In Original Beauty Technology Company Ltd and others v G4k Fashion Ltd and others, David Stone, sitting as a Deputy Judge in the High Court, considered the issue as to whether the existence of a genuine Part 36 offer prevented the court from dealing with the costs of a liability trial prior to quantum being determined, even when the “losing” party’s conduct had been egregious.
In this matter, the claimants alleged the defendants had infringed their design rights in relation to a total of 91 garments. A judgment was received on 24 February 2021, in relation to 20 selected garments, in which seven had been found to have infringed on the claimants’ design rights. The remaining 71 garments were yet to be adjudicated.
At a form of order hearing following the judgment, the claimants sought their costs in the sum of £934,943.98, considering themselves to be the “winners” to date.
The defendants resisted the making of a costs order, submitting that costs should be reserved because of the existence of a Part 36 offer they had previously made to settle proceedings.
It was common ground between the parties that:
- A genuine Part 36 offer had been made by the defendants to the claimants to attempt to settle the litigation.
- That Part 36 offer related to issues which had not yet been decided.
- The relief ultimately obtained by the claimants may be less favourable than the terms of the Part 36 offer.
- The court could be told of the existence of a Part 36 offer, but not its terms (CPR 36.6 and 36.16(4)).
- The usual order would be for costs to be reserved until after the determination of quantum.
The claimants submitted that the usual order ought not apply in this case. The defendants argued that this was the only order open to the court.
Both parties sought to rely upon the provisions within CPR 36.17. The claimants sought to rely upon CPR 36.17(3), which states where the claimant does not beat a defendant’s Part 36 offer, they must pay the costs post-expiry of the offer, unless it is unjust to do so. The claimants also sought to rely on the comments of Jackson J in Multiplex Constructions (UK) Limited v Cleveland Bridge UK Limited and another.
In the Deputy Judge’s view, CPR 36.17 was clear on this issue. Firstly, CPR 36.17(3) is reliant upon CPR 36.17(1)(a), which requires judgment to have been entered and the claimants to have lost. However, without quantum having been decided, it was unknown as to whether the claimants had won or lost, so CPR 36.17(1)(a) could not apply in this instance.
Additionally, even if the court was able to consider if the usual order would be unjust, the court was bound to consider the factors under CPR 36.17(5), namely:
- The terms of the offer.
- The stage in the proceedings.
- The information available at the time of the offer.
- The conduct of the parties, including in relation to a refusal to provide the relevant information.
- If the offer was genuine.
However, CPR 36.6 and CPR 36.16(4) prevents the court from knowing the terms of the Part 36 offer and as such, the court could not make a decision in accordance with CPR 36.17(5). The Deputy Judge therefore considered that he was unable to make the proper determination.
Finally, the decision in Multiplex was considered, however it was not considered to be useful, as the Part 36 rules at the time were different and Jackson J was bound to consider CPR 36.20 (as it was) and did not have to consider CPR 36.17 and in particular CPR 36.17(5).
Therefore, the answer to the issue in question, and the upshot of the judgment, is that where there is a Part 36 offer, the court cannot override the express language of CPR 36.17 and make an order for costs where quantum is yet to be determined, even if unreasonable conduct is alleged.
Interestingly, it may be worthy of note in Dinglis v Dinglis and others, the court was able to deviate from the “usual order” where the offer in question was not a Part 36 offer.