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A Claimant has had their costs paid (which totalled £200,000), despite securing only a nominal award of damages at trial.
The parties in Shah & Anor v Shah & Anor were embroiled in an “intense and protracted” family dispute. They were litigating over a property in Goa which the defendants had agreed to transfer to the claimants. The defendants failed to take the necessary steps to do so, and so in breach of this agreement, the claimants brought proceedings against the defendants. The claimants sought damages of £30,000.
In an attempt to settle the matter, a Part 36 Offer was put forward by the claimants of a nominal £1.00.
A Part 36 Offer is made under Part 36 of the Civil Procedure Rules (CPR). It is an offer to settle the case and is intended to provide a real incentive to the parties to avoid proceeding to a trial. When a claimant makes a Part 36 offer to settle a dispute, and the defendant does not accept this, they will receive a number of benefits if the claimant receives a more advantageous award at trial. This includes a 10% uplift on the amount of the first £500,000 of damages awarded and 5% of any amount above that figure up to a maximum of £75,000 as well as beneficial costs consequences. Rejecting or accepting a Part 36 offer is a serious decision to be made.
At trial, the Judge found the defendants to be in breach of the agreement and awarded the claimants a nominal £10.00 in damages. His Honour Judge Saggerson ruled that the Part 36 Offer that had been made was “operative”, and so usual rules should apply.
The defendants argued in the costs hearing that the Part 36 consequences should not follow because the £1.00 proposal was not a genuine offer to settle the value of the claim. They argued it was an attempt to “game the system” in order to obtain a costs order.
The Judge disagreed. He said that the claimants were prepared to bend with their Part 36 offer, but the defendants were “unbendable”. The offer was deemed to be genuine and was close to the court’s conclusion. The Judge stated that the “sometimes harsh, even brutal” consequences of the CPR should be applied in this case. The court had to apply the cost consequences. At this point, the claimants’ costs were over £200,000.
The Judge at appeal stated that “litigation consumes public resource. It is both discouraged and constrained by rules of court, on the basis that it should be a last resort, avoided where possible.” The appeal was unsuccessful.
It is imperative to consider whether it is possible to settle the dispute without the need to continue with court proceedings. This is a reminder of how harsh and brutal Part 36 can be and that litigation should be a last resort.
The court expects parties to try and reach an agreement without going to court and consider whether any Alternative Dispute Resolution forms may be appropriate to resolve their issues. Part 36 offers can be very persuasive, and parties should consider the potential consequences of rejecting a Part 36 offer carefully.