Lokhova v Longmuir [2017] EWHC 3152 (QB)

Case No HQ12D02397[2017] EWHC 3152 (QB)IN THE HIGH COURT OF JUSTICEQUEEN'S BENCH DIVISIONMEDIA AND COMMUNICATION LISTVenue Royal Courts of Justice, Strand, London, WC2A 2LLDate 07/12/2017
Before
MR JUSTICE WARBY
Between
SVETLANA LOKHOVAClaimantDAVID LONGMUIRDefendant
Mark Lewis Solicitor Advocate of Seddons for ClaimantJustin Rushbrooke QC (instructed by Osborne Clarke) for DefendantHearing Hearing date: 1 December 2017
JudgmentMr Justice Warby :
[1]On this application, I have to resolve costs issues arising from the claimant’s late acceptance of a Part 36 offer, and from some further applications and disputes that have followed that acceptance.[2]It is common ground that I should make the orders which CPR 36.13(5) requires the Court to make where a Part 36 offer is accepted after the expiry of the “relevant period”, unless it would be unjust to do so. The claimant is entitled to her costs up to the date on which that period expired (“the Claimant’s Part 36 Costs”). The defendant is entitled to his costs from the date of expiry of the relevant period to the date when the Part 36 Offer was accepted (“the Defendant’s Part 36 Costs”). It is also common ground that the Claimant’s Part 36 Costs should be assessed on the standard basis.[3]The defendant applies, however, for the following:(1) an order that the Defendant’s Part 36 Costs be assessed on the indemnity basis, except for those that are already the subject of an order for standard basis costs;(2) an order that the claimant pay on the indemnity basis the defendant’s costs of an application he made, post-acceptance. for an order that the damages payable under the Part 36 offer should be set off against costs which the claimant is due to pay the defendant;(3) an order that the claimant pay the balance of the defendant’s post-acceptance costs, on the standard basis.[4]In the course of the hearing, Mr Rushbrooke QC has corrected a misapprehension on the claimant’s side, that the third application seeks prospective costs orders. It is in fact concerned only with the costs from the date of acceptance to the date of this hearing. Procedural background[5]The action is for remedies for libels and a slander published by the defendant in 2011. Much of the background is set out in a previous judgment of mine handed down over a year ago, on 20 October 2016: [2016] EWHC 2579 (QB) (“the 2016 Judgment”). Reference can be made to that judgment for more detail, but for present purposes the key features of the factual and procedural background can be quite shortly summarised. Events from 2008 to 23 November 2015[6]The claimant was employed by Troika Dialog, now part of Sberbank (“the Bank”). Whilst in that job she was the victim of unlawful treatment by the Bank and fellow members of staff. One of those responsible was the defendant in this action, who was the Bank’s Head of UK Equity Sales. The claimant pursued a claim in the Employment Tribunal (“ET”) against him, the Bank and other fellow staff members. She alleged sex discrimination, harassment, victimisation and unfair dismissal.[7]Whilst that claim was pending, the claimant brought this defamation claim against the defendant personally. Her claim related to seven statements published by him to colleagues, clients, and competitors, in and between June and December 2011. The words complained of in those publications included descriptions of the claimant as a “bi-polar coke-crazed madwoman”, and“Miss Bonkers”. The thrust of the words complained of was that the claimant was mentally unstable and/or a drug abuser.[8]These proceedings were started on 14 June 2012. By that time, the defendant had already admitted liability and offered an apology and other remedies in settlement of the claim. He did so in April 2012, in response to the letter of claim. The defendant made a series of further settlement offers, and the claimant made counter-offers. None of these was accepted.[9]On 22 November 2012, the defendant made an offer of amends pursuant to the Defamation Act 1996. That was not accepted. The question of whether it would be accepted was put on hold, by agreement, pending the resolution of the claimant’s ET claim. The claimant’s solicitors had said in February 2013 that she was “minded to accept” the offer of amends, subject to “comprehensive disclosure”. By that they meant full disclosure of the defendant’s “campaign” of defamation.[10]Judgment on the merits in the ET claim was handed down in October 2013. The ET upheld the claimant’s complaints of sex discrimination, harassment, victimisation and unlawful dismissal. Remedies were dealt with in a judgment of 5 March 2015, which awarded the claimant £1.762m net.[11]On 30 September 2015, the claimant notified the defendant of an intention to amend her claim by adding three further causes of action, two for libel and one for slander: see the 2016 Judgment at [24]. Some seven weeks later, on 20 November 2015, the claimant filed an application notice seeking permission to amend her claim in this way. But that notice did not come to the attention of the defendant straight away.[12]On 23 November 2015, the defendant made a Part 36 offer. This offered the sum of £70,500 “in full and final settlement of your client’s claim … including the proposed amendments to that claim set out in your letter dated 30 September 2015.” The offer letter also offered to issue letters of apology to the claimant and to the publishees of the offending statements, and included drafts of such apologies. The defendant offered to make a statement in open court in the form of a draft enclosed with the letter. He offered an undertaking not to repeat the same or any similar allegations. He confirmed his willingness to make payment of the sum of £70,500 within 14 days of acceptance. The letter made clear that it was intended to have the consequences of Part 36. Events from 23 November 2015 to 10 October 2016[13]The “relevant period” for accepting the defendant’s offer, and automatically recovering costs to the date of acceptance pursuant to CPR 36.13(1), expired on 14 December 2015 (“the Expiry Date”). It was not accepted. Instead, the claimant proceeded with her application for permission to amend her claim.[14]She sought to amend by adding claims in respect of two alleged libels in May 2011, and one alleged slander in February 2014. The themes of the words complained of were the same as those already complained of. The claimant had known of the 2011 publications for some time. On 6 October 2016 the claimant made a further witness statement in support of her amendment application in which, at paragraph 69, she said this about the need for these amendments:
“If I am not allowed to amend my claim to add these new statements, I will be at risk for substantial costs because of offers that the Defendant has made previously. … It is therefore critical that these amendments are allowed, in order that the entirety of the Defendant’s campaign (or as much of it as I have been able to obtain through the unsatisfactory disclosure so far) can be before the Court.”
[15]I heard the claimant’s amendment application on 10 October 2016. In the reserved judgment mentioned above, I dismissed it. I did so on the grounds that the slander claim had no real prospect of success, and/or the new claims were all so weak that permission should be refused on Jameel grounds (Jameel (Yousef) v Dow Jones Inc [2005] EWCA Civ 75, [2006] QB 946); further, there had been significant unjustified delay by the claimant; it was far from clear that the grant of permission would or could achieve the claimant’s stated aim; if it would, there would be prejudice to the defendant which outweighed any which the claimant might suffer; and the introduction of the new claims would represent an unnecessary and disproportionate complication of a relatively straightforward piece of litigation: see the 2016 Judgment at [64]. Events since the 2016 Judgment[16]My decision to dismiss the amendment application was embodied in a formal order dated 8 December 2016 (“the 8 December Order”). By that order the claimant was required to pay the costs of the amendment application, and of various other applications and appeals by her, to be assessed on the standard basis. I made an order (“The Interim Payment Order”) that required the claimant to make an interim payment on account of these costs, in the sum of £105,000. That sum was due within 14 days, according to the CPR. The claimant has not paid those costs. What has happened since 8 December is this.[17]On 21 December 2016, the claimant issued an application seeking another 28 days to pay. I dealt with the application without a hearing on 23 December 2016. I extended time to 4 January 2017, giving these written reasons:
“1. The application is made on short notice, and the evidence filed in support has some fairly obvious shortcomings; in particular, it contains no supporting detail about the Claimant’s means, in circumstances where I know she was employed at a senior level and (partly for that reason) is the recipient of a very substantial award in the Employment Tribunal. 2. Nevertheless, the evidence is just sufficient in all the circumstances to justify a short extension of time over the holiday period. I bear in mind what is said about the difficulty of getting instructions from the claimant. A further application will have to be made if a further extension is required. That application will need to be supported by evidence. 3, If no better evidence is filed than has been filed in support of this application there is a real risk the extension will not be granted. On the face of it, the claimant should be able to authorise others to amass the evidence necessary to demonstrate rather than merely assert her financial position, and to provide some detail.”
[18]No payment was made on or before 4 January 2017. On that date, the claimant’s solicitors came off the record. She became a litigant in person. On 10 January 2017, the defendant filed an application for an “unless” order (“the Unless Order Application”). The order sought was that unless the claimant complied with the Interim Payment Order by 6 March 2017 her claim would be struck out, and costs awarded in favour of the defendant. Plainly, that would have been a disaster for the claimant. She would have lost out on the substantial compensation that had been offered, the public vindication that would be available, and the chance to recover the costs of her claim. Instead she would incur a substantial costs liability to the defendant, for the whole of the costs of the claim, as well as having to bear all her own costs.[19]When the Unless Order Application was first listed for hearing the claimant, through her partner Mr North, or Mr North on his own account, made a number of attempts to have it adjourned on medical grounds. I had seen attempts to adjourn on these grounds before. Several had been made in December 2016, on the basis that the claimant was due to give birth in January and was for that reason unfit to proceed meaningfully with preparatory work for the hearings. I had refused the applications on the basis that there was no, or no satisfactory medical evidence, and in any event the claimant was legally represented and the matters at issue were overwhelmingly matters for her lawyers to deal with, rather than her.[20]In the adjournment applications of 2017 there was a rather better account of the medical position. It still was not good. When the first application was made, however, the claimant was a litigant in person and there was no doubt or dispute that she was due to give birth shortly before the listed hearing date. So, I adjourned the hearing. I eventually ordered the Unless Order Application to be listed for hearing after 17 March 2017, allowing the parties to apply for some variation of this timetable if they had reason to do so. It is unnecessary to rehearse the sequence of events in any further detail. The upshot was that the hearing of the Unless Order Application was put off, but it was listed for hearing on 28 April 2017.[21]In the last of the orders I made on these issues I set out detailed written reasons, in which I reiterated the principles that the court applies in dealing with applications to adjourn on medical grounds. I set out an extensive extract from my earlier decision on those principles, in Decker v Hopcraft [2015] EWHC 1170 (QB) [22]-[28]. My reasons emphasised the need for evidence. I made clear also that if it was to be asserted that the claimant was unable to pay for legal representation, evidence was required. This was not the first time I had made these points. It must by this time have become clear to the claimant that unless she could produce clear and compelling evidence that an adjournment was required on medical or other grounds the hearing was going to proceed. She made no further application. Nor did she file any evidence that she was unable to pay the sum due.[22]On 21 April 2017 (“the Acceptance Date”) the claimant gave notice by email of her acceptance of the defendant’s Part 36 offer. In that email, she said: "Although I am confident that my claim is worth more than the offer, especially with malice and aggravated damages taken into account, I have to obey the orders of my medical advisors. I cannot continue this claim as a result of the damage caused to me by your clients David Longmuir and Sberbank.” She copied the court on this email, asking for the hearing fixed for 28 April 2017 to be vacated. That was opposed by the defendant, on the basis that although the Unless Order Application had been superseded by the acceptance of the Part 36 Offer the hearing might be required to deal with issues consequential on the acceptance.[23]On 24 April 2017, the defendant’s solicitors explained their client’s position. This was that unless the parties agreed otherwise, the offer obliged the defendant to pay the settlement sum of £70,500 within 14 days of acceptance (CPR 36.14(6)) and if payment was not made the claimant would be entitled to enter judgment for that sum (r 36.14(7)). But the claimant still owed the defendant £105,000 under the Interim Payment Order. It was said that the one should be set off against the other, and that failing agreement an application to that end would be made. Clearly, in order to be effective this application would need to be heard before the expiry of the 14 day period for enforcement of the Part 36 offer.[24]On 27 April 2017, no agreement having been reached, the defendant did file an application for an order setting off the damages due to the claimant against the costs due to him (“the Set-Off Application”). The application sought a hearing date of 2 or 3 May 2017, giving the maximum time to the claimant. The claimant responded with a series of complaints, accusations, and threats coupled with demands for an adjournment on medical grounds. There was a flurry of correspondence, including a substantial number of emails to the court demanding instant action. I shall have to return to some of the detail of this.[25]On the morning of 2 May 2017, shortly before the hearing was in the event due to take place, the claimant agreed a Consent order which achieved the defendant’s objective. The mechanism was that time for payment of the £70,500 due to the claimant was extended until 14 days after any determination by the Court of any application by the claimant to enter judgment. I made that order, reserving the costs of the Set-Off Application. The practical if not the legal effect of this order is that the claimant’s outstanding liability to the defendant is reduced to £34,500.[26]There have since been exchanges between the parties in relation to costs more generally. These have included attempts to agree costs liabilities with a view to avoiding the need for detailed assessment. The defendant’s side have provided details. On 24 August 2017, the claimant’s new solicitors, Seddons, indicated that they had instructed costs lawyers to prepare a bill of costs. No bill has been produced. The defendant’s case is that the claimant has failed and refused properly to engage with the process of seeking to agree costs liabilities.[27]The Interim Payment Order remains unsatisfied. In the course of the exchanges between the parties’ solicitors it has been asserted on the claimant’s behalf that the reason for non-payment is that she cannot meet her liabilities to the defendant. In a letter dated 22 August 2017 her solicitors said that “if she had the money she would pay”. This is very general of course. The position remains that at no stage has the claimant put any evidence put before this Court as to her financial position, in the form of documentation, or even a signed witness statement containing details of her income, assets and liabilities.[28]On 17 October 2017, the claimant attended Court for what was to be an oral examination on her assets, pursuant to an Order made by me on 21 June 2017. No attempt was made in advance of the hearing to secure an adjournment. The hearing was in the event adjourned, however. Master McCloud has since ordered that it be re-heard before a Judge with power to commit for contempt. The defendant’s evidence is that the claimant disrupted the hearing on 17 October in various ways and that she brought about the adjournment by threatening to call an ambulance. There is no evidence to contradict this account, but it is not my role on this application to make findings about events on that date, nor do I need to do so. These matters are however relevant as context and background.[29]On 24 October 2017, the defendant filed the application notice that is now before me. The application is supported by a lengthy witness statement from Mr Hurst of the claimant’s solicitors, running to 95 paragraphs and 13,000 words. The statement has a number of Annexes, lettered A to G, containing chronologies of relevant aspects of the proceedings. It has an exhibit, which runs to 359 pages.[30]The claimant has not filed any evidence. On 22 November 2017, her solicitors wrote to say that they saw no need to do so. They did say this:
“… It might assist you to understand the background. Our client instructed Taylor Wessing to pursue your client for libel … At the time that your client made a Part 36 Offer, Taylor Wessing and Counsel advised her that to beat the part 36 Offer she needed to amend. They did not give any thought to the interplay between recoverable costs and any possible increase in damages. If they had done so, the only advice that a client could have been given was that, the irrecoverable costs of such an amendment would render any increase in damages worthless ie the best position if Ms Lokhova won was financially worse, and if she lost even worse still. If ever there was a case that was pursued for the benefit of the lawyers then this was it … … We have notified Taylor Wessing of a negligence claim. It seems to us that such is the best prospect of your client getting paid. The allegation of negligence has caused a hiatus in getting the file to work out the costs. It does seem to us that the differential between the costs and damages due to our client and the costs due to your client will be small and might favour our client. We suggest that a deal is agreed that either mediates those costs or resolve by negotiation.”
[31]Mr Lewis tells me that a letter of claim alleging negligence has been sent, but no proceedings have yet been issued. Points of agreement[32]I have already indicated that there is now some agreement. This includes agreement that there should be orders for the usual allocation of the costs up to the Expiry Date, and of the costs between the Expiry Date and the Acceptance Date. In addition, the parties have agreed that the December 2016 Order should be amended in one respect. By paragraph 7, I ordered that summary assessment of certain costs that I had awarded to the defendant should take place at the hearing of 16 January 2017 which was then envisaged. That hearing never took place, and the parties now agree that these costs should be subject to detailed assessment. I share that view and approve that amendment. A further change is required to correct a typographical error. These changes will be made by consent. Everything else is in dispute. Defendant’s Part 36 Costs: indemnity basis?[33]The application is concerned with the defendant’s costs incurred in the period between the Expiry Date and the Acceptance Date, other than his costs of the amendment application. The issue is, in the end, quite a narrow one. It is this: did the claimant, in that period, behave in a way that went outside the norm, so as to justify an order for assessment on the indemnity basis?[34]The phrase “outside the norm” is derived of course from the decision of the Court of Appeal in Excelsior Commercial and Industrial Holdings Ltd v Salisbury Hammer Aspden and Johnson [2002] EWCA Civ 879. The Court there held that costs are awarded on the indemnity basis rather than the standard basis only where there is something in the conduct of the action or the circumstances of the case in general which takes it outside the norm, in a way that justifies a non-standard order of this kind.[35]The normal order in respect of what can be called “post-expiry costs”, when a Part 36 Offer is accepted late, is for the offeror to recover his costs assessed on the standard basis. The mere fact of late acceptance “cannot be a basis on which to award costs on the indemnity basis”: Optical Express v Associated Newspapers Ltd [2017] EWHC 2707 (QB) [51]. That of course does not preclude an order for indemnity costs in respect of this period. The Court retains a discretion. I accept the submission of Mr Lewis that the Court should be cautious in the exercise of that discretion. There are strong policy reasons for adhering to the default principles of the Part 36 regime. It is important that Part 36 should remain a clear and simple mechanism by which the parties can resolve their dispute. That aim is undermined if the Court is too ready to depart from the ordinary rules that apply in this context. Speaking generally, it is desirable for claimants to have confidence that acceptance of an offer will bring a close to matters, on the usual terms.[36]In my judgment, however, it is also of importance that the Court should be willing to examine the conduct of those who first refuse and then accept a Part 36 offer. If a claimant’s conduct in this respect is wholly or highly unreasonable, the Court should be prepared to contemplate an indemnity costs order. A readiness to do so should provide a proper incentive for the timely acceptance of fair and reasonable offers.[37]The cases show that a failure by the claimant to offer any explanation for the belated acceptance of a Part 36 offer can be a proper basis for inferring such unreasonable conduct, at least if the failure is itself inadequately explained: see Jordan v MGN Ltd [2017] EWHC 1937 (Ch) [72] (Mann J) and Optical Express (above) at [51]. In the present case, however, the claimant has provided an explanation, which can be evaluated. It is not wholly satisfactory for the explanation to be provided only by the claimant’s current solicitors, and then only in a letter, without the reassurance of verification by the claimant. I also need to tread carefully because the explanation involves events before Seddons were involved, and criticism of third parties who are not represented before the court, and have not had an opportunity to answer the criticism, at least not in the present context. I am nonetheless satisfied that I can reach a conclusion on the claimant’s conduct which is safe, fair and reasonable.[38]My conclusion is that the claimant’s behaviour in pressing on with her claims after the Expiry Date, and at all times up to the Acceptance Date, was highly unreasonable, and deserving of an order that she pay the costs at issue on the indemnity basis.[39]This period can be broken down into two: the period up to the 2016 Judgment (“the First Phase”) and the period from the 2016 Judgment until the Acceptance Date (“the Second Phase”). As to the First Phase, it was in my judgment wholly unreasonable for the claimant to refuse the Part 36 Offer and press on with the amendment application.[40]The main if not the only evidence as to her reasons for doing this is contained in paragraph 69 of her witness statement of 6 October ([14] above). In the 2016 Judgment I referred to that evidence and found that concern about a risk of adverse costs consequences from previous settlement offers did “appear to be the or a dominant reason” why she wanted to obtain permission to amend. I have no further evidence, but I do now have further assertions from the claimant, in her solicitors’ letter of 22 November 2017 ([30] above). I am in no position to adjudicate as between the claimant and her former solicitors. But I can and do proceed on the basis that, on the claimant’s account of things, the dominant reason for pressing on with her claim was in order to beat the Part 36 offer. I also have Mr Lewis’s skeleton argument for this hearing, in which he invites the Court to infer that the claimant pursued the amendment application on advice. That is her position, and it is fair to accept it, as between her and the defendant.[41]What I cannot accept for present purposes, is Mr Lewis’s further submission that the claimant’s conduct cannot be regarded as unreasonable, because she acted on legal advice. That submission blurs the distinction between two separate and distinct issues. The first is whether it would be fair to criticise the claimant for adopting a litigation strategy recommended by her legal advisers. Mr Lewis’s argument has obvious relevance to that issue. But that is not the relevant question for present purposes. The issue for me is whether, as between the claimant and the defendant, the claimant’s behaviour went outside the norm in such a way as to justify indemnity costs. I can and do decide that question against her, without needing to assess quite what conclusions should be drawn from Seddons’ letter of 22 November 2017, and without ruling on whether Mr Lewis is justified in inviting the inference he does.[42]I have always been puzzled by the claimant’s evidence about her reasons for wanting to amend. At the time of the 2016 Judgment I was unable to follow what seemed to be the logic of her position. I was unable to understand how it could be thought that a claimant might avoid the costs risks involved in rejecting a settlement offer in respect of libels A to G, by amending to add further claims in respect of libels H and I, and slander J. I had not, quite rightly, been shown or told the content of the defendant’s Part 36 offer of 23 November 2015. I did not know that it encompassed all the alleged defamations, from A to J. In the light of that knowledge, and having now seen all the offers passing between the parties, I am if anything more baffled.[43]The sequence of offers before the defendant’s Part 36 offer of 23 November 2015 is instructive. It shows clearly that the claimant herself accepted that compensation far below the sum of £70,500 would be sufficient for the defamations of which she originally complained. The sequence can be quite shortly summarised.(1) On 5 April 2012, the defendant made an open offer of £10,000 in damages, costs, undertakings not to repeat, and apologies. The claimant’s then solicitors, RJW, responded positively. After further negotiations, the claimant counter-offered in open correspondence, offering to accept damages of £20,000.(2) On 10 July 2012 the claimant made further, alternative offers. One was to accept £36,000 as a global payment for damages and costs. The other was to accept £15,000 plus costs. On 19 July 2012, the defendant made an offer of £36,000 all-in, to cover damages and costs. On 27 July 2012 RJW agreed to this in principle, subject to settling claims against the Bank. On 1 August 2012 the claimant, through RJW, indicated that the £36,000 was acceptable, but sought amendments to other aspects of the settlement package offered.(3) On 9 October 2012 Taylor Wessing took over the conduct of the claimant’s claim. On 18 October 2012, she indicated through that firm that she would accept payment of £45,000 all-in. Significantly, the letter gave the firm’s assessment of the true value of the claims. Taylor Wessing said “We believe that she would recover damages in the region of £20,000 should this matter proceed to trial.” No doubt the claimant was aware of this assessment. On 1 November 2012, the defendant made a Part 36 offer of £25,000 in damages. At the same time, he made an open offer of £25,000 in damages and £25,000 in costs. The offer was therefore in excess of the sum indicated on 18 October.(4) After a lengthy lull in activity resulting from a stay imposed by agreement, the defendant made two further offers and the Part 36 offer which the claimant has eventually accepted. On 26 October 2015, there was a Part 36 offer of £35,500 in damages. This offer included the proposed amendments that had been indicated in Taylor Wessing’s letter of 30 September 2015. On 23 November, at the same time as the final Part 36 offer, there was an open offer of £25,000 in damages plus the claimant’s costs on the indemnity basis. Again, the offer was expressed to cover the proposed amendments as well as the claims that were already pleaded.[44]The claimant has not sought to explain exactly what she meant by her puzzling evidence of October 2016. Doing my best, I think she was probably suggesting that if she did not amend her claim she was at risk because of the offers of 2012. That, in my view, would represent a reasonable assessment of the value of her original claims as compared with the offers. Indeed, it would be an assessment consistent with the value that her own solicitors had put on her claims. But the conclusion is illogical, for the reasons indicated above; amendment to add further causes of action could not alter the value of the existing claims, or affect the costs risks in respect of those.[45]In any event, the defendant had made a much higher offer in November 2015. Timely acceptance of that offer would have resulted in a deemed order for payment by the defendant of all the claimant’s costs to the date of acceptance. If Taylor Wessing’s October 2012 assessment of the value of the claims as then pleaded was a reasonable one (which in my judgment it clearly was) it is impossible to see how the November 2015 offer of £70,500 could be viewed as anything other than reasonable. My own conclusion was that the three new causes of action which the claimant sought to add were untenable or, if tenable, worth so little that the additional complexity they would add could not be justified. Nobody could reasonably believe that they were collectively worth more than £50,000 in additional damages.[46]In all these circumstances, it is perhaps an understatement to describe the claimant’s decision to reject the Part 36 offer of November 2015 and press on with the amendment application as highly unreasonable, as between the parties to the litigation. It would be unjust to the defendant to award him his costs in respect of the First Phase on anything other than the indemnity basis. In reaching that conclusion I have – as required by r 36.13(6) - had regard to all the circumstances including the matters listed in CPR 36.17(5).[47]As to the Second Phase, the main activities undertaken in this period were the resolution of the orders following my dismissal of the amendment application; the claimant’s application for more time to pay; the defendant’s pursuit of the Unless Order Application; and the claimant’s various attempts to put off the hearing of that application. I was myself closely involved in this phase of the litigation, dealing with each application as it came in. I am in a very good position to assess the claimant’s conduct at this time. I conclude that in this phase too the claimant behaved in a way that falls well outside the norm, and was highly unreasonable. Mr Rushbrooke submits that the claimant has behaved in a defiant way, declining to pay or to explain why she cannot or will not do so. On the evidence and information before me that is a well-founded submission. The claimant has had ample opportunities to seek time to pay and to explain the reasons why that should be granted. She has turned them all down.[48]The claimant has also failed to provide any evidence to corroborate her repeated claims of ill-health. The claim in her email of acceptance, that she was acting on the “orders” of her doctors, is therefore unsupported by any evidence. I have concluded that the real reason for the claimant’s belated acceptance of the defendant’s Part 36 offer was a realisation that(1) she was highly unlikely to beat it at a trial and(2) if she did not accept it there was a good chance that the Court would grant the Unless Order Application, leading to a threat that her claim would be dismissed.[49]Mr Lewis makes a reasonable point, when he observes that the majority of the defendant’s costs in the First Phase will have been incurred in dealing with the claimant’s amendment application. I have made a costs order about those and, as is common ground, the defendant cannot revisit that order before me. It does not follow, however, nor do I consider, that the defendant incurred no other costs in that period. Mr Rushbrooke tells me, and I accept, that in this period a substantial amount of work was done on strategic advice and other aspects of the case. The costs figures put forward tend to support this submission. The fact that indemnity costs were not sought or awarded in respect of the amendment application is no bar to the application which the defendant makes now.[50]Nor do I accept Mr Lewis’s further submissions,(a) that the costs judge would find it virtually impossible to disentangle the costs which related to the amendment application and those that related to work done on other aspects of the case during the first phase; and/or(b) that the difference between standard and indemnity basis costs in respect of the First and/or Second Phases must be so slender that the present application is wholly disproportionate. I am confident that the defendant’s solicitors will be able to show what work was devoted to what aspects of the case, and that the costs judge will be able adequately to assess the position. If the court has the power to dismiss an application without examining its merits, on the grounds that it is disproportionate, it is a power that is very rarely if ever exercised. The normal sanction would be a reduction in recoverable costs. Here, the defendant’s bill for work done between the Expiry Date and the Acceptance Date is very substantial, and far exceeds the amount of the Interim Payment Order. I see every reason to believe that the present application is likely to yield a significant benefit for the defendant. The Set-Off Application[51]Mr Lewis submits that I have no jurisdiction to make a costs order in respect of this application. He argues that acceptance of a Part 36 offer settles, indeed freezes, the costs position between the parties. Further and alternatively, he says that if there is no determination of an application then there can be no costs order. If the parties reach agreement and a consent order is made, then the opportunity to seek costs is lost.[52]These points are intuitively unattractive and I do not see any merit in any of them. First, there are the provisions of CPR 36.14. That rule makes provision for the “Other effects of acceptance of a Part 36 offer”. This would seem to mean effects “other” than those prescribed by r 36.13. The rule provides, among other things, as follows:
“(1) If a Part 36 offer is accepted, the claim will be stayed. (2) In the case of acceptance of a Part 36 offer which relates to the whole claim, the stay will be upon the terms of the offer. … (5) Any stay arising under this rule will not affect the power of the court— (a) to enforce the terms of a Part 36 offer; or (b) to deal with any question of costs (including interest on costs) relating to the proceedings….”
The effect of r 36.14(5)(b) seems to be to ensure that the court has full power over the costs of the proceedings, save to the extent that costs orders are prescribed by r 36.13. (b) to deal with any question of costs (including interest on costs) relating to the proceedings….”[53]Mr Lewis’s other submissions fail on the facts. The order I made by consent on the Set-Off Application expressly provided that the costs should be reserved. The effect of that form of order is explained in 44PD 4.2:
“The decision about costs is deferred to a later occasion, but if no later order is made the costs will be costs in the case.”
This hearing is the “later occasion” to which the decision on costs has been deferred.[54]As to the merits, the claimant has in my judgment no answer to the submission that she should be ordered to pay the costs of the Set-Off Application. She forced the defendant to make it, then conceded it. She was the unsuccessful party. That leaves the question of whether those costs should be assessed on the indemnity basis. I have no doubt that they should. Mr Hurst’s Annex G sets out the sequence of relevant events on and between 25 April and 2 May. It does so in what I am satisfied is an objective and suitably concise way. It covers three pages of single-spaced text. I remember much of it, as I had to devote quite a lot of time to reading and dealing with the claimant’s communications with the court. It would unnecessarily lengthen this judgment to recount much of this part of the history. It is enough to record that for the reasons summarised below, the claimant’s behaviour was in my judgment unreasonable to a very high degree, and unquestionably resulted in a considerable increase in the time and costs that had to be devoted to what in the end was a relatively simple issue, the merits of which were fairly obvious.[55]She complained, unjustifiably, of “bombardment” by the defendant’s solicitors, whom she falsely accused of “abusing” and “bullying” her. She claimed that her partner, Mr North, would be seeking an injunction to restrain “harassment” of him by the defendant’s solicitors. She repeatedly demanded that the hearing date be put off, when that would clearly defeat its plainly expressed objective. She complained that she was “unwell”, but never gave any detail. Whilst claiming to be unable to address the application she was able to write lengthy emails to the court, one of them some 700 words long. Other post-acceptance costs[56]Other than the jurisdiction point with which I have dealt already, Mr Lewis really has no answer to this part of the defendant’s application. I shall have to deal with the costs of this application. Costs of the assessment process will fall to be dealt with as part of that process. It does seem clear to me that the other post-acceptance costs should be paid by the claimant. Review of the correspondence between the parties since the Acceptance Date reveals a significant failure by the claimant to engage with the complicated costs situation that, on any view, resulted from the belated acceptance of the Part 36 offer. It is just that, between the parties, the costs of this exercise should be met by the claimant. This is particularly so in view of my conclusions on the next issue. Interim payment[57]The defendant’s application notice seeks an order “pursuant to CPR 44.2(8) that the claimant shall pay the defendant a reasonable sum on account of the above costs within 14 days.” The claimant’s response to this aspect of the application is indicated by the passage cited above, from Seddons’ letter of 22 November 2017. Mr Lewis argues that there should be no interim payment as it cannot yet be known whether there will be a balance in favour of the defendant, once the parties’ bills are assessed. I disagree. In the light of my conclusions, and the sums presented on behalf of the parties so far, I can be confident that there will be a balance owing to the defendant.[58]The costs position is conveniently summarised in Mr Hurst’s Annex A. There are three categories of sums due to the claimant:(1) the damages of £70,500;(2) the costs of an application dated 21 April 2016, awarded but yet to be assessed, which are said to be £3,651.20; and(3) the Claimant’s [other] Part 36 Costs. The claimant has not produced any bill for this last category, but I do have her costs budget from November 2016, signed by a partner in her solicitors. At that stage, the claimant’s incurred costs were said to be £210,742.90. A significant proportion of this will be irrecoverable. The largest single figure is for “Issue/pleadings”, for which £140,000 is claimed. It is obvious that a large proportion of that must relate to the failed amendment application and the costs of preparing the Reply, which was served shortly after the hearing. It is possible to discount a further £50,000, representing the costs of ADR in August 2016, over 8 months after the Expiry Date. A figure of £120,000 would represent if anything a generous assessment of the recoverable amount by way of Claimant’s Part 36 Costs. In round terms, for the purposes of assessing whether there should be any interim payment, I would allow the claimant £200,000 for costs and damages. There may be some interest to be allowed for, of course.[59]On the defendant’s side, there is the crystallised liability for £105,000 under the Interim Payment Order. He claims a further £95,000 as the costs of the amendment application. Even if I assume that none of that will be recoverable, the sum total of the amounts claimed as Defendant’s Part 36 Costs, costs of the hearing on 8 December 2016, and costs of the Set-Off Application is some £285,954. It may be that these costs will be much reduced on assessment. But in order for the balance to end up in the claimant’s favour, they would have to be cut by as much as £190,000, or 66%. I cannot imagine that scenario, or anything close to it.[60]Quite what the appropriate sum may be, by way of interim payment, is another matter on which I will hear argument. Costs of this application[61]Mr Lewis relied heavily on a submission that the defendant’s costs of this application, as set out in the statement of costs filed pursuant to the Practice Direction, are or may be wholly disproportionate to what is really at stake on the application. The costs are stated to be £60,000. Mr Lewis’s first point was that a sum of this order is wholly disproportionate to what is at stake on the application. There may or may not be merit in that argument but, as I have indicated, I cannot regard it as a basis on which to dismiss the application, or any part of it. I will hear argument on the allocation and quantum of costs after delivery of this judgment.