself, was of great significance. Of further significance to the Judge was the fact the Claimant offered no explanation as to why he had decided now accept the Defendant’s lower offer, given that in the negotiations prior to the Trial a further offer was made on his behalf in the sum of £160,000.00.

Whilst there remain within the CPR 36 provisions regarding the bettering of offers at Trial, the further provisions of CPR 36, and the discretion afforded to the Court under CPR 44.2, mean that where matters settle before Trial, conduct of the parties is to be the deciding factor when it comes to awards of indemnity costs. It was highlighted in paragraph of 64 of Mr Manns’s judgement that failure to engage in discussions at an early stage of the litigation is not so culpable. The downfall of the Claimant in this instance was a culpable failure to engage in negotiations which would, if conducted more properly, have been likely to have led to a settlement. That is very significant matter (Para 67).

Given the above, it is clear that in no way is this case authority for to the effect that a successful Claimant will be ordered to pay the Defendant’s costs on the indemnity basis should they decide to accept an offer out of time. As long as you can demonstrate reasonable conduct and a willingness to engage in sensible settlement discussions there should be no ‘double penalty’ should you be forced to accept a Part 36 offer out of time.

Should you be faced with an argument to this effect in the future, or should you feel the opposing parties conduct warrants a finding of indemnity costs on your behalf, MRN would be happy to advise further in respect of the same and stand in your corner.