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.

Advertisements

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: INJUSTICE

There have been various cases recently on how the courts consider whether it would be “unjust” to apply the consequences of CPR 36.17.

In White -v- Wincott Galliford Limited [2019] EWHC B6 (Costs) it was held that it would be unjust to allow an additional amount (CPR 47.17(4)(d)) for the whole of a claim where the offer had only related to some of the issues.

In Invista Textiles & Anor -v- Adriana Botes & Ors (costs judgment unreported) it was held that there is a high bar to demonstrate injustice. The ratio of the judgment suggests that the amount by which an offer has been beaten is at least not the only criterion which the Court should consider. Where a defendant / paying party seeks to argue that it would be unjust to allow some of all of the consequences of CPR 36.17 claimants / receiving parties would do well to refer to this authority as an example of the threshold for “injustice” which must be met.

It should also be noted that the court has previously held that the amount of the additional amount itself cannot be taken into account when considering whether it would be “just” to award the consequences of Part 36.17 per Cashman -v- Mid Essex Hospital Services NHS Trust [2015] EWHC 1312 (QB). In that case, the court on appeal held that the assessing officer had erred in refusing to award the additional amount “not because he considered the making of such an award unjust, but because he thought it unjust to make an award of the required amount”.

There is currently some inconsistency in the judicial approach to the application of the test of injustice. In the opinion of the author, the test is a high bar (supported by White and Invista) and the mere fact that the additional amount of 10% may appear high does not of itself render the consequence “unjust”. The consequences of CPR 36.17 are intended to be punitive and the purpose of the exception for “injustice” is not to allow judges to “soften the blow” to a litigant which has failed to accept a Part 36 offer, but to avoid genuine injustice where there are “exceptional” circumstances.

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.

The effect of Payments on Account on Part 36 and Judgment

The case of Gamal -v- Synergy Lifestyle [2018] EWCA Civ 210 has reinforced the position that a payment on account does not “increase” the value of a paying party’s Part 36 offer when considering whether the offer has been “beaten” for the purpose of CPR 36.17.

Case Summary

The original action between Synergy Lifestyle (the Claimant / Respondent), and Ms Nivin Gamal (the Defendant / Appellant) related to a claim for unpaid invoices. For ease of reading, the parties are referred to throughout as the Claimant and Defendant respectively. There were various issues relating to the fraudulent nature of the invoices, applicability of VAT, payment or a carpet in October 2013, and the level of costs payable as a result, however these have been omitted for the sake of simplicity and ease of reading.

29 October 2013 – Defendant paid the Respondent £6,600

October 2014 – Claim issued for £151,000

24 August 2015 – Defendant’s CPR 36 offer of £15,000

8 February 2016 – Defendant pays £10,000 to the Claimant

10 May 2016 – Judgment for the Claimant in the sum of £14,275.49 (assessed at £30,275.49 less £16,600 already paid by the Defendant in respect of that work) and the Defendant pay the Claimant’s costs.

The Defendant appealed on the basis that she had beaten the CPR 36 offer of £15,000 and that the judge had failed to properly apply CPR 36.17.

Judgment on Appeal

Giving Judgment, Flaux LJ placed great reliance upon the earlier authority of MacLeish -v- Littlestone [2016] EWCA Civ 127. In that case, Briggs LJ had held that a Part 36 offer was made to settle the entirety of the claim, and that admissions made by a defendant do not have the effect of modifying the Part 36 offer such that it applied only to those parts of the claim which remained in dispute (i.e. a Part 36 offer made in respect of the whole of the claim relates to the whole of the claim, whether or not part of that claim is subsequently admitted).

In Gamal, the court extended this principle to apply not only where a payment had been made following admissions but to any payment on account whether or not an admission had been made. The effect of the payment on account was to reduce the amount which the Defendant could ultimately be ordered to pay, and therefore to a corresponding reduction to the Part 36 offer. As such, the Court dismissed the appeal, held that the Part 36 offer had not been beaten, and upheld the award of costs.

Summary

In summary, the judgment reinforces what many would consider to be the “common sense” position. A payment on account is just that; a payment in anticipation of a future liability. It therefore does not have the effect of making a defendant’s offer more attractive or a claimant’s offer less attractive.

The discussion regarding a “reduction” to the Part 36 offer in the judgment may be somewhat confusing, however this is simply because there are two ways of looking at the issue:-

1. The court gave judgment for £23,675.49[1], distinct from the balance of £14,275.49 payable once credit was given for the payments applicable payments on account (i.e. those made after the date of the offer). Looked at in this way,  the Defendant had obviously not beaten her own offer.

2. The court gave judgment for £14,275.49 (as a result of the payments on account), however just as the payment on account reduced the judgment sum, it also reduced the level of the Defendant’s Part 36 offer (i.e. the offer of £15,000 became £5,000 once the payment on account was applied). This is the approach the court adopted.

Both of the approaches above arrive at the same conclusion though by different methods.

All practitioners should note that whether a payment is “on account” is open to judicial interpretation however the general presumption is that payments made during the currency of a claim are payments on account unless specifically stated otherwise.

Matthew Rose is a Solicitor and Associate in the Costs and Litigation Funding Department at Clarion Solicitors. You can contact him on 0113 222 3248 or by email at matthew.rose@clarionsolicitors.com.

[1] In fact, the court assessed the value of the work at £30,275.49, which was necessary as the Claimant admitted that the invoices it had submitted were part of a fraud between it and the Defendant. However, the Claimant had already paid £6,600 towards this work in satisfaction of invoices prior to the commencement of proceedings. Therefore, the total value of the work done was found to be £30,275.49 but the total value of the claim against the Defendant was £23,675.49.

Fixed Costs – the effect of acceptance of a Part 36 offer

The case of Ansell & Evans -v- AT&T (GB) Holdings Ltd (County Court at Oxford 14/12/2017) was an appeal to the County Court in relation to the interpretation and effect of acceptance of a Part 36 offer made in a case to which fixed costs applies.

Further information can be found in Gordon Exall’s blog on this case here

Background

The Claimants had been injured in a car accident and the claim, due to its value, fell within the scope of the RTA protocol (‘the Protocol’). The claims were submitted to the Protocol and the Defendant admitted liability. Subsequently, the Defendant wrote to the Claimants stating that they were concerned that the accident was a low velocity impact and they therefore requested that they have access to the vehicle in order to arrange an inspection “in line with Kearsley -v- Klarfeld…” and that pending such investigations the Defendant “may wish to raise Casey -v- Cartwright”.

Shortly thereafter, the Claimants wrote to the Defendant stating that in light of this request, pursuant to paragraph 7.76 of the Protocol the claim was not suitable for and therefore would no longer continue under the Protocol.

Three months later, the Defendant wrote to the Claimants stating that “LVI is no longer an issue”.

No settlement having been reached, the Claimants issued proceedings under Part 7 and the Defendant thereafter made Part 36 offers, which the Claimant accepted within the relevant period.

The issue between the parties

Following settlement, the Defendant stated that it considered that the Claimants’ conduct in withdrawing the claim from the Portal had been unreasonable, and that the Claimant should be limited to pre-action fixed costs (CPR 45.29B Table 6C).

The Claimants’ position was that:-

  • Pursuant to CPR 36.20 there was no deemed order for costs (CPR 44.9 applies only to settlement under CPR 36.13);
  • CPR 36.20(2) provides that where a Part 36 offer is accepted within the relevant period the Claimant is entitled to fixed costs applicable at the date on which the notice of acceptance was served;
  • The court had no discretion to go behind the self-contained provisions of CPR 36 and make some other order as the court;
  • Even if the court did have such a discretion, the court should not do so because if the Defendant had wished to raise issues of reasonableness it should not have made an offer pursuant to CPR 36; and
  • It is incumbent on a defendant to ‘say what it means’ when making offers. The consequences of CPR 36.20 are designed to give certainty in the event that the claim is settled. The consequences of the Defendant’s offer should therefore have been construed contra preferentem in favour of the Claimants.

The Claimants also alleged that, in the alternative,  it had not been unreasonable to withdraw the claim from the Portal in light of the Defendant’s statement that it “had LVI concerns”

The Decision

At first instance, the Court dismissed the Claimants’ application on the basis that it had been unreasonable to withdraw the claim from the Portal. However, the judge did not give any reasons for dismissing the Claimants’ argument that by operation of CPR 36.20 costs payable by the Defendant were fixed to the sums set out in Table 6B for the stage at which the claim settled and that therefore the Court did not have discretion to make an order in a different amount. The judge at first instance refused permission to appeal.

The Claimants made an application for permission to appeal on the grounds that (1) the judge had failed to give reasons for their judgment, (2) that the judge was wrong in law to reject the Claimants’ argument that by operation of CPR 36.20 costs payable by the Defendant were fixed at those set out in Table 6B, and (3) that the judge was wrong in law to conclude that the Claimants’ had acted unreasonably by withdrawing the claim from the Portal.

At the appeal hearing the Court allowed the appeal on the first ground, but dismissed the second and third grounds.

The First ground was a simple question of fact. As to the third, the court held that the letter sent by the Defendant that it “had LVI concerns” was merely an indication that complex issues might be raised, but was not of itself sufficient to give rise to complexity sufficient to justify withdrawal from the Portal.

However, had the Claimants succeeded on the second ground, the reasonableness or otherwise of the Claimants’ conduct would have been irrelevant. Thus it was upon the second ground that the Claimants’ case hinged and therefore the reasons for dismissal require more detailed analysis.

In respect of the second ground, which was that CPR 36.20 provides that where a Part 36 offer is accepted within the relevant period a claimant is entitled to the costs applicable for the stage at which the claim settlement, the judge held that CPR 36.20(1) incorporates CPR 45.29A(1), which therefore incorporates CPR 45.29A(3) which incorporates CPR 45.24 (consequences of failure to comply or electing not to continue with the relevant pre-action protocol). Simply put, the judge found that where a case settles by CPR 36, the court has discretion to award a different amount to that provided for under CPR 36.20 and Table 6C if the court determines that the claimant acted unreasonably.

Analysis

CPR 36.20(2) provides that where a Part 36 offer is accepted within the relevant period, the claimant is entitled to the fixed costs in Table 6C of Section IIIA of Part 45 for the stage applicable at the date on which notice of acceptance was served on the offeror.

There is no provision within CPR 36.20 which is relevant to these facts. In particular, there is no provision which states that CPR 45 generally shall apply where a Part 36 offer is accepted within the relevant period or which provides for any discretion for the court to award any other amount.

CPR 36.20(1), states “This rule applies where (a) a claim no longer continues under the RTA or EL/PL Protocol pursuant to rule 45.29A(1)”.

So far as it is relevant CPR 45.29A(1) provides that “subject to paragraph (3), this section applies (a) to a claim started under (i) the Pre-Action Protocol for Low Value Personal Injury Claims in Road Traffic Accidents (‘the RTA Protocol’)… where such a claim no longer continue under the relevant Protocol or the Stage 3 Procedure in Practice Direction 8B”

CPR 45.29A(3) provides that “nothing in this section shall prevent the Court making an order under rule 45.24.”

The judge found that because CPR 45.29A(1) states that it is “subject to” CPR 45.29A(3), where the court considered that withdrawal from the portal was unreasonable under CPR 45.24, by virtue of CPR 45.29A(3) the claim had not “continued under the RTA Protocol” for the purpose of CPR 36.20(1). Accordingly, the Court was not bound to allow only those costs within Table 6C.

Alternative View

It is possible to argue that the judge on appeal erred in their finding as set out above.

In this case, it was a simple matter of fact that the claim had not continued under the Protocol under CPR 45.29A(1). CPR 45.29A(3) states that “nothing in this section” shall prevent the court from making an order under CPR 45.24. However, it does not state that a finding under CPR 45.24 that the claim had left the portal unreasonably would mean that section CPR 45.29A(1) did not apply. Furthermore as is clear, CPR 36.20 is not “in this section” (i.e. within CPR 45.29A) and therefore CPR 45.29A(3) is specifically dis-applied.

Summary

Claimants should careful to ensure that they do not withdraw a claim from the portal unless the defendant has actually raised a complex issue. Parties should be sure to clarify with their opponent whether there are any issues of conduct prior to the issue of proceedings and in any event before any offer of settlement is made or accepted. It is a common tactic for defendants in particular to only raise issues such as this after settlement has been agreed, as was indeed the position in this case. Written correspondence on the point prior to the acceptance of an offer should at the least give rise to an argument in estoppel should they later try to raise conduct.