Tag: #part36

Part 36 consequences following judgment, where judgment is given in a sum other than sterling

Katie SpencerLeave a comment

The Claim

It is not unusual for claims in the Commercial Courts to be denominated in currencies other than sterling. However, that gives rise to challenges where an effective Part 36 offer has been made by a Claimant, as Part 36 of the Civil Procedure Rules assumes that judgment will be given in sterling. Recent case law has given an indication of how the Court may exercise its discretion whilst respecting the importance and intention behind Part 36 offers.

In the recent case of Sanlam General Insurance Ghana Ltd v Sustainable Growth Fund II SCSP SICAV-SIF [2025] EWHC 559 (Comm) (14 February 2025), a claim was made for $1 million said to be due under a promissory note or corporate counter guarantee governed by English law.

On behalf of the Defendant, Ms Wick acknowledged the debt through a series of letters, either explicitly or implicitly confirming the obligation to repay the claimed sums. Despite repeated promises to pay, the Defendant failed to do so, prompting the Claimant to initiate legal proceedings.

Jurisdiction and Defence

The proceedings were served in Luxembourg in accordance with local law. The Defendant filed an Acknowledgment of Service, indicating an intention to defend the claim and contest jurisdiction. However, no formal application to challenge jurisdiction was made.

Claimant’s Application for Summary Judgment

The claimant sought summary judgment on multiple grounds:

  1. Entry of default judgment against the Defendant,
  2. Striking out the Defendant’s Defence,
  3. Summary judgment on the basis that the Defendant had no real prospect of successfully defending the claim.

In response, the Defendant submitted another document incorrectly labelled a ‘Defence’ despite having already filed one.

The Defendant raised various points, including an assertion that it was not a legal “person” and therefore could not be sued, and that Ms Wick lacked authority to sign legal documents alone.

The Court considered these arguments but was ultimately satisfied that the Defendant had no real prospect of success.

 Court’s Ruling on Costs and Interest

The Claimant had made a Part 36 offer to settle the claim for $1 million, inclusive of interest, plus costs. The Defendant did not accept the offer, which was subsequently beaten.

Although the Court declined to order that all the Claimant’s costs should be assessed on the indemnity basis, it did award the usual Part 36 consequences following judgment, including costs on the indemnity basis following expiry of the offer, enhanced interest on costs and the judgment sum, and an uplift on damages capped at £75,000.

However, the claim was denominated in US dollars and Part 36 of the Civil Procedure Rules assumes that a judgment will be given in sterling. To quantify interest on the judgment sum, the Court therefore used the US dollar prime rate as the starting point, rather than the Bank of England base rate, and awarded an uplift of 7.5%. In doing so, the Court followed the guidance given in OMV Petrom SA v Glencore International AG [2017] 1WLR 3465, where it was recognised that the Court has a discretion as to interest, but it was nevertheless important to incentivise Defendants to engage in reasonable settlement negotiations.

There were fewer difficulties regarding interest on costs, which were denominated in sterling, and a 10% uplift was awarded. However, the uplift on the judgment sum presented the same difficulties as interest on the judgment amount as it was denominated in dollars. The Court rejected a submission that the uplift could not be awarded where the judgment was denominated in a currency other than sterling, as that would defeat the purpose and intention of Part 36; the approach adopted therefore was to notionally convert the judgment sum into sterling at the applicable exchange rate on the date of judgment and to calculate the uplift on those sums.

Costs Assessment for the Summary Judgment Application

Costs were assessed on the indemnity basis following expiry of the Part 36 offer and on the standard basis up to expiry of that offer . The Court therefore had to take both bases of assessment into account in the summary assessment of the Claimant’s costs:

  • Hourly rates: The Claimant claimed £700/hr for a Grade A fee earner, £528/hr for a Grade C fee earner, and £260/hr for a Grade D fee earner. The Grade A hourly rate was assessed at the London 1 rate (£566). The Defendant’s delay and the cross-border aspect involving Luxembourg law supported this rate. Other fee earners were compensated at London 2 rates (£269/hr for a Grade C and £153/hr for a Grade D).
  • Work done on documents: Document preparation costs were reduced by £3,000 to reflect that the Witness Statement and Application Notice were prepared at a time when the assessment should technically have been on the standard, not indemnity, basis. All other document-related costs were allowed as claimed. Additionally, a £7,000 brief fee was found to be reasonable as it included work on documents.
  • Attendance at the hearing: Only the Grade A fee earner’s attendance at the hearing was deemed reasonable. The Grade C fee earner’s attendance time was disallowed as it was unreasonable, even where costs were being assessed on the indemnity basis.

Katie Spencer is a Paralegal in the Costs and Litigation Funding Department at Clarion Solicitors and can be contacted on 07741 988925 or at katie.spencer@clarionsolicitors.com.

Part 36 offers, the basis of assessment, and knowing your expert

Joanne ChaseLeave a comment

It is well known within the costs profession that there is some tension in the provisions of CPR 36.17, which deals with the costs consequences following judgment.

When a Claimant beats their own Part 36 offer, CPR 36.17 (4) provides that the Claimant is entitled to: interest not exceeding 10% above base rate from the date of expiry of the offer on the whole or part of any sum of money awarded, their costs on the indemnity basis from the date of expiry of their offer, interest on those costs, again, at a rate not exceeding 10% above base rate, and a prescribed percentage uplift limited to a maximum of £75,000 (10% on awards less than £500,000, and for awards more than £500,000, 10% on the first £500,000 and 5% of any amount above that figure thereafter).

However, for the Defendant, the rules are not quite so generous. CPR 36.17 (3) provides that the Defendant is entitled to costs from the date on which the relevant period expired, and interest on those costs. There’s no mention of indemnity basis costs, and no mention of any enhanced interest.

The recent costs decision in the case The Governors and Company of the Bank of Ireland (1) and Bank of Ireland (UK) PLC (2) v Watts Group PLC [2017] looked at this point closely, with the Defendant trying to persuade the Hon. Mr Justice Coulson that they should be awarded their costs on the indemnity basis following expiry of their first Part 36 offer, which they beat at trial, and which expired on 23 October 2015 (the parties had previously agreed that the Defendant should recover interest at 2% above base rate for the relevant period).

The Defendant relied on three main arguments; that the claim was hopeless and should never have been brought, that the Defendant had beaten their own Part 36 offer, and that the Claimant’s expert was heavily criticised by the trial judge.

The Hon. Mr Justice Coulson considered the principles that he had set out in Elvanite Full Circle Limited v Amec Earth and Environmental (UK) Limited [2013] EWHC 1643 (TCC), and summarised that “indemnity costs are appropriate only where the conduct of a paying party is unreasonable “to a high degree”. ‘Unreasonable’ in this context does not mean merely wrong or misguided in hindsight”. He went on to say that “The pursuit of a weak claim will not usually, on its own, justify an order for indemnity costs, provided that the claim was at least arguable”

In this case, he did not regard the case as being hopeless from the start, and he stated that the claim was, at least in part, supported by expert evidence and detailed witness statements.

He recognised that if the Claimant had beaten their own Part 36 offer then, in accordance with CPR 36.17(4)(b), they would have automatically been entitled to indemnity basis costs, however, he stated that whilst the rules were misaligned and considered unjustified by some, it remained the law that the same rules did not apply to successful Defendants.

He did, however, allow costs on the indemnity basis in relation to one discrete aspect of the case – the expert’s conduct, and he relied on the decisions of Balmoral v Borealis [2006] and Williams v Jervis [2009] in doing so. He considered that the expert’s conduct should be reflected in the costs order, but he did not consider that an order for indemnity basis costs in their entirety was appropriate. He recognised that the expert’s inadequacies had already been a factor in the Claimant losing at trial, and therefore “to order indemnity costs as well would be penalising the Bank twice over for the conduct of their independent expert”. He ordered that costs of the Defendant expert should be assessed on the indemnity basis, as well as costs of and occasioned by the oral evidence given by the Claimant’s expert at trial.

The Claimant paid a heavy price for relying on an expert who had never given oral evidence at a trial. However, the conduct of the expert did not persuade the Court to allow indemnity basis costs throughout. Nor did the fact that the Defendant had beaten their own Part 36 offer. And whilst the Claimant bank accepted that they lost the litigation “badly”, they denied that the claim was unreasonably brought and they warned about the dangers of applying hindsight to such decisions.

It, therefore, seems that there is a high bar to clear in persuading the judge to award indemnity basis costs in a claim where the Defendant has successfully beaten their own Part 36 offer. Like in this case, a paying party would need to consider and rely upon the factors listed in CPR 44.2 (4), in order to formulate a case that would persuade a judge to make such an award in the circumstances.

If you have any questions or queries in relation this blog or legal costs in general please contact Joanne Chase (joanne.chase@clarionsolicitors.com and 0113 336 3327) or the Clarion Costs Team on 0113 246 0622.