AB v CD & Ors

The position on costs in this case is complicated by the fact that each side has made an offer pursuant to CPR Part 36 (“a Part 36 offer”) which it says that it either has already beaten, or may beat in the future, thereby leading to the favourable costs consequences set out in the relevant part of CPR rule 36.14, while arguing that the other side’s offer is ineffective for Part 36 purposes and is at best just one among a number of relevant factors for the court to take into account in the exercise of the general discretion on costs conferred upon it by CPR rule 44.3. It soon became apparent in the course of argument that these contentions involved some potentially important and far-reaching questions, on which there is no authority directly in point. I therefore said that I would take time to consider my ruling on the Part 36 issues, and after the argument on them had concluded it was agreed that further consideration of all other outstanding matters should also be deferred until I had given this judgment.

In view of the fact that this is a split trial, and I have determined only the issues relating to liability, it was agreed that appropriate practical steps must be taken to ensure that the existence and terms of the offers are kept concealed from any future trial judge until the quantum issues have been decided. Similar steps will also be needed if there is an appeal to the Court of Appeal on liability issues. The public version of this judgment has thus been anonymised by agreement.

CPR Part 36 in its present form came into effect on 6 April 2007. In its original form Part 36 drew a distinction between Part 36 payments into court and Part 36 offers to settle. As the Court of Appeal explained in Carver v BAA Plc [2008] EWCA Civ 412, [2009] 1 WLR 113, at [2] an offer to settle a money claim would not have the consequences set out in the Part unless it was made by way of a Part 36 payment, and the costs consequences then set out in rule 36.20 used different language depending on whether the claimant failed to better a Part 36 payment or whether he failed to obtain a judgment which was more advantageous than a defendant’s Part 36 offer. Under the rules in their modern form, payment into court no longer has any role to play in Part 36 and the concept of failing to better a Part 36 payment has disappeared. Instead, the crucial criterion in what is now rule 36.14 is whether a claimant fails to obtain a judgment which is “more advantageous than a defendant’s Part 36 offer”, or whether judgment against the defendant is “at least as advantageous to the claimant” as the proposals contained in a claimant’s Part 36 offer. In the present case it is the modern version of Part 36 with which I am concerned, because the relevant Part 36 offers were made in June and July 2010. For convenience, I will cite the provisions of Part 36 without the further changes to them, immaterial for present purposes, which have been made by the Civil Procedure (Amendment) Rules 2010 (SI 2010/621) consequential upon the introduction of the Pre-Action Protocol for Low Value Personal Injury Claims in Road Traffic Accidents.

The most important provisions of Part 36 for the purposes of the present case are as follows:

The provisions of CPR rule 44.3 on the court’s discretion as to costs, and the circumstances to be taken into account when exercising that discretion, are very familiar, and I will confine myself to citing the following extracts from it:

In the recent case of Gibbon v Manchester City Council [2010] EWCA Civ 726, [2010] 1 WLR 2081, the Court of Appeal has stressed that Part 36 contains a carefully structured and self-contained code of rules, and that it is “to be read and understood according to its terms without importing other rules derived from the general law, save where that was clearly intended”. That quotation comes at the end of some valuable general observations in the leading judgment which was given by Moore-Bick LJ. The other two members of the Court, Sir Anthony May P and Carnwath LJ, agreed with the judgment of Moore-Bick LJ, so the general observations which I will now cite clearly carry the authority of the Court and are binding upon me:

On 14 June 2010 the defendants’ solicitors wrote to the claimant’s solicitors in the following terms:

On 5 July 2010 the claimant’s solicitors responded with their own Part 36 offer which was expressed to be made in respect of the whole of the claim and the counterclaim. The terms of the claimant’s Part 36 offer were as follows:

The letter added that, in making this offer, the claimant had addressed certain aspects of the defendants’ offer of 14 June, and made the following comments:

On 29 July the defendants’ solicitors replied:

On 11 August 2010 the claimant’s solicitors replied in a further letter headed “without prejudice save as to costs”. The letter maintained that the claimant had made an offer to settle the case in its entirety on terms that were perfectly clear, and criticised the defendants’ reliance on Part 36 as “simplistic and misguided”. The letter continued:

It only remains to record that neither side’s Part 36 offer was accepted, and the defendants declined to provide any of the information requested in the letters of 5 July and 11 August.

Where there is a split trial (which I understand to be the usual practice in intellectual property cases where infringement is alleged) the question arises whether disclosure of (a) the existence, and (b) the terms, of any Part 36 offer should be made to the court after it has ruled on liability in favour of the claimant, with the consequence that a further trial on quantum will take place (unless, of course, the parties are able to settle the issue of quantum in the meantime, which I believe to be in practice the most usual outcome).

A literal reading of CPR rule 36.13(2) would suggest that even the existence of a Part 36 offer must not be communicated to the trial judge until the second stage of the case has been decided, subject only to the three exceptions contained in paragraph (3), of which the only material one for present purposes is “where the offeror and the offeree agree in writing that it should not apply”. That this is indeed the correct construction of the rule appears to be confirmed by contrasting it with the previous version of the rule, which dealt expressly with the case of a split trial and permitted disclosure of the fact (but not the terms) of a Part 36 offer where the issue of liability had been determined on a split trial and where the existence of the offer might be relevant to the costs of that issue. So far as material, the old rule 36.19 read as follows:

In HSS Group Plc v BMB Limited [2005] EWCA Civ 626, [2005] 1 WLR 3158, the Court of Appeal considered the meaning of rule 36.19 and its relationship with rule 44.3(4)(c). The leading judgment was given by Waller LJ, with whom Mance LJ and Sir William Aldous agreed. In paragraph [35] Waller LJ concluded as follows:

It is also relevant to note that the prohibition on disclosure in rule 36.19(2) was directory, not compulsory, with the result that upon breach the court had a discretion whether to continue to hear the case: see Garratt v Saxby [2004] EWCA Civ 341, [2004] 1 WLR 2152, at paragraphs [15] to [20]. I have no doubt that the same principles would apply to a breach of the prohibition now contained in rule 36.13(2).

It is easy to understand why the old rule 36.19(2) and (3) had to be recast when the 2007 amendments to Part 36 were introduced, because those paragraphs applied only to Part 36 payments which were abolished. Thereafter the single concept of a Part 36 offer included monetary as well as non-monetary offers to settle. However, it is less easy to understand why the express provision relating to split trials was removed, and no explanation is offered by the editors of the White Book in the notes to the 2010 edition at paragraph 36.13.1 (volume I, page 1047). The notes merely say this:

It seems to me that there is a real problem here. If the existence of a Part 36 offer cannot be disclosed, except where the parties agree, until the conclusion of the second stage of a split trial, such agreement is unlikely to be forthcoming in any case where the disclosure might prejudice the position on costs of either the offeror or the offeree at the conclusion of the liability stage. It would seem to follow that in nearly all split trial cases where a Part 36 offer has been made all questions of costs would have to be reserved to the conclusion of the second stage, because it will be in the interests of at least one party to refuse consent to its disclosure at the liability stage. But it will often be desirable in principle, and in the wider interests of justice, for the costs of the liability hearing to be dealt with at its conclusion. Very substantial costs may well have been incurred, it will probably be clear that one party has succeeded, and the general philosophy of the CPR is to encourage the determination and payment of costs on a “pay as you go” basis. Furthermore, the Part 36 offer may relate only to the costs of the liability stage; and even if it does not, it is relatively uncommon for trials on quantum to proceed to a hearing. Why, then, should the court be compelled to deal with the costs of the liability hearing in ignorance of the fact that a Part 36 offer has been made, and in ignorance of the terms of the offer, unless the relevant parties all agree? Further, if the court is asked to reserve the costs, it will almost inevitably conclude that the reason for the request is the existence of a relevant Part 36 offer, thereby undermining the apparent policy of rule 36.13(2).

In the present case I fortunately do not have to resolve these questions, because each side wishes me to look at its own Part 36 offer at this stage. They have therefore agreed that I should do so, and that if the case progresses to a trial on quantum the trial judge should be someone other than me.

Since it is unnecessary for me to resolve the problems to which I have drawn attention, and since I have not heard full argument on them, I think it would be unwise for me to say much more about them. I will merely hazard the suggestion (perhaps foreshadowed in the notes in the White Book) that a possible solution might be to focus on the words “until the case has been decided” in rule 36.13(2), which are much less specific than the wording of the old rule 36.19(2) (“until all questions of liability and the amount of money to be awarded have been decided”). It may be that in appropriate circumstances the new wording should be construed as referring to the conclusion of the first part of a split trial. But even then the difficulty would remain that the court may only be told about the existence of the Part 36 offer, so the question of costs would in practice still have to be reserved for the reasons given by the Court of Appeal in the HSS Group case.

The claimant’s Part 36 offer, or purported Part 36 offer, is contained in the letter of 5 July 2010. Subject to one point, I consider that it complies with the requirements of form and content in rule 36.2. However, there is an issue whether it is a genuine offer at all, or merely a lightly disguised request for total capitulation. If it is a proper Part 36 offer, the question then arises whether the judgment which the claimant has now obtained against the defendants is “at least as advantageous” to the claimant as the proposals contained in the letter, within the meaning of rule 36.14(1)(b).

The concept of an “offer to settle” is nowhere defined in Part 36. I think it clear, however, that a request to a defendant to submit to judgment for the entirety of the relief sought by the claimant cannot be an “offer to settle” within the meaning of Part 36. If it were otherwise, any claimant could obtain the favourable consequences of a successful Part 36 offer, including the award of indemnity costs, by the simple expedient of making an “offer” which required total capitulation by the defendant. In my judgment the offer must contain some genuine element of concession on the part of the claimant, to which a significant value can be attached in the context of the litigation. The basic policy of Part 36 is to encourage the sensible settlement of claims before trial, or even before the issue of proceedings (see rule 36.3(2)(a) which provides that a Part 36 offer may be made at any time, including before the commencement of proceedings). The concept of a settlement must, by its very nature, involve an element of give and take. A so-called “settlement” which was all take and no give would in my view be a contradiction in terms.

In the usual way, the concession offered by the claimant will be something that it is in the claimant’s power to give up at the time when the offer is made. However, I do not think that this is an invariable requirement. I see no reason in principle why the concession offered may not also relate to an advantage or form of relief which the claimant would only be able to obtain at or after trial, provided that obtaining it would be of significant value to the claimant, and the agreement to forego the opportunity to obtain it is not merely an empty gesture. Furthermore, it is necessary to have regard to the principles stated by Moore-Bick LJ in Gibbon v Manchester City Council at paragraph [40], where he said that “a party faced with a Part 36 offer ought to be entitled to evaluate it by reference to a rational assessment of his own case (including the risk of incurring unrecoverable costs if he presses on). He should not have to make a significant allowance for the court’s view of factors that are inherently difficult to value …” Those principles were stated in the context of explaining, and confining the scope of, the previous decision of the Court of Appeal in Carver v BAA Plc, but in my judgment they are of general application.

The claimant says that it has matched or improved upon its Part 36 offer in at least the following respects:

In answer to these submissions, the defendants submit that in substance and reality the claimant’s so-called offer was for the defendants to give up and submit to judgment for an unquantified sum. All issues of quantum were left to be determined by an inquiry or account of profits, at the claimant’s election. The undertakings required were for all practical purposes equivalent to the injunctions obtained at trial. The defendants would have to give up their entire counterclaim, and would also have to pay all of the claimant’s costs of the proceedings, to be the subject of detailed assessment if not agreed. Furthermore, there is no substance in the other ways in which the claimant says it has improved on its offer. The order for delivery up adds nothing of value to the undertakings sought, given the re-branding exercise which has taken place. The publication order achieves nothing that the claimant could not have achieved for itself by publicising a consent order incorporating the undertakings, and weight cannot be attached to publication of the judgment because the policy of Part 36 is to encourage settlement of cases before trial, and therefore before any judgment has been given. The confidentiality provisions in the offer are illusory, in view of the exceptions which permit publication of the order containing the undertakings and envisage a public trial of the quantum issues, added to the fact that the claimant had already given extensive publicity to the re-branding of the defendants’ business. Finally, the certificate of contested validity is not something that the court can take into account, because such a certificate can only be given by the court after trial, and the policy of Part 36 is (again) to foster the resolution of disputes before trial.

Both sides also referred me, for guidance by way of analogy rather than directly in point, to observations made by the Court of Appeal in Roache v News Group Newspapers Limited [1998] E.M.L.R. 161. Although not reported until 1998, the case was decided in 1992. The plaintiff (an actor who had played the part of Ken Barlow in Coronation Street for 30 years) sued the defendant publishers of the Sun for libel. Three weeks before trial the defendants paid £25,000 into court, which when added to an earlier payment made a total of £50,000. At trial the jury awarded the plaintiff precisely that sum. The trial judge also granted an injunction against repetition of the libel, although there was no evidence of any real likelihood of repetition. The defendants asked for their costs from the date of the payment in, on the basis that the plaintiff had failed to beat it. However, the judge refused the application and awarded the plaintiff his costs of the action, on the ground that he had to pursue the matter to judgment in order to obtain an injunction.

The Court of Appeal (Sir Thomas Bingham MR, Stuart-Smith LJ and Simon Brown LJ) unanimously reversed the judge’s decision on costs, holding that the defendants had been the substantial winners at trial, and that the injunction added nothing of real value from the plaintiff’s point of view because the defendants had no intention to republish the libel, and an undertaking would have been his for the asking had he accepted the money in court.

Sir Thomas Bingham MR began his discussion of the matter at 166 by referring to the general principle that costs follow the event, and said:

The Master of the Rolls distinguished the split trial procedure that was familiar then, as it is now, in intellectual property cases, and referred to the decision of Falconer J in Colgate Palmolive Limited v Markwell Finance Limited [1990] R.P.C. 197 which had strongly influenced the trial judge in favour of granting an injunction:

Stuart-Smith LJ agreed, and at 174 cited the following explanation of the procedure in the Chancery Division given by Falconer J in Colgate Palmolive:

Simon Brown LJ also agreed, and summarised his own approach in a number of propositions at 178-9, from which I cite the following extracts:

In evaluating these submissions, I begin with the point that the claimant’s offer cannot in my view be regarded as a valid Part 36 offer in relation to the quantum stage of the proceedings. The offer does not state any specific sum that the claimant would be prepared to accept in satisfaction of its monetary claims, and paragraph (2) merely replicates the standard order that would anyway be made for the second stage of a split trial in any intellectual property case once liability had been established. There is also a potential ambiguity about the scope of paragraph (2). It is not stated expressly whether the inquiry or account is to be confined to damages or profits which flow from infringement of the trade mark X by the two impugned signs specified in paragraph (1), or whether it was meant to extend to damages or profits flowing from the infringement of all three of the claimant’s registered trade marks by all six of the impugned signs. In the context of the offer as a whole, a reasonable offeree would in my judgment interpret paragraph (2) in the former sense, and counsel for the claimant submitted that this is indeed the correct construction. So on paper at least paragraph (2) does appear to offer a concession about the scope of the second stage of the trial. But that still does not turn it into a valid Part 36 offer about the financial outcome of the second stage: it just reflects the concession apparently offered in paragraph (1) about the outcome of the first (liability) stage, and says that the scope of the second stage will then be limited accordingly.

Thus the critical question, in my judgment, is whether the offer was a valid Part 36 offer in relation to the liability stage of the trial which has now concluded. If it was, then it can hardly be doubted that the judgment obtained against the defendants is “at least as advantageous” to the claimant as the offer. It is important to note in this connection that the judgment needs only to match the offer: it does not have to improve on it in any significant respect. Plainly the combined effect of the points set out in paragraph [24] above must be such that this test is satisfied.

But did the offer make any real concession of significant value, bearing in mind that the policy of Part 36 is to encourage the settlement of claims before trial and before any judgment has been given? In my view it did not, for the following reasons.

I take first the limitation on the scope of paragraphs (1) and (2). If the defendants were to give an undertaking to the court (and therefore equivalent in its effect to an injunction) not to infringe the trade mark X, they would then in practice be equally unable to infringe the trade mark Y without also breaching the undertaking. There has been no suggestion of which I am aware at any stage of the proceedings that a distinction can sensibly be drawn between the two Community marks in terms of validity, infringement or consequential relief. For all practical purposes, they stand or fall together. As to trade mark Z, it is true that its validity raises a number of distinct questions, but I again find it hard to see how the defendants could in practice seek to use it in the context of the defendants’ type of business without also infringing, or running the risk of infringing, the trade mark X. Nor is there any evidence that the defendants would wish to do any such thing, if they could not at the same time use the other impugned signs.

The restriction of the undertaking to two of the impugned signs is in my view equally devoid of practical significance. No substantial distinctions between the signs have been drawn in the pleadings, the evidence or legal argument. Everyone has in practice proceeded on the footing that they too stand or fall together. Thus the undertakings sought in paragraph (1) would in practice prevent use of any of the signs in the context of this type of business.

All in all, I cannot avoid the impression that the limitations on the scope of paragraphs (1) and (2) were deliberately designed to lay the foundations for an argument that success at trial on liability would inevitably mean that the claimant had matched or beaten its Part 36 offer, and that in framing the offer in this way the claimant was not in fact intending to give up anything of real value. I am reinforced in this conclusion by the fact that counsel for the claimant submitted, in relation to the scope of paragraph (2), that it would make no practical difference whether an inquiry as to damages or an account of profits related only to the paragraph (1) undertakings, or whether it extended to infringement of both the Community marks by all of the impugned signs. I am inclined to agree, but to my mind the point does not assist the claimant because it demonstrates the illusory nature of the limitation.

I now turn to the other factors relied upon by the claimant. The order for delivery up of infringing items is in my view of negligible significance, given the re-branding exercise which has taken place. I would not be surprised if there were no material at all to be delivered up, and I find it difficult to imagine what it would consist of. Such allegations of continuing infringement as there are relate to the continued use of some of the impugned signs as Google adwords, or other forms of electronic infringement. There is no serious suggestion, so far as I am aware, that the defendants are currently using any infringing physical items in the course of their trade. With regard to publicity, it is true that the publication order requires the defendants to take certain steps at their own expense, but, that apart, the publication order achieves nothing of substance that the claimant could not have done for itself had its offer been accepted, except of course for publication of the judgment itself. In particular, the claimant would have been free to publicise the undertakings given by the defendants; it had already given extensive publicity to the re-branding of the defendants’ business; and any subsequent trial of quantum issues would be heard in public in the usual way. I accept the submission for the defendants that obtaining a reasoned judgment from the court following a trial cannot in itself be regarded as an improvement upon a Part 36 offer, because the policy of Part 36 is to promote the settlement of cases before trial. Further, in the light of the scope for publicity retained by the claimant, the confidentiality offered to the defendants was in my judgment also of no real value. Finally, the opportunity to obtain a certificate of contested validity in relation to the UK mark seems to me to take matters no further, because the advantage that it gives to the claimant is not an advantage in relation to the defendants (who would anyway be bound by the judgment, or in terms of the offer by the discontinuance of their counterclaim), but in relation to future proceedings by third parties. For the purposes of Part 36, it must in my view be regarded as a purely incidental advantage of proceeding to trial, and forgoing it was not a genuine concession offered by the claimant to the defendants.

For all these reasons I conclude that the claimant’s offer was not an offer of settlement within the meaning of Part 36. It follows that the claimant is not entitled to the favourable treatment afforded by rule 36.14, although the offer remains a relevant consideration for the court to take into account in the exercise of its general discretion on costs.

The defendants’ amended Part 36 offer is contained in their solicitors’ letter of 29 July 2010. It was explicitly an offer to settle the whole of the claim and the counterclaim (see the first paragraph of their earlier letter of 14 June), and it therefore offered not only undertakings relating to the infringement of all three of the claimant’s registered trade marks and the use of two of the impugned signs, but also a monetary payment of £x in settlement of the claimant’s claim for damages or an account of profits.

If this offer was a valid Part 36 offer, I can see no alternative to reserving the costs which have been incurred since the expiry of the 21 day period for its acceptance on 19 August 2010, including the costs of the trial on liability, until the conclusion of the trial on quantum. It would be premature to deal with the costs of the trial on liability in isolation, even though in one respect it is already clear that the claimant has failed to obtain a judgment more advantageous than the defendants’ offer. I have dismissed the claimant’s claim for infringement of the UK mark, whereas the non-infringement undertaking included the UK mark. The answer to this point, however, is that the Part 36 offer was an offer to settle the whole of the proceedings and, as such, was indivisible. Until the conclusion of the quantum stage it will be impossible to say with certainty where the ultimate balance of advantage lies in relation to the terms of the offer viewed as a whole. So, for example, if the claimant were to recover less than £x, it would then be clear beyond argument that the claimant had failed to better the offer. If, on the other hand, the claimant were to recover substantially more than £x, it would then be necessary to assess where the overall balance of advantage lay, bearing in mind that the claimant had failed to establish infringement of the UK mark but had nevertheless obtained more than the £x on offer.

I now turn to the prior question whether the defendants’ offer was indeed a valid Part 36 offer. The claimant submits that it was not, because of the defendants’ failure to supply the necessary financial data to enable the claimant to make an informed assessment of the value of the £x monetary compensation on offer. Counsel for the claimant submits that, if the policy of Part 36 is not to be defeated, a defendant which wishes to make a monetary offer to a claimant in the present type of case must supply the claimant with the same sort of financial information about the allegedly infringing business as the court would order by way of Island v Tring disclosure so as to enable the claimant to elect between an inquiry as to damages and an account of profits. It is only with the benefit of such information that the claimant can make an informed decision whether or not to accept the offer. In the present case, the claimant through its solicitors made reasonable requests for the necessary information, and said that it would be willing to receive it on a confidential basis and without prejudice save as to costs: see the letters of 5 July and 11 August 2010 quoted above. However, the requests were refused, and no good reason was given for the refusal. In particular, the assertion in the defendants’ solicitors’ letter of 29 July 2010 that “[The claimant] is certainly able to assess the defendants’ offer” misses the point and is unsupported by any evidence.

In support of these submissions counsel for the claimant relies on the duty of the parties to help the court to further the overriding objective, and to co-operate in the conduct of the proceedings: see CPR 1.3 and 1.4(2)(a). He also relies on the provisions of Part 36 itself, including in particular rule 36.8 (dealing with clarification of a Part 36 offer) and rule 36.14(4)(d) (in considering whether it is unjust to grant a successful Part 36 offeror or offeree the favourable orders referred to in paragraphs (2) or (3), the court will take into account all the circumstances of the case, including “(d) the conduct of the parties with regard to the giving or refusing to give information for the purposes of enabling the offer to be made or evaluated”).

In addition, counsel for the claimant cited the decision of the Court of Appeal in a personal injuries case, Ford v G. K. R. Construction Ltd [1999] EWCA Civ 3030, [2000] 1 WLR 1397. This was a pre-CPR case where liability was admitted for injury sustained by the claimant in a road traffic accident, and after a hearing to assess damages she failed by a substantial margin to beat the payment into court made by the defendants. The trial judge nevertheless ordered the defendants to pay the claimant’s costs of the action. The appeal to the Court of Appeal was concerned only with the order for costs. For present purposes nothing turns on the detailed facts, and the interest of the case lies in certain observations made by Judge LJ (as he then was), who gave the leading judgment, and by Lord Woolf MR.

Judge LJ said this at 1400H:

Lord Woolf MR agreed, and added this at 1403 C-G:

Relying on these principles, counsel for the claimant submits that the defendants’ offer as a whole cannot be regarded as a valid Part 36 offer, or alternatively that the monetary offer of £x should be disregarded. He accepts that no existing authority has yet gone this far, but points out that the principles of civil procedure are apt to develop in an incremental fashion, and some advances which are now taken for granted (such as Island v Tring disclosure, or orders for the interim payment of costs) were once unprecedented.

These submissions were persuasively advanced by counsel for the claimant, but I am unable to accept them. I readily agree that it is good practice, and in accordance with the spirit of the CPR in general and Part 36 in particular, for a party who makes a Part 36 offer to provide the offeree with enough information to make an informed decision whether or not to accept it. Nothing that I say in this judgment is intended to detract in any way from that salutary principle. But the provisions of Part 36 itself seem to me to show that the result of a failure to comply with this obligation is not to invalidate the offer, provided of course that the other requirements of a valid Part 36 offer are satisfied. There would be no need for the clarification provisions in rule 36.8 if the result of a failure to provide enough information were automatically to disqualify the offer from being a Part 36 offer at all; and the provisions of rule 36.14(4)(d) show that a refusal to give information for the purposes of enabling the offer to be evaluated comes into play at the later stage of deciding whether or not it would be unjust to grant the successful party the favourable consequential orders which normally follow from equalling or beating the offer (as the case may be).

Furthermore, it would in my view be productive of much uncertainty if the validity, as opposed to the costs and interest consequences, of a Part 36 offer were to depend on something as difficult to ascertain as the adequacy of the information supplied by the offeror to the offeree. In many cases it may well be reasonable for the offeror to supply no, or only limited, information when the offer is made, and to leave it to the offeree to come back with a request for further information. Any such request should then be dealt with in a spirit of co-operation, and (if it is not) the offeree is free to apply to the court for an order under rule 36.8. Alternatively, the offeree can decide whether or not to accept the offer as it stands, and if he decides to refuse it, but later fails to match or improve on it, he can argue that the usual adverse consequences should not follow, or should at least be mitigated, in reliance on rule 36.14(4)(d). This is in my judgment a coherent and workable scheme, which respects the “demands of clarity and certainty in the operation of Part 36” to which Moore-Bick LJ referred in Gibbon v Manchester City Council at [18].

To return to the present case, it is in my judgment far from self-evident that the claimant lacked sufficient information to make an informed decision whether or not to accept the defendants’ amended offer. The claimant and the defendants were in the same line of business, and the claimant may have had enough information from its own experience and business models to make an educated decision, particularly as the alleged infringing use had lasted for barely seven months and had ceased (or at least substantially ceased) with the re-branding of the defendants’ business. The claimant had the option of applying to the court for an order under rule 36.8, but for whatever reason chose not to do so. The truth may be that the claimant never had any serious intention of examining the merits of the offer, given its apparent belief (referred to in the its solicitors’ letter of 11 August 2010) that the defendants “made a profit of the order of £y million from the business operating under the [defendants’ business name] sign solely in the eight month period up to August 2009”. I am of course in no position to make findings of fact on these points at this stage, but the mere fact that such questions may arise is enough to show how dangerous it would be to rule that the defendants’ failure to provide information automatically invalidated their Part 36 offer.

For these reasons I conclude that the defendants’ amended offer was a valid Part 36 offer, with the result that the costs since 20 August 2010 cannot be dealt with at this stage and must be reserved until the conclusion of the trial on quantum.

There remains the question whether the costs up to 19 August 2010 should also be reserved. The claimant submits that they should not, and that I should make an immediate award of costs in its favour on the basis that it has (thus far) been the successful party overall. Furthermore, the counterclaim challenging the validity of the three registered trade marks has been dismissed, and subject to any appeal that dismissal has finally disposed of the counterclaim: it is only in relation to the claim that the question of quantum remains outstanding. The claimant also asks the court to award its costs on the indemnity basis, relying on various allegations of unreasonable behaviour on the part of the defendants and my criticisms of certain witness evidence in the judgment.

The defendants disagree, and submit that all of the costs of the action and counterclaim should now be reserved. They argue that only at the conclusion of the trial on quantum will the court be in a position to review the conduct of the parties from the beginning, and to form a view on the question whether the claimant has in substance beaten the defendants’ Part 36 offer. Further, the outcome of the trial on quantum may be a relevant factor for the court to take into account when considering whether the claimant should recover any of its costs at an earlier stage on the indemnity basis. There is a danger that, if the court were now to award the claimant all or part of its costs up to 19 August 2010 on the indemnity basis, the award might subsequently appear to have been too generous in the context of the ultimate outcome of the litigation. Conversely, I would add, if it subsequently transpires that the claimant has beaten the defendants’ Part 36 offer by a substantial margin, that might be an additional factor which would weigh with the court in deciding to make an award of indemnity costs in the claimant’s favour.

In my judgment the defendants are correct, and since it is anyway necessary to reserve the costs incurred since 20 August 2010 it is on balance preferable also to reserve the costs incurred before that date, including the costs of the counterclaim, so that the court can review the whole question of costs with a free hand at the conclusion of the litigation.