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Part 36 – Finding the right formula – Jordan v MGN Ltd [2017] EWHC 1937 (Ch)

Pt 36 – Finding the right formula

We have another case where a decision on costs has been made in a case involving a celebrity – this time involving former Formula 1 team owner and now television pundit, Eddie Jordan.

Jordan v MGN Ltd [2017] EWHC 1937 (Ch) is one of the many phone hacking cases brought by celebrities against the Daily Mirror and its associates. The decision in this case relates to considerations which apply when a Part 36 offer is accepted beyond the “relevant period” and the parties cannot agree about the provisions on costs.

In this case, there had been a number of offers, both by way of Part 36 and otherwise in the several years whilst the claim was proceeding towards trial. By 2016, the Defendant had made an offer of £80,000 for damages together with some ancillary relief. However, certainly in so far as disclosable material was concerned (that is to say other than purely “without prejudice” communications) the Claimant did not respond to that offer until much later, indeed not until the proposed trial was looming in 2017.

At that point, the Claimant made an offer of £90,000, again with some ancillary relief included. The Defendant complained that had the offer been made in 2016 it may well have been capable of acceptance, but the delay, coupled with the consequent increase in costs on both sides, meant that the offer was no longer attractive. During the weekend prior to the trial, there was a flurry of activity on offers being made backwards and forwards. The Judge, Mann J, subsequently formed the view that Mr Jordan had decided that he was not going to proceed with the trial come what may. Notwithstanding that, the Claimant proceeded with preliminary hearings which were held in the days immediately before the listed trial in relation to the trial timetable (the claim was one of several listed to be heard concurrently) and therefore additional costs incurred.

The parties remained at odds in relation to costs and thus the Claimant made an application, asking the Court to determine whether there had been compromise of the action and, as something of a fallback position, with the Claimant accepting an offer of just £15,000 made by way of Part 36 in 2014. The position of both parties was that they should have the costs following expiry of the “relevant period”, with the Defendant contending that they should be paid on an indemnity basis.

Somewhat to his surprise, copies of Part 36 offers and “without prejudice save as to costs” communications were put before the Court in relation to the application. Although this did not prove to be a problem, the Judge made the point that it would have been impossible for him to have dealt with any subsequent trial should the Claimant’s application fail.

The Judge was dismissive of much of the Claimant’s application. For example, any suggestion that the Claimant could validly accept an offer which had already been rejected was treated with little short of derision.

He then went on to consider the appropriate order for costs on the basis that the 2014 Part 36 offer was to be accepted in order to conclude matters. Given that the offer was made prior to 6 April 2015, the relevant provisions of the CPR with those made prior to the amendments of that date. Thus the provisions were:

“36.10(4) Where – …

(b) A Part 36 offer is accepted after expiry of the relevant period,

if the parties do not agree the liability for costs, the court will make an order as to costs.

(5) Where paragraph 4(b) applies, unless the court orders otherwise –

(a) the claimant will be entitled to the costs of the proceedings up to the date on which the relevant period expired; and

(b) the offeree will be liable for the offeror’s costs for the period from the date of expiry of the relevant period to the date of acceptance.”

That usual order was to be made unless the Court considered it unjust to do so, applying the principles as contained in CPR 36.14 as it then was.

In his analysis, the Judge found that the Claimant had not advanced any explanation, let alone a good one, for having failed to respond properly to a number of offers and in particular the offer of £80,000 which was very close to his subsequent offer in 2017. This had caused both him and the Defendant to incur considerable costs, not the least of which were in relation to the success fee and the ATE premium – which was staged and would increase should a trial be required.

The Judge found it hard to believe that a client who was not litigating under a CFA/ATE would have adapted the tactic of not responding to the 2016 offers. However, the failure to engage in 2016 did not of itself justify an award of indemnity costs to the Defendant. The problem for the Claimant was that the Judge was not satisfied with his conduct as the trial approached. The indication at that point that the matter could be settled for £90,000 (just £10,000 more than the Defendant’s offer) tended to show that the matter could have been settled in 2016 if there had been proper engagement in the negotiation process.

The claim had been amended late in the day and yet, as noted above, the Claimant effectively surrendered just before trial. The application which was made in relation to costs of the action was found to be “an act of desperation”. Attempting to allege that previously rejected offers could be validly accepted was “surprising”. There was a lack of adequate explanation from the Claimant as to why he had decided not to proceed with the trial.

In effect, by accepting the 2014 Part 36 offer, the Claimant was walking away from the action. In those circumstances, he found that there were good reasons for ruling that the costs from expiry of the “relevant period” should be paid on the indemnity basis.

The consequence of the order on costs would of course be that Mr Jordan would be a net loser, despite having no doubt satisfied the definition of “a win” in his CFA. Having to pay the costs of the Defendant from 2014 would presumably be covered by his ATE policy, but his Solicitors would presumably be able to charge him for the work they had undertaken in that period.

Thus, this case demonstrates the impact of conduct on costs awards, particularly in relation to costs incurred after the expiry of the “relevant period” of Part 36 offers.

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