The Procter & Gamble Company v Svenska Cellulosa Aktiebolaget SCA & Anor

Further to my judgment in this matter, formally delivered on 13 July 2012, various questions have arisen as to the proper order in relation to costs. I am also invited to give permission to appeal. The purpose of this supplemental judgment is to address those issues; it should be read in conjunction with (and using the definitions in) my main judgment.

As to costs, the principal questions that arise are:

Rule 44.3(2) preserves the general rule or starting point that the unsuccessful party will be ordered to pay the costs of the successful party. That general rule may, however, be departed from in an appropriate case. Further, a party who succeeds only partially may recover only a proportionate part of its costs.

In the present case, both sides accepted the general rule or starting point; but both claimed to be the successful party. Neither sought an issue-based or partial award.

The Claimant submitted that it was clearly the winner. It had faced a potential liability of up to £19 million. Its eventual liability to pay a much lesser sum should not be regarded as failure: if that had been all that was involved, it is not likely that there would have been need or justification for proceedings. It obtained 2 of the 3 declarations sought. It pointed to its offer of more than that in July 2011 (and its rejection) as the litmus test of what the parties truly thought of as the battle-ground between them and the true measure of success. It drew attention to the fact that only the Defendants had any application for permission to appeal, the Claimant being, so it professed, “extremely happy” with the result.

On the other hand, the Defendants invoked the simple, mechanical test of identifying which of the parties is compelled at the end of the day to pay money to the other. They submitted that in a money claim that is the surest guide: and they cited especially A L Barnes Ltd v Time Talk (UK) Ltd [2003] EWCA Civ 402, particularly per Longmore LJ at paragraph 28. As to P&G’s July Offer, they accepted liability for costs after that date, but not before. As to the consideration that it is they, and not the Claimant who are seeking permission for an appeal, they submitted that that should not be determinative, given that they should be entitled to achieve even more if they succeed at a subsequent stage.

In the context of a money claim in a writ action that simple approach obviously has much to commend it, subject of course to the overriding discretion to disapply it in whole or in part. Most commercial disputes are indeed, in the end, about money.

But in the context of a claim for negative and other declaratory relief, and seeking in substance the determination of the Court on points of contractual construction which, both parties wishing to abide by the contractual terms, it is in effect agreed require determination, the approach seems to me to run the risk of being somewhat too simplistic. It may not always be either fair or realistic to adopt such a mechanical approach to the determination of success and failure. The fact that at the end of the day the claims are about money, and one of the parties is required to pay the other, does not (as it seems to me) necessarily signify that the paying party has lost: the payee might, on its perfectly possible construction of the contract, have held out for payment of a far greater sum, and the proceedings might have been unavoidable at the outset, and persisted in thereafter, unless the payer accepted that construction. If the payer prevails in demonstrating the payee’s construction to be incorrect, and establishes a construction which the payee always contested and which results in a far lesser sum being payable, it may not be realistic to depict the payee as the winner.

A more nuanced approach to the process of identifying the successful party is reflected in a passage from the judgment of Sir Thomas Bingham MR (as he then was) in Roache v Newsgroup Newspapers Ltd [1998] EMLR 161, as quoted by Tomlinson LJ in Medway Primary Care Trust, Dr Ashiq Hussain v Sebastian Marcus [2011] EWCA Civ 750 (at paragraph 46):

“The judge must look closely at the facts of the particular case before him and ask: who, as a matter of substance and reality, has won? Has the plaintiff won anything of value which he could not have won without fighting the action through to a finish? Has the defendant substantially denied the plaintiff the prize which the plaintiff fought the action to win?”

As a matter of substance and reality, it seems to me that in this case P&G is, overall, the successful party. In the particular circumstances I consider that to be so even though it is they who must write a cheque and notwithstanding that it has not succeeded on every point.

In my view, the question of liability for the Enhancements was always a subsidiary issue or side-show, and the main play concerned liability for the whole of the ERBs. It was the latter that impelled and justified the proceedings: the sums involved in relation to the Enhancements alone were never such as to warrant proceedings on any sensible comparison of cost and benefit; and I consider that if liability for Enhancements had been conceded by P&G the overwhelming likelihood is that SCA would nevertheless have proceeded to seek to establish liability for the ERBs.

My assessment in that context is supported by the fact that SCA did not accept P&G’s July Offer, which was in excess of the capitalised value of liability for the Enhancements. That was never enough for SCA: the prize SCA sought was payment in full on the basis that all liabilities transferred, and that was really what the case was about.

It is also, to my mind, supported by taking as the test of what was truly in issue the declarations and orders sought by SCA in its counterclaim. Put shortly, SCA sought declarations to the effect that the FPAA (as defined) was to be calculated by reference to “the whole of the ERBs” and orders for payment of the FPAA so calculated accordingly. The overall substance of the dispute was encapsulated in the Counterclaim. The Counterclaim failed entirely.

Further, to quote Longmore LJ in the Time Talk case it “is not irrelevant” that it is, in these circumstances, SCA that is seeking permission to appeal. It self-evidently wishes to appeal because it has not secured the prize it wanted, and is not sufficiently satisfied with what it has achieved to allow the matter to rest there. Again, this seems to me to support my assessment as to what truly has been and remains the main play or battle between the parties, and which of them should be regarded (as it regarded itself as being) successful

The second issue is whether there are grounds for departing from what would otherwise be the consequence of concluding that P&G has in the round been the successful party, which is that ordinarily it should therefore be entitled to its costs.

In this context (and leaving for later the effect of any Part 36 offer) CPR 44.3(4) mandates the court to have regard to all the circumstances, including –

CPR 44.3(5) provides that “the conduct of the parties includes –

Then CPR 44.3(6) provides for the orders that the court may make; and these include “an order that a party must pay –

The authorities on these considerations are many and various. The rules are designed to assist; but as Coulson J remarked in Brit Inns Limited (in liquidation) and others v BDW Trading Limited [2012] EWHC 2489 (TCC) “for the first instance judge at least, steering a path through these various provisions is something of a minefield.” Every case is different and calls for an exercise of discretion. Nevertheless, the Court of Appeal has emphasised the importance it ascribes to application of the principles underpinning these parts of the CPR, and the danger of attempts to arrive at a result which might appear just on the particular facts but is not sufficiently referable to principle.

Eight principles were identified by Jackson J (as he then was) in Multiplex Constructions (UK) Ltd v Cleveland Bridge UK Ltd and Cleveland Bridge Dorman Long Engineering Ltd [2008] EWHC 2280 (TCC), as follows:

Applying these principles to the present case I consider that the only factors that might make some departure from the starting point appropriate (still leaving aside considerations which arise if CPR Part 36 applies) are:

As to (1), the arguments relating to each issue were inter-related or part of a continuum, and are difficult to segregate with any accuracy. To a substantial extent, the division into issues was simply to facilitate orderly analysis and the adjudication of the overall question: none was otiose. I do not think an issue-based approach would be appropriate. But I do think some allowance might be appropriate to reflect the fact that on the first issue so identified (whether anything passed under TUPE at all), P&G in the end put up little resistance, and substantially changed its case in reply so as in effect to concede that the relevant right did transfer, but not so as to alter the result. With some justification SCA contend that effort and costs would have been saved had P&G not disputed the issue in the first place.

As to (2), and the costs of an argument raised by P&G but which they then abandoned, and a rectification claim which SCA felt obliged to advance to meet it (which was then withdrawn when in light of that it became unnecessary) the history is convoluted. It is set out over the course of 3 pages in P&G’s Skeleton Argument and 2 pages (with a different slant) in SCA’s Skeleton Argument. SCA also point out that Deputy Master Hoffman by order dated 13 September 2011 reserved the costs “of and occasioned by the said amendments to be reserved to the trial judge.”

I consider that even were it possible (where both sides’ amendments were abandoned and thus never sought to be justified) it would be wholly disproportionate for me to adjudicate on the relative merits even if I could do so with any precision (which I cannot). In the circumstances, however, I do propose to reflect the waste of time and diversion of energy in consequence of a train of events instigated by P&G and then abandoned by making some reduction in P&G’s recoverable costs. That was P&G’s alternative position: I adopt it, but consider that a slightly higher percentage reduction is warranted than Mr Nugee suggested.

Taking both (1) and (2) into consideration, I consider that I should disallow 20% of P&G’s costs up to the date of the expiry of P&G’s July Offer.

In conclusion as to this issue, P&G, as the successful party, should, in my judgment, be entitled to 80% but no more of its costs until that date. As to costs thereafter, I turn to the third issue, that of the status and effect of P&G’s July Offer.

What, then, of P&G’s July Offer? P&G contend that this constituted a Part 36 Offer falling squarely within CPR 36.2 and thus attracting the costs consequences set out in CPR 36.14 as and from the last date for acceptance. SCA, on the other hand, contend that the letter was not a Part 36 offer: they submit that it did not comply with the mandatory requirements of CPR Part 36.2(2)(c), which state that a Part 36 offer must “specify a period of not less than 21 days within which the defendant will be liable for the claimant’s costs in accordance with rule 36.10 if the offer is accepted.” It is stipulated in rule 36.1(2) that if not made in accordance with rule 36.2 an offer will not have the consequences specified in rules 36.10, 36.11 and 36.14.

P&G’s July Offer was in material part in the following terms:

“…This Offer is intended to have the consequences set out in Section 1 of Part 36 of the Civil Procedure Rules. In particular, our client will be liable for your clients’ costs up to the date of notice of acceptance (which must be in writing), in accordance with CPR 36.10 if the offer is accepted within 21 days (the “Relevant Period”).

Our client is prepared to offer to pay your clients the sum of £3 million in full and final settlement of all claims made or which could be made arising out of the facts and matters referred to in the Pension Proceedings. Payment would be made within 14 days of acceptance of this offer in writing in accordance with CPR 36.11(6).

For the avoidance of doubt, this sum is inclusive of interest to the end of the Relevant Period.

If there is any part of this offer which you do not understand, you should request clarification of it from us. We ask that you do so within 7 days of service of this letter…

Our client believes that this offer far exceeds the best award your clients can hope to achieve. Were your clients minded to accept, they would obtain a substantial windfall and avoid incurring (and being held responsible for) unnecessary costs in the period up to and including Trial.”

CPR 36.10(1) provides as follows:

CPR 36.3 defines the “offeror” as the party who makes the offer and the party to whom the offer is made as the “offeree.”

I must acknowledge that my initial supposition, when seeking to construe Part 36 as a whole, was that perhaps the word ‘claimant’ in rule 36.10(1) was a mistake and should read “offeree”: and that similarly in rule 36.2(2)(c) the words “offeror” and “offeree’s” should be substituted in place of the words “defendant” and “claimant’s”. I tentatively put this forward in a draft provisional judgment circulated to Counsel and invited additional submissions on the suggestion, which had not been argued before me. Both Counsel provided helpful written submissions, politely but clearly explaining why that supposition was wrong. I am most grateful to them: my supposition is, I see now, plainly wrong (as on reflection it was likely to be, having regard to the care with which CPR 36 has been drafted, and the change in the effect of the rules within it that my alteration would entail).

I accept, first, that in CPR 36 the use of the defined terms “offeror” and “offeree” denotes that the offeror may be either the claimant or the defendant: thus, rules 36.6(1), 36.7, 36.8 and 36.9 all use those terms because all those rules apply to both claimant’s offers and defendant’s offers. Secondly, I accept that the term “claimant” is used precisely and carefully where it appears in CPR 36 to denote just that: it is not to be read as if it were intended to mean “claimant or defendant”, which would be the effect of substituting the term “offeree”. Thirdly, different consequences are provided according to whether the offer is made by a defendant and not accepted by a claimant or vice-versa.

In that regard, CPR 36.14(1)(b) provides for special consequences to follow where a claimant fails to obtain a judgment more advantageous than a defendant’s Part 36 offer (see rule 36.14(1)(a)), or where judgment against the defendant is at least as advantageous to the claimant as the proposals contained in a claimant’s Part 36 offer (see rule 36.14(1)(b)). The consequences differ according to whether rule 36.14(1)(a) or rule 36.14(1)(b) applies. Where a claimant fails to better a defendant’s Part 36 offer, the defendant will (unless it is considered by the court to be unjust) be entitled to costs from the expiry of the relevant period for acceptance, and to interest on those costs. By contrast, where a claimant betters its Part 36 offer these consequences include an entitlement (again, unless it is considered by the court to be unjust) to costs on an indemnity basis and interest on those costs at a rate not exceeding 10% above base rate: see rule 36.14(3).

Thus, CPR 36.10 and 36.14 are carefully crafted particularly to incentivise a claimant to make a Part 36 offer. It seems that the rationale for this is that whereas a claimant in a money claim can ordinarily expect to recover his costs if he succeeds to any material extent, and so needs to be specially incentivised to make an offer, a defendant plainly has every incentive already, being to stop the claimant incurring more of the costs for which if the defendant loses he is likely to be required to pay: and see per Simon Brown LJ in Victor Kermit Kiam II v MGN Limited [2002] EWCA Civ 66 at paragraph 8.

Especially having regard to this careful architecture and its specific objectives, Mr Clifford, on behalf of SCA, urged on me that Part 36 is a highly prescriptive code, intended by Parliament to define exhaustively the only circumstances in which an offer will have the special consequences set out in Rule 36.10, 36.11 and 36.14, and demanding a strict approach to its construction. In support of this literal and unyielding approach he cited a recent decision of the Court of Appeal in F&C Alternative Investments (Holdings) Limited & Ors v Barthelemy & Anor [2012] EWCA Civ 843.

In that case, the parties had made unsuccessful efforts to compromise proceedings which in the event took some 95 days to try. The proceedings related to the complete breakdown in the working relationship between the members of a limited liability partnership. Ultimately, the overall victors were the defendants to the claim. Amongst various settlement attempts, the respondents’ solicitors had written a letter (dated 24 December 2009 and headed “Without Prejudice save as to costs”) offering to settle for what, in the event was significantly less than they achieved at trial. The defendants pressed for indemnity costs and other consequences by analogy to Part 36.10. Their problem was that the offer letter itself expressly stated it was not a Part 36 offer, and further stated why not in these terms:

“Unfortunately, this Offer to settle has to be made outside the terms of Part 36…The fact that formally (although not in substance) your client is in the position of claimant…would have the result, were the offer to be made under part 36, that a rigid application of CPR36.10 would render our clients liable for the costs of the...proceedings in the event that the offer was accepted by your client. That would be a nonsensical result…”

Sales J accepted that the result was nonsensical but compelled by the words of the relevant Rule; so that Part 36 did not in terms apply (and indeed its application had expressly been disclaimed). However, he accepted the submission that there was a “glitch” in the wording of Rule 36.10 in not extending to such a case; he considered the offer sufficiently “mimicked”, with appropriate adjustments, the operation of Part 36; and he made orders for indemnity costs and rates of interest (in one case at the arrestingly high rate of 10% over Base Rate) as if Part 36 applied by analogy.

The Court of Appeal reversed his decision. It held that it was an error of principle for the judge to have applied Part 36 by way of analogy where the offer made was expressed not to be intended to be a Part 36 offer: there was no reason or justification for extending Part 36 beyond its expressed ambit (see paragraph 56 in the judgment of Davis LJ). In paragraph 56, Davis LJ emphasised the departure from established costs practice that Part 36 represents in stipulating for indemnity costs and prohibitive rates of interest on costs. At paragraph 57, he quoted Moore-Bick LJ in Gibbon v Manchester CC [2010] EWCA Civ 726; [2010] 1 WLR 2018 to the effect that Part 36 is a self-contained code and only by following its specific requirements may its advantages be secured. Also at paragraph 57 Davis LJ (with whom Arden and Tomlinson LJJ agreed) said this:

“The judge thought that the failure of Part 36 to extend to the position of litigants in the position of the respondents constituted a “glitch” in the operation of Part 36 and called for adjustment to reflect “the infelicity in the wording” of Part 36. With respect, I do not regard that as a permissible approach. Parliament has decided what the ambit of Part 36 is to be. It is to be regarded as self-contained for these purposes and it is not for the parties or the courts to go around looking for asserted glitches or asserted omissions so as to bring a case indirectly within the reach of Part 36 when it cannot directly be so brought in.”

Then, at paragraph 63, Davis LJ emphasised that, although in rare circumstances and on special facts it might be (Davis LJ struck a sceptical tone) that the court might give effect to a non-compliant Part 36 offer by the exercise of discretion under Part 44 (as Underhill J did in Huntley v Simmonds [2009] EWHC 406 (QB)), this would be rare:

“While the result in Huntley may be capable of being justified on the special facts, in my view it is not permissible wholly to discount a number of failures to comply with the requirements of Part 36 as the merest technicality. Perhaps there can be de minimis errors or obvious slips which mislead no one: but the general rule, in my opinion, is that for an offer to be a Part 36 offer it must strictly comply with the requirements.”

The message is clear: Part 36 is a complete code; nothing in it prevents a party making an offer to settle in whatever way he chooses (as indeed is stated in CPR36.1(2)), but the special costs consequences it provides for can only be obtained by strict compliance with its provisions; an offer which may be analogous but does not strictly comply is not enough to warrant importing those consequences, notwithstanding the broad discretion vested in the court (and see CPR 44.3).

Mr Clifford submitted that the message from that case mandates the conclusion in this case. Although he accepts that in that case the offer was expressly stated not to be a Part 36 offer, whereas in this case P&G’s July Offer was expressly couched in terms of being a Part 36 offer, the plain fact is that was not because it failed to comply with the strict requirements of Part 36 itself.

Mr Nugee, on the other hand, submitted that the two cases are distinguishable: P&G’s July Offer letter was not only expressly stated to be intended to comply with Part 36, but in substance did so. In contrast to the F&C case, P&G was not seeking to put itself in a better position in relation to costs than Part 36 prescribes: the only departure from the standard was an adjustment which had the effect that, as part of its offer, P&G was offering to accept less than its full entitlement under Part 36, thereby making the offer more attractive. In effect this amounted to an offer (i) to waive the benefit of CPR 36.10(1) and (ii) to pay SCA an extra sum (on top of the offered sum) calculated as the amount assessed on an assessment of SCA’s pre-acceptance costs.

The difficulty of this case is, as it seems to me, that it is not the paradigm contemplated by CPR 36.2. To my mind, the paradigm contemplated by CPR 36.2(2)(c) is a monetary claim brought by a claimant where either the claimant makes an offer to settle at a lower amount than his claim or the defendant offers to settle rather than dispute the claim. In either case the claimant will have achieved something by litigation, even though not all he hoped for: and the usual consequence is that he should thus be entitled to his costs up to the point of acceptance of the relevant offer. The curiosity or defining feature of this case is that P&G’s claim is not to recover any money or money’s worth from SCA: it is to eliminate or reduce the amounts SCA claims to be entitled to recover from it.

Mr Clifford submitted that one answer might be that Part 36 is not engaged at all in such circumstances: and that Part 36, and in any event, CPR 36.14, must be restricted to offers by a claimant to accept in satisfaction of his claim a lesser sum than he was claiming, and that since P&G make no claim to a monetary award Part 36 was not engaged. I do not accept that argument: although plainly a monetary claim is the paradigm, in my judgment Part 36 is not confined to that: and, for example, CPR 36.14(1A) contemplates claims other than money claims.

So the question remains the specific one: whether P&G’s July Offer lacked or contained some specific feature as to its form or content such as to take it outside the definition of a Part 36 offer in CPR 36.2.

Especially in view of Davis LJ’s description of Part 36 as “highly prescriptive”, his emphasis on strict compliance with its carefully crafted terms, and his admonition against looking around for “glitches” so as to bring a case “indirectly” within Part 36, I have approached this matter with caution and not a little anxiety. Nevertheless, I have in the end concluded that the F & C case is distinguishable and does not mandate my answer in this case.

In my view, the issue in the F & C case was really whether an offer accepted not to be within Part 36 could be given, by analogy, the same consequences as would have followed if it had been compliant and intended to be so. Here, the issue is whether CPR 36.2(2), and thus the gateway to CPR36.10 and 36.14, is to be so strictly construed that it requires (by rule 36.2(2)(c)) the offer made to provide for the defendant to be liable for the claimant’s costs even if the claimant expresses his offer to be a Part 36 offer, but as part of that offer, agrees to forsake that entitlement and instead pay the defendant his costs. Put another way, I do not accept that it is impossible for a claimant to comply with Part 36 unless he requires to be paid his costs and such payment to be made within a period of not less than 21 days.

As it seems to me, such a strict construction would tend to undermine a central objective of Part 36, identified by Davis LJ himself as being to encourage claimants to make sensible offers and provide an inducement to defendants to accept them lest otherwise they be exposed to the consequences provided. That objective would be advanced, not undermined, by reading CPR36.2(2)(c) as requiring a claimant who seeks his costs to specify a period of not less than 21 days within which the defendant will be liable to pay them, but not as mandating that the claimant must seek costs and make payment of them a condition of his offer.

I do not myself see why such a purposive approach to construction should not be available in the context of Part 36, as it is in the context of statutes and contracts and other instruments (subject, of course, to well-known limitations). Nor do I see that such an approach is precluded by the judgment of Davis LJ in F & C: this is not a matter of applying Part 36 by analogy; and the strict compliance required is of the statutory provision properly, and, if appropriate, purposively, construed.

Accordingly, I have concluded that P&G’s July Offer should be treated as compliant with Part 36, as it was expressed and intended to be. That, however, is not the end of the matter: there arises the further question as to whether the usual consequences prescribed would be unjust having regard to the particular circumstances of this case.

It is plain that P&G have beaten their offer: it has done better than if SCA had accepted P&G’s July Offer. If the offer had been accepted substantial costs would have been saved and the distraction and wear and tear of litigation would have been brought to an end. On the basis of my conclusion that it is to be treated as a Part 36 offer, P&G’s July Offer is effective to open the gateway to CPR 36.14, and in particular the consequences that CPR 36.14(1)(b) and 36.14(3) prescribe.

As a further illustration of the prescriptive character of Part 36, CPR 36.14(3) mandates the Court to order that the claimant is entitled to (a) interest on the whole or part of “any sum of money (excluding interest) awarded at a rate not exceeding 10% above base rate for some or all of the period starting with the date on which the relevant period expired” and (b) indemnity costs from that date and (c) interest on those costs at a rate not exceeding 10% above base rate, unless it considers it unjust to do so.

P&G seek orders as in (b) and (c): they accept that (a) is not engaged. SCA oppose both (b) and (c). The burden of persuading the Court that such orders would be unjust rests on SCA as the party at risk (see note 36.14.4). The Court is directed to take into account all the circumstances of the case including four specific matters adumbrated in CPR 36.14(4).

I should acknowledge that I had perhaps not fully appreciated SCA’s case in this regard until Counsel, after considering my draft provisional judgment, clarified its argument for me (as part of the further written submissions to which I have referred previously). Their argument is to the effect that it would indeed be unjust to visit on SCA the consequences of CPR36.14(3) because (and I quote) “the July Offer was, in substance, a defendant’s offer and failure to accept or beat a defendant’s [offer] does not occasion any of the consequences of CPR 36.14(3).”

I do not think it is either required or permissible to go behind the formal status of the parties for the purposes of determining compliance with Part 36 and the prima facie effect of a compliant offer: it seems to me that for those purposes the description in the record is conclusive. However, it does seem to me that the substance of the claim, and which of the parties is seeking to establish liability and which to oppose it, is one of the circumstances to be considered by the court in determining whether it would be unjust to make orders for indemnity costs and interest on costs for the purposes of CPR 36.14(3).

In that regard, I have accepted (see paragraph 8 above) that in this case both parties were in substance seeking adjudication of the true construction of the relevant contractual provisions, but that what the case was ultimately really about was whether the whole of the ERBs transferred (see paragraph 12 above). I have also accepted (see paragraph 13 above) that it was SCA which insisted on resolution of that issue: and it was that issue which was the subject of the declarations and orders sought by SCA in its counterclaim.

In such circumstances, it does seem to me that there is force in the argument that in substance P&G was really in the position of a defendant; and that, further or alternatively, the rationale in Part 36 for giving a special incentive to claimants to put forward offers to settle is not easily applicable to this case. Is it in such circumstances “unjust” to visit on SCA the consequences prescribed by CPR36.14(1)?

In the context of Part 36, and where CPR 36.14 applies, an order for payment of costs on an indemnity basis carries no stigma, nor does it connote the court’s disapproval: to quote Chadwick LJ in McPhilemy v Times Newspapers Ltd (No 2) [2001] EWCA Civ 933; [2001] 4 All ER 861 (at paragraph [9]):

“Properly understood, the making of such an order in a case to which [CPR36.14, the successor to rule 36.21 then in force] applies indicates only that the court, when addressing the task which it is set by that rule, has not considered it unjust to make the order for indemnity costs for which the rule provides.”

Furthermore, in not accepting P&G’s July Offer, SCA must have appreciated that it was at least at risk of the consequences prescribed by CPR 36.14.

Against that, it is ordinarily more just for substance rather than form to determine the result; and more generally, it does not seem to me that the court should encourage a rush to issue proceedings by persons who in substance are seeking to negate or reduce liability rather than to establish it.

The question also arises whether “unjust” has a general or specific meaning in the context. Whether it is just or unjust to treat claimants’ and defendants’ Part 20 offers differently in terms of their consequences is to my mind debatable; but it seems to me that in the context, there may be infused into the question whether the consequences are “unjust” whether they coincide with and advance the objectives of Part 36 (which include this differential treatment of claimants and defendants).

I have, after much reflection, concluded that in the particular circumstances of the case it would not be just to make an order under CPR 36.14(3), but that the just order is that SCA must bear all P&G’s post-July offer costs on the standard basis (to be assessed if not agreed).

In light of that conclusion it may not be necessary: but in case the matter goes further, I should confirm that if I am wrong in my conclusion that P&G’s July Offer was a valid Part 36 Offer, so that I should have proceeded, not by reference to CPR 36.14, but by reference to and in exercise of my discretion in accordance with CPR 44.3, I would not have considered this a proper case for indemnity costs, nor for interest on costs.

The next question is whether I should order a payment on account; and if so, in what amount.

P&G estimates its costs to be about £760,000. That is not dissimilar to SCA’s estimate of its own costs. P&G seeks payment on account of £450,000. That is just under 60%.

In light of my decision (a) to reduce P&G’s recoverable costs to 80% in relation to the period prior to the expiry of the period for acceptance of P&G’s July Offer but (b) to provide for full payment on the standard basis and without interest thereafter, I consider that a payment of £375,000 would be appropriate.

Lastly, I turn to SCA’s application for permission to appeal my substantive decision.

Mr Nugee for P&G put up token resistance to this. But the issues raised are undoubtedly complex; they have encouraged considerable debate; it would be at best unrealistic of me to consider that an appeal would have no real prospect of success. I give permission to appeal.

I invite Counsel to agree a draft Order to reflect these conclusions for my consideration.