The existence of a genuine part 36 offer prevents a court from dealing with the costs of a liability trial prior to quantum being determined, the High Court has ruled.
David Stone, sitting as a deputy High Court judge in Original Beauty Technology Company Ltd and Ors v G4k Fashion Ltd and Ors  EWHC 954 (Ch), rejected the argument that, though reserving costs until quantum has been determined was the usual order, it was not the only order he could make.
Having ruled in the claimants’ favour in relation to seven of 20 garments where they said their design rights had been infringed, the first and second claimants sought costs of £935,000 on the basis that they were the ‘winners’ to date, with an interim payment on account of £842,000, 90% of the total claimed.
The defendants argued that costs should be reserved because of the existence of a part 36 offer they had previously made.
It was common ground that the judge should assume that the part 36 offer related to issues which remained undecided and the relief ultimately obtained by the claimants could be less favourable than the terms of the offer.
The claimants argued that he should make a costs award because of the defendants’ dishonest and unreasonable conduct to date – an allegation the defendants contested.
They pointed to the qualification in CPR 36.17(3), which provides that a claimant who does not do better than the defendant’s offer ought to pay the defendants’ costs unless it is “unjust to do so”.
But Judge Stone said the language of CPR 36.17 was “very clear on its terms”, and prevented the court from making a costs order on the agreed facts of this case.
His reasons included that CPR 36.17 “clearly envisages that the case has been determined”, referring to “judgment being entered” and required, for its operation, that the “claimant fails to obtain a judgment more advantageous than a defendant’s part 36 offer”.
Here the parties accept that it remained a possibility that the claimant would not beat the offer, with liability in relation to a further 71 garments needing to be determined before quantum was considered. The parties were “some months” from knowing whether or not the offer had been beaten.
Further, in considering whether it was “unjust to do so”, CPR 36.17(5) listed factors the court must take into account, “which serves to emphasise the importance of knowing the terms of the part 36 offer etc, prior to determining costs”.
Judge Stone rejected a further argument based on comments of Jackson J (as he then was) in Multiplex Constructions (UK) Limited v Cleveland Bridge UK Limited and Anor  EWHC 659 TCC, because part 36 was in a different form then from today.
He added that, even if he were wrong and the court had discretion to award costs at this stage, he would not have done so here.
“Even were I to accept that the defendants’ behaviour in this case was towards the egregious end of the spectrum (which the defendants’ counsel vigorously disputed), I simply do not have enough facts before me to enable a proper exercise of my discretion.”
Anna Edwards-Stuart and David Ivison (instructed by Mono Law) for the first and second claimants. The third claimant was not represented. Chris Aikens (instructed by Fieldfisher) for the defendants.