Channel 5 faces penalty after making good part 36 offer but failing to file budget

Channel 5 has failed to overcome the penalty imposed on those who make successful part 36 offers but fail to file a 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 costs management hearing.

The case, Ali and Anor v Channel 5 Broadcast Ltd [2018] EWHC 840 (Ch), saw the claimants awarded £10,000 in damages each over Channel 5’s misuse of private information by featuring them being evicted in the show Can’t Pay? We’ll Take It Away.

The judge did not reveal the amount offered in a September 2017 part 36 offer – because he has given the claimants permission to appeal on quantum – but said it was larger than the total amount which was awarded.

Costs budgets had to be filed by 2 December 2016, which the claimants did but Channel 5 did not, despite Hamlins, the claimants’ solicitors, drawing its attention to rule 3.14. This meant rule 36.23(2)(a) applied, restricting Channel 5 to 50% of its assessed costs.

Channel 5 argued that this should not apply for the period before the costs management hearing on 19 December 2017 because the costs subject to the restriction in rule 36.23(2)(a) were only budgeted costs and not incurred costs (and so not subject to costs management).

Arnold J said: “I do not accept this contention for the following reasons. The Court of Appeal held in Mitchell v News Group that the sanction in rule 3.14 applied not only where a party failed to file a costs budget at all, but also where a party filed a cost budget after the time prescribed in rule 3.13.

“In the present case, the parties were directed to file costs budgets by 2 December 2016. The claimants did so, but Channel 5 did not. Accordingly, at that point in time Channel 5 became subject to the sanction in rule 3.14 unless it obtained relief from that sanction…

“It is immaterial that the costs management hearing did not take place until 19 December 2017. It is true that, at the costs management hearing, Master Shuman could only approve budgets for prospective costs, and not costs which had already been incurred by then.

“But 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. This is particularly so given that Channel 5 could have applied for relief from the sanction at that hearing, but did not do so.

“Accordingly, I conclude that Channel 5 is only entitled to 50% of its assessed costs after 8 November 2017 [when the part 36 offer expired].”

The claimants were awarded their costs up to that point, but they lost their challenge to the part 36 offer. They argued it was not valid under rule 36.5 because it sought to settle the claims by paying the claimants jointly, whereas the claimants had distinct individual claims.

The claimants relied upon rule 36.11(3)(c), which provides that the court’s permission is required to accept an offer where an apportionment is required.

Arnold J said: “I do not accept this contention for two reasons. First, while I accept that the claimants’ claims were technically distinct individual claims, they were parallel claims made by a married couple arising out of the same events.

“Although it is not necessarily the case that Mr Ali and Mrs Aslam were entitled to the same sum by way of damages, they presented a united front throughout the litigation and could have agreed the division of the sum between them. Thus, in the circumstances of this case, I do not consider that the mere fact that the sum was offered to them jointly meant that the offer was not made in accordance with rule 36.5.”

In any event, he said it was not open to the claimants to raise this objection. 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, indeed, treated the offer as valid in later correspondence.

The judge then dismissed the claimants’ submission that it would be unjust for them to have to pay Channel 5’s costs from expiry of the offer. One of the reasons given was Channel 5’s failure to offer an apology or agree to a statement in open court.

Arnold J did not accept this. “First, there is no settled practice that claimants in misuse of private information cases are entitled to an apology or agreed statement in open court. Secondly, the claimants could have applied to make a unilateral statement in open court. Thirdly, damages for misuse of private information are compensatory, not vindicatory.

“Accordingly, I am not satisfied that it would be unjust to impose the ordinary costs consequences of failing to beat Channel 5’s improved part 36 offer on the claimants.”

William Bennett and Felicity McMahon (instructed by Hamlins) represented the claimants, with Tom Blackburn (instructed by Lee and Thompson) for the defendant.

 

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Costs News
Published date
25 Apr 2018

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