Part 36 of the civil procedure rules was designed to encourage settlement by introducing costs and interest sanctions when unsuccessful parties fail to beat offers made by their opponents. The sanctions apply in relevant cases unless the court considers it is unjust for them to do so.
In Hemming & Others v Westminster City Council  the court considered the question of what should happen when one of the parties had refused to accept a Part 36 offer (which was later beaten by its opponent) because the case was one of principle and it did not wish to set a precedent for other cases. This is a question that can often arise for large organisations faced with a number of similar claims from different individuals.
The claimants were the licensees of sex establishments. They brought judicial review proceedings against the defendant local authority in relation to the licence fee charged by the Council in 2011/12 and sought restitution of a proportion of the licence fees paid in the previous five years. The claimants were successful and the matter returned before the judge to address the question of costs.
The claimants had made a Part 36 settlement offer and asked the judge to follow Part 36 in making his costs order claiming interest on their claim and costs for the relevant period and for those costs to be assessed on an indemnity basis. The Council argued that the judge should exercise his discretion not to impose the Part 36 sanctions on the basis that it was unjust to do so. It argued that acceptance of the Part 36 offer would require them to accept that the Regulations in dispute in the case prohibited them from reflecting certain costs of investigation and prosecution in the licence fees that the Council charged. This, the Council argued, was too important a principle for the Council to concede when the principle could apply to any licensing system anywhere in the country where unlicensed traders were being prosecuted.
The judge refused to accept the Council’s argument. He did not agree that the acceptance of the offer required the Council to accept any principle. All it needed to do was to agree a fee for the relevant year in dispute. The acceptance of the offer could have been treated as the Council’s willingness to compromise a particular claim on this occasion, without prejudice to its stance on other cases. The judge therefore imposed the costs sanctions set out in Part 36.
The case confirms that refusing to accept an offer because it will set a precedent for other cases will not prevent the Part 36 sanctions from applying. This is a position that commercial organisations may often find themselves in and so the judgment provides helpful guidance on the approach to be taken. It also serves as a reminder that the court will be unwilling to relax the costs sanctions in Part 36 unless special circumstances can be shown.
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