Part 36 Archives

Costs Follow the Event | No Reduction for Refusal to Mediate When Positions Were Polarised

Costs Against Successful Party, New Costs Blog, Part 36

Background

Assensus Limited (‘Assensus’) initiated proceedings against Wirsol Energy Limited (‘Wirsol’) over an alleged entitlement to a performance-related bonus of approximately £2.5 million. Assensus’ claim was based on a contractual agreement which it argued entitled it to the bonus for its work on certain projects, including the Cleve Hill project. The trial involved detailed examination of factual and expert evidence relating to the existence and scope of the alleged contractual entitlement. In the judgment handed down on 26 February 2025, the court dismissed all claims brought by Assensus.

Following the main judgment, various consequential matters were remitted to Mr Justice Constable for determination, including costs, interest on costs, interim payment of costs, the Claimant’s application for permission to appeal, and stay of execution pending appeal. These matters were determined based on written submissions from both parties.

Costs Issues Before the Court

The primary costs issue revolved around the general rule that costs follow the event, as per CPR r.44.2. Assensus, the unsuccessful party, accepted its liability for costs but contended that Wirsol should only receive 70% of its costs due to its refusal to mediate. Key authority cited includes Halsey v Milton Keynes General NHS Trust [2004] EWCA Civ 576, which establishes that depriving a successful party of costs due to refusal to mediate requires the unsuccessful party to prove that such refusal was unreasonable. Further reliance was placed on Gore v Naheed [2017] EWCA 369 and PGF II SA v OMFS Company 1 Ltd [2013] EWCA Civ 1288 which elaborate on whether refusal to mediate can be considered unreasonable.

The Parties’ Positions

Claimant’s Position: Assensus argued that Wirsol’s rejection of mediation invitations, both pre-litigation and during proceedings, was unreasonable. Assensus referenced authorities such as OMV Petrom SA v Glencore International AG [2017] EWCA Civ 195 to support the contention that parties must engage constructively in settlement processes. Assensus also raised issues related to contentious amendments in pleadings, arguing these should affect cost liability.

Defendant’s Position: Wirsol maintained that, as the successful party, it should receive its full costs. It contended that its refusal to mediate was reasonable given the polarised positions and unlikelihood of resolving the dispute via ADR. Wirsol cited Gore v Naheed to argue that choosing court adjudication over mediation is not inherently unreasonable. Furthermore, Wirsol highlighted its Part 36 Offer of £100,000 as evidence of genuine settlement attempts, countering the claim that no efforts were made to resolve the matter amicably.

The Court’s Decision

Reduction in Costs: The court reaffirmed the general principle that costs follow the event. After evaluating the specifics of the case and authorities cited, the court found Wirsol’s refusal to mediate was justified. The positions of both parties were highly disparate, and mediation was unlikely to bridge the gap. Additionally, the court recognised Wirsol’s Part 36 Offer as a valid attempt at settlement, further diminishing the justification for a costs reduction based on refusal to mediate.

Interest on Costs: The court ordered interest on costs as per Wirsol’s request, granting 2% above the Bank of England base rate from the date costs were paid until one month after the delivery of a detailed bill of costs to Assensus, followed by the Judgments Act rate of 8%. However, due to a considerable proportion of costs falling outside the approved budget, the court allowed two months for the assessment of the detailed bill before the higher interest rate applied.

Interim Payment of Costs: The court assessed an interim payment based on realistic calculations. Considering both budgeted and non-budgeted phases of incurred costs, the court allowed 90% recovery for budgeted phases up to £256,369.39 and 60% for non-budgeted phases leading to £151,543.90. Consequently, the total interim payment ordered was £407,913.39.

Permission to Appeal and Stay of Execution: The application for permission to appeal was thoroughly examined. The grounds including errors in fact and law, claims of quantum meruit, unjust enrichment, and issues regarding Invoice 176 were all reviewed. The court found none had a realistic prospect of success. The request for a stay of execution pending appeal was also denied, as insufficient evidence was provided to demonstrate that such an order would stifle the appeal.

Part 36, Set Off And Litigants In Person

Case Law, New Costs Blog, Part 36

Costs Of Late Amendment Which Did Not Substantially Alter The Case

Case Law, Costs Against Successful Party, New Costs Blog, Part 36

In Magee and Others v Crocker and Others, the High Court addressed costs arguments following a judgment on a disputed share transfer and shareholders’ agreement, with particular focus on the impact of a late amendment to plead novation. The court considered whether to apply the general rule from Beoco Ltd v Alfa Laval Co. Ltd regarding costs up to the date of a late amendment. Departing from this principle, the court found that the amendment did not substantially alter the case and would not have changed the defendant’s approach if pleaded earlier. The judge noted that even if the novation case had been pleaded initially, the claim would still have been vigorously resisted, and the defendant was not deprived of the opportunity to make a Part 36 offer or compromise the proceedings. While the claimants were ordered to pay the costs of the amendment application, they were awarded 90% of their overall costs, subject to a 10% reduction to reflect partial success on some arguments and issues with evidence.

CPR 36.17 | Claimant Beats Own Part 36 Offer Against “Intransigent” Police

Actions Against Police, Case Law, Indemnity Costs, New Costs Blog, Part 36

“…it was plain to me that the Claimant has suffered profound and enduring distress due to the Defendant’s officers’ failings. The Defendant’s intransigent conduct of these proceedings, contrary to the obligation on all parties to engage meaningfully with settlement possibilities, has compounded the failures that underpinned the Claimant’s claims. I have no difficulty in accepting that the Defendant’s conduct of the litigation has prolonged and exacerbated the Claimant’s distress. That is a relevant factor when the court is considering the use of compensatory powers in relation to interest.”

Receiving Party Beating Its Own (Non Part 36) Offer Did Not Warrant Indemnity Costs Award

Case Law, Indemnity Costs, New Costs Blog, Part 36

“…the claimants’ offer is not, in my view, sufficient to make the order for costs (excluding the first day) one to be assessed on the indemnity basis. The offer could have been made via Part 36 which would almost inevitably have resulted in an indemnity basis order in accordance with CPR 36.17, but it was not couched in those terms. Instead, the claimants have to show that the defendants’ conduct was “out of the norm” to obtain an indemnity basis order. There is only a single paragraph in the claimants’ submissions on this point and it refers solely to the defendants’ conduct in relation to negotiations and offers.”

Effect And Consequences Of Part 36 Offers In Solicitor And Client Assessments

Case Law, Detailed Assessment, New Costs Blog, Part 36, Solicitor & Client Costs, Solicitor and Client Costs

“It seems to me that (apart from the practical difficulties identified in Friston on Costs) one possible reason why CPR 36 has been imported into CPR 47, but not into the provisions for Solicitors Act assessments at CPR 46, is that it is not possible to reconcile the provisions of CPR 36 with subsections 70(9) and 70(10) of the 1974 Act.”

Failure To Mediate And Validity Of Part 36 Offers In Probate Claims

Case Law, New Costs Blog, Part 36, Trustees & Estates

I have concluded that the claimant’s conduct was not such as to warrant a deduction from his costs. In reaching that conclusion I have in mind in particular (a) the fact that the claimant made most of the running in relation to settlement (b) the third defendant’s behaviour in her conduct of the claim and (c) the strong merits of the claim which either were known or should have been known to the third defendant and (d) the late stage at which the third defendant expressed a willingness to engage in ADR. Although the claimant did not explain his position in April and May 2023 it would not have been unreasonable to have concluded that the additional cost of mediation was not warranted. I do not consider that on the facts of this case it can be said that silence on the part of the claimant amounted to a refusal to undertake mediation (or some other form of ADR).

Interest Following Late Acceptance Of A Claimant’s Part 36 Offer

Case Law, New Costs Blog, Part 36

“It seems clear to me that such an informed and reasonable observer would understand the offer term to mean that after 21 days interest would accrue on the entire offer sum. The way to understand it is to imagine a black box. The amount the claimant offered to compromise the claim and that the defendant accepted to pay is in that black box. By accepting the claimant’s offer, the defendant agrees to give the black box to the claimant. But there is a delay in giving the claimant the box. If the claimant had been given the box with the full sum on the Day 21, he could have invested it and received interest. But he did not get it. Instead, the defendant kept the money for that extra period. In that delay period, two things happened. The defendant benefited from the monies and the claimant was deprived of them. It seems to me obvious that the claimant should receive interest for the net sum for the delay period (or periods, strictly).

Part 36 Offer Was Not A Genuine Offer To Settle

Case Law, New Costs Blog, Part 36

“This was not a case where a very high claimant offer reflected a very strong prospect of the claimant succeeding at trial. The parties were diametrically and evangelically opposed in terms of their characterisation – and, I sensed, subjective understanding – of the deal they had concluded. A discount of 1% is meaningless in such context. It amounts to saying ‘pay up now, accept that you are wrong’.”

QOCS | An Order Under CPR 36.22(9) Is Not An “Order For Damages …” As Defined By CPR 44.14(1)

Case Law, New Costs Blog, Part 36, QOCS

“I have concluded that the judge was right to reach the decision that he did. Although I have reached that conclusion for five separate reasons, by far the most important is the first: that, on my analysis, an order under r.36.22(9) is not “an order for damages and interest made in favour of the claimant” (as per r.44.14(1)). The other reasons are that, if the appellant was right, it would elevate form over substance; that there are policy considerations which also militate against the appellant’s construction of the rule as it stands; that to the extent that they are relevant, the authorities support the claimant’s position, not that of the appellant; and finally because what the appellant says that r.44.14(1) means in its present form is not what the rule provides, and that problem may explain why there is a proposal to amend the words of the rule.”