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On 19 January 2021, Mr Justice Mann gave an interesting judgment in the case of Pallett v MGN Limited [2021] EWHC 76 (Ch). The claim involved an allegation of infringement of privacy rights by mobile phone voicemail interception. However, it has important implications regarding Part 36 for many practitioners.

Why it’s important

The judgment is important because the Defendant took a clever and inventive approach to accepting the Claimant’s Part 36 offer. They did so to try and limit their liability to pay the Claimant’s costs.

It’s important to be aware that defendants in other types of claim might now attempt to employ similar tactics.

The background

In Pallett, the Claimant made a Part 36 offer of £99,500 on 20 October 2020. This offer had a relevant period of 21 days. If the Defendant had accepted the offer within the relevant period it would have been liable for the Claimant’s costs up to the date of acceptance (Rule 36.13).

It appears that, with these consequences in mind, the Defendant accepted the offer on the 22nd day; just after the relevant period had expired. As Mann J stated at [8] “In this case the offer was accepted outside the 21 days, on the 22nd day. It appears that that was deliberate.

What the CPR says about this

When a Part 36 offer is accepted after the relevant period has expired, the court will determine liability for costs unless the parties reach agreement (Rule 36.13(4)(b)).

The presumption, when a claimant’s offer is accepted late by a defendant, is that the claimant will be awarded their costs up to the date on which the offer was accepted (Rule 36.13(5)).

The court is required to apply this presumption “unless it considers it unjust to do so”, in which case it can make a different costs order (Rule 36.13(5)). It is this provision which allowed the Defendant in Pallett to attempt to limit its liability for the Claimant’s costs.

Mr Justice Mann’s judgment

Mann J agreed that, by accepting the Claimant’s offer when it did, the Defendant could invoke these rules. However, Mann J stated that the application of the rules in this way may seem “odd”. This is because, he explained, the Claimant had made an offer which she has pitched as being acceptable provided that her costs are also paid and “The one thing that [the Claimant] would not expect is that the [Defendant] can wait until the relevant period (usually 21 days in practice) has passed, accept the offer (and thus bind the [Claimant]) and then seek to avoid the costs by asking the court to determine them. The [Claimant] will usually not think that that is an appealing option to have forced on him or her…” but that is the effect of the rule (quote from [17]).

So, by waiting until the relevant period of the Claimant’s Part 36 offer had expired before confirming acceptance, the Defendant could ask the court to order that the Claimant should not be paid her costs from 26 March 2019, as it felt that she had not properly engaged in the settlement process. (An allegation that was denied by the Claimant.) As Mann J stated at [18] “I therefore consider that the defendant was entitled to do what it did, that is to say to accept the Part 36 offer and say what it said about the costs.

Incidentally, the Defendant was unsuccessful in arguing that the Claimant should not be paid her costs from 26 March 2019. The court rejected its argument that the Claimant had not properly engaged in the settlement process.

Other authority on this issue

Mann J recognised that there is some Court of Appeal authority for the above approach; he cited Dutton and Others v Minards and Others [2015] EWCA Civ 984. In Dutton, the Defendant also attempted to limit its liability for the Claimant’s costs by accepting the Claimant’s Part 36 offer outside its relevant period. As Lewison LJ stated at [11] “The Defendants did not accept… [the Claimant’s] offer within the 21-day period. Quite deliberately, they sent a fax accepting the offer one minute after the period of 21 days had expired.

About the author

This case law update was prepared by Jonathan Gray, a solicitor on our medical negligence and dental negligence team. You can read the full judgment in Pallett v MGN Limited [2021] EWHC 76 (Ch) on BAILII.

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