In Sugar Hut Group Limited and others v AJ Insurance  EWHC 3775 (Comm),the High Court unusually took into account an unsuccessful Defendant's Part 36 offer of settlement when deciding the issue of costs against it, despite the fact that the Defendant failed to beat its offer at trial.
When deciding what costs order to make, Eder J commented as to the Court's wide discretion and ordered the winning Claimant to pay costs from June 2014 but reduced the Claimant’s costs by 30% before that date. That was because the Claimant had not succeeded on all issues at the quantum trial and because the Defendant's Part 36 Offer of settlement was to be taken into account, even though the Claimant had beaten it at trial.
Eder J stated that, in making this decision on costs, he was not introducing a "“near-miss" rule for Part 36 offers by the back door, which would have been contrary to the guidance in Hammersmatch Properties (Welwyn) Ltd v Saint-Cobain Ceramics and Plastics Ltd  EWHC 1161 (TCC). He considered that this case could be distinguished from Hammersmatch as his conclusion was not based on a near-miss analysis, did not involve any speculation about what negotiations might have taken place and because all the circumstances supported the view that the Claimant had insisted unreasonably on a higher figure than that offered. The claim had been much exaggerated and delays regarding disclosure and evidence had caused the Defendant real difficulties in taking appropriate precautions to protect its position.
Whilst the facts of this case are quite specific, this decision highlights the continuing movement of the Courts towards early settlement and the discretionary consequences of failing to properly engage in meaningful settlement negotiations.