AssetCo PLC -v- Grant Thornton UK LLP [2019] EWHC 592 (Comm)
While already a case of interest for any cost practitioner, given the requirement for electronic billing was dispensed with by the High Court. A further investigation of the case reveals perhaps a more interesting aspect concerning Part 36, and what happens when you beat your own Part 36 offer at Trial in terms of interest.
Before Mr Justice Bryan, the question was considered.
Part 36 offers were as follows (Judgment, para 5 refers):-
- On 22 November 2016 AssetCo made a Part 36 offer to settle the claim for £10 million, inclusive of interest; and
- On 26 July 2017 AssetCo increased its previous Part 36 offer to settle the claim to £17.5 million, inclusive of interest.
The Claimant at Trial obtained judgment for over £22 million, in which case, taking into account the above mentioned offers, both were comfortably beaten and as such, the consequences of CPR 36.17 were engaged. Part 36.17, reads as follows:-
CPR 36.17
Part 36.17 reads the court must, unless it considers it unjust to do so, order that the claimant is entitled to (a) interest on the whole or part of any sum of money, excluding interest awarded at a rate not exceeding 10% above base rate, for some or all of the period starting with the date on which the relevant period expired; (b) costs (including any recoverable pre-action costs) on the indemnity basis from the date on which the relevant period expired; (c) interest on those costs at a rate not exceeding 10% above base rate, and (d) an additional amount which shall not exceed £75,000, calculated as set out in CPR 36.17.
CPR 36.17(5) provides: “In considering whether it would be unjust to make the orders referred to in [inter alia CPR 36.17 sub-paragraph (4)], the court must take into account all the circumstances of the case including –
(a) the terms of any Part 36 offer;
(b) the stage in the proceedings when any Part 36 offer was made.
(c) the information available to the parties at the time when the Part 36 offer was made;
(d) the conduct of the parties with regard to the giving of or refusal to give information for the purposes of enabling the offer to be made or evaluated; and
Application
There was no suggestion that the Claimant’s Part 36 offers were not compliant with Part 36, in which case, the question became one of how the Court would assess such issues and determine the levels of ‘enhanced interest’, ‘compensatory interest’ and ‘interest on costs’.
Briefly, enhanced interest is the non-compensatory element of an award as part of the “carrot and stick” approach to litigation, in essence the reward/penalty. Compensatory interest is the part of the award which is designed to put the successful party in the position they would have been had the offer been accepted.
In this article, we are going to focus on the issue of ‘interest on costs’, as while the court awarded a blended interest rate of 5% above LIBOR (The London Inter-bank Offered Rate), with 2% above LIBOR being the compensatory rate, and the additional 3% being enhanced interest pursuant to CPR 36.17(4) (a). The court held that it was not appropriate to award enhanced interest on costs (CPR 36.17 (4) (c)), which were already on the indemnity basis.
In particular, in making this determination the Court’s view was that such interest on costs was compensatory as opposed to enhanced and it remained the Court’s power to decide whether enhanced interest was appropriate.
Now follows an extract from the Judgment (paragraphs 48):-
- For his part, Mr Templeman invites me to award enhanced interest on costs. There is no doubt that such a power is available to me and it is part of the range of remedies which are set out in the CPR in this situation. However, realistically, Mr Templeman also accepts that the basis for his submission, which is that there has been unreasonable conduct in the sense of going “uphill and down dale” in the litigation and also not responding to Part 36 offers, is to be taken in the light of the findings that I have made earlier in my judgment in relation to that, where I have indicated that, whilst the litigation was conducted “uphill and down dale” and, in certain respects raised points which perhaps ought not have been pursued – such as the Companies Act point and a pleading point taken on interest and the like, this is not one of those cases where there was egregious conduct and, therefore, although I bear those points well in mind, I consider that in circumstances where there are already indemnity costs, and the payment of £75,000, and the enhanced interest which I have already awarded in relation to principal, I do not consider that this would be an appropriate case, on the particular facts of this case, where it is appropriate to award enhanced interest on costs.
Conclusion
Quite clearly, it can be seen from the Judgment that the Court was concerned about penalising the Defendant for decisions taken in the litigation with the benefit of hindsight and furthermore, about over-rewarding the Claimant. Taking onboard such commentary implies the hurdle for enhanced interest on the costs awarded for successfully beating a Part 36 offer pursuant to CPR 36.17 (c) is a very high one and one where the advocate attending any such hearing may need ulterior arguments justifying the application of such. While this perhaps may not impact many cases, where such interest if likely to be negligible, it is worth bearing in mind in cases such as this where the sums in dispute are vast and every decision to compensate/reward is carefully scrutinised.
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