INTEREST IS NOT PAYABLE ON AN ADDITIONAL AMOUNT AWARDED UNDER CPR 36.17(4)(d)

Where the Court awards an “additional amount” under CPR 36.17(4)(d) as a claimant / receiving party beating its own Part 36 offer, the additional amount will not attract “enhanced” interest under CPR 36.17(4)(a).

In FZO -v- Adams & Anor [2019] EWHC 1286 (QB) the court allowed an additional amount under CPR 36.17(4)(d), but held that interest under CPR 36.17(4)(a) – enhanced interest at 10% above base rate – was not payable on that amount. Giving judgment, Mrs Justice Cutts found that the construction of CPR 36.17(4)(d) was that the “additional amount” was not a “sum awarded” and that the words “additional” and “amount” mean that the award is in addition to the enhanced interest at CPR 36.17(4)(a).

It should be noted that CPR 36.17(4) states that where the claimant has beaten their own offer the court “…must, unless it considers it unjust to do so, order that the claimant is entitled to…” and thereafter lists the consequences (enhanced interest, additional amount, etc). This does not appear to accord with the judge’s acceptance of the defendant’s submission that the additional amount is not a “sum awarded”. On the construction of CPR 36.17(4) it seems that those consequences are sums awarded by the court, albeit they are sums which the court is bound to award save where it considers it to be unjust.

Notwithstanding, the second strand of the judge’s reasoning appears wholly sound insofar as the “additional amount” is additional to the other consequences and therefore not itself subject to those consequences.

However, practitioners should be aware that this applies only to interest arising under CPR 36.17(4)(a). As the additional amount is a sum which a party is ordered to pay, and (as above) is a sum which the court orders that party to pay, it is a judgment debt and thus interest will, in the author’s opinion, arise under section 17 of the Judgments Act 1838 at the rate of 8% should payment not be made within the prescribed period (14 days pursuant to CPR 40.11 unless otherwise ordered)

Matthew Rose is an Associate in the Costs and Litigation Funding Department at Clarion Solicitors. You can contact him at matthew.rose@clarionsolicitors.com and 0113 222 3248. You can contact the Clarion Costs Team on 0113 246 0622.

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A PART 36 OFFER WHICH EXCLUDES INTEREST MAY BE VALID

A Part 36 offer in detailed assessment proceedings may be valid where it excludes interest under the Judgments Act 1838.

In Horne -v- Prescot (No.1) Ltd [2019] EWHC 1322 (QB) the Court held that a Part 36 offer on costs which excludes interest is a valid Part 36 offer, contrary to Ngassa -v- The Home Office [2018] EWHC B21.

CPR 36.5(4) states that a “part 36 offer… [for] a sum of money will be treated as inclusive of all interest…” In Ngassa it was held that therefore an offer which purported to exclude interest was not a valid Part 36 offer and therefore would not attract the consequences of Part 36.

However, in Horne the judge found that in detailed assessment proceedings, interest accruing under section 17 of the Judgments Act 1838 does not form part of the claim for costs, as it is a statutory entitlement in respect of which the Court is not required to make any finding. Therefore, unlike interest which may form a part of substantive proceedings (for example interest under the Late Payment of Commercial Debts (Interest) Act 1988) which forms part of the claim and must be Ordered by the Court, Judgments Act interest does not form a part of the “claim” for costs, and is not required to be ordered by the Court (though it may be disallowed).

Whilst the judgment in Horne is both legally sound and eminently sensible, as CPR 36 was not drafted with detailed assessment proceedings in mind (indeed until 2013 it was not possible to make a Part 36 offer in costs proceedings and is only now applicable due to a modification to Part 47 specifically applying Part 36 to detailed assessment) practitioners should bear in mind that Horne is a first instance decision and a different court on a different day may find differently. It may be prudent for practitioners to continue to include interest in Part 36 offers on costs until further authority clarifies the position. It is however a useful judgment to deploy where there is any dispute as to the validity of an offer.

Matthew Rose is an Associate in the Costs and Litigation Funding Department at Clarion Solicitors. You can contact him at matthew.rose@clarionsolicitors.com and 0113 222 3248. You can contact the Clarion Costs Team on 0113 246 0622.

Consequences of beating a Part 36 offer may be varied by the Court

***THIS JUDGMENT HAS NOW BEEN SUPERSEDED***

Senior Courts Costs Office extends the principle in JLE v Warrington & Hamilton Hospitals NHS Foundation Trust [2018] EWHC B18 (Costs).

In JLE  Master McCLoud held that where a Part 36 offer is beaten at a hearing, the Court has the power to consider the justness of each of the consequences of CPR 36.17 individually. In that case, the Court held that whilst it would not be unjust to allow costs on the indemnity basis or interest at the rate of 10% over base rate, it would be unjust to allow the uplift of 10% (often known as the “penalty payment”) given the amount by which the offer was beaten.

Following judgment in Andrews & Anor -v- Retro Computers & Anor [2019] EWHC B2 (Costs), there was a hearing to determine consequential orders on 5th March 2019.

Prior to the Oral Assessment of the Claimants’ costs, the Claimants had made Part 36 offers in the sum of £40,000. The bill of costs was ultimately assessed in the sum of a little more that £43,000 (inclusive of interest). Accordingly the Claimants submitted that they were entitled to the full range of orders under CPR 36.17. After finding that the Claimants should be entitled to additional interest and costs on the indemnity basis, Maser Friston considered whether or not to allow the “penalty payment” of 10% of the amount of the bill as assessed.

The Deputy Master pointed out that the Claimants had beaten the amount of the assessed bill by “only” 7.5%, and therefore considered that the uplift of 10% would be too high and therefore was minded to disallow the uplift under CPR 36.17(4)(d) on the basis that to do so would be unjust.

The Claimants submitted that pursuant to JLE the court had the power to “deconstruct” CPR 36.17 and to consider the unjustness or otherwise of each consequence individually, and that Master McCloud had held that the consequences of CPR 36.17 were not “all or nothing”. Therefore, they argued, that the Court had a general discretion not only to allow or disallow the penalty uplift, but where it considers that an uplift of 10% would be unjust, the Court may reduce the amount of the penalty uplift to a just level. The Court is therefore not constrained to disallow the penalty uplift in full if it considers that 10% is too high.

Following these submissions, Deputy Master Friston allowed an uplift of 7.5%, commensurate with the proportion by which the Claimants had beaten their offer.

Summary

The Court has the power to vary the percentage level of the uplift proscribed at CPR 36.17(4)(d). The proscribed rate is therefore a cap, not an entitlement, but if the Court finds that to allow the entirety of the 10% uplift would be unjust it is not bound to disallow the uplift entirely.

Every case will be decided on its own merits, but it seems reasonable that where a Claimant has beaten its own offer by less than 10%, the uplift should in principle be allowed in proportion to which the offer has been beaten.

The Claimants were represented by Richard Wilcock of Exchange Chambers, assisted by Matthew Rose of Clarion Solicitors.