COSTS AFTER A SPLIT TRIAL-THE BLACK HOLE 28 August 2012 Marc-Rivalland LP Costs, LP Part 36 (0) 1. Just over five years ago, there was an unfathomable change to the Part 36 rules on split trials which, it turns out, gives a huge incentive to defendants to make a monetary Part 36 offer before any split trial that is ordered. 2. Prior to 6th April 2007, the matter was dealt with by Part 36.19. Part 36.19, entitled Restriction on disclosure of a Part 36 offer or a Part 36 payment, stated (2) The fact that a Part 36 payment has been made shall not be communicated to the trial judge until all questions of liability and the amount of money to be awarded have been decided. (3) Paragraph (2) does not apply-….. (c) where-(i) the issue of liability has been determined before any assessment of the money claimed and (ii) the fact that there has or has not been a Part 36 payment may be relevant to the question of the costs of the issue of liability 3. That rule was interpreted in HSS Group plc v BMB Limited  1 WLR 3158. In that case the First Defendant had made a Part 36 payment after the start of proceedings but before an order for a split trial. At the split trial, the First Defendant was found liable and the trial judge ordered it to pay the costs on the issue of liability. Held: The trial judge should have reserved costs. The First Defendant’s Part 36 payment might affect the final costs order. 4. On 6th April 2007 the old Part 36.19 became the present Part 36.13. In the present rule, there is no reference whatsoever to split trials. It is difficult to know why the draughtsmen of the new rule thought it fitting to drop the clear and helpful sub-rule in the old Part 36.19(3) dealing with split trials. There is now a blanket ban on telling a trial judge about the fact of Part 36 offer except where the parties agree or in two other exceptional cases. 5. It is not hard to agree with the thoughts of Henderson J in AB v CD  EWHC 602 at paragraphs 16 to 20 who did not have to decide the matter but found the wording of Part 36.13(2) unsatisfactory and who observed that the party against whom a costs order was otherwise likely to be made would simply withhold their agreement to disclosure of the fact of a Part 36 offer. He concluded: “ I will merely hazard the suggestion…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)…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 [and not its terms], so the question of the costs would in practice still have to be reserved for the reasons given by the Court of Appeal in the HSS Group case”. 6. The learned judge may be right about the need to construe the rule, although construing it in that manner appears to be re-writing it to include that which the rules committee thought fit to leave out. 7. Accordingly where a defendant has made no monetary Part 36 offer (or one that is plainly hopeless and could not conceivably be engaged), the Court will be able to make a costs order after a split trial on liability. In all other cases, it should reserve costs. 8. But why shouldn’t the Claimant have his costs on issues of liability up to the date of the Part 36 offer? 9. This question was posed in The Jean Scene Limited v Tesco Stores Limited  EWHC 1275. The Court held that the default position is that costs should be reserved and since in this case the Part 36 offer had been made early and there were potential arguments about pre-action protocol matters, the default position ought to apply. Costs were reserved and no payment on account of costs was made. 10. So the position after the date of Part 36 offer is clear. Costs must be reserved. I have my doubts whether defendants will be able to smother the claimant’s right to the costs on liability pre-dating the Part 36 offer simply by making a Part 36 offer a week or two before the split trial. It needs to be made early. 11. In the latest case on this subject, Ted Baker PLC v Axa Insurance & ors  EWHC 1779, the court declined to make any immediate costs orders but ordered the defendants to pay the costs of the preliminary issues subject to any settlement issues that might arise at the end of the case. A contingent order like that is scarcely the solution. One can but agree with Mr Justice Eder that there is an urgent need for Part 36.13 to be reviewed and reformulated to deal with the matter of split trials.