Lowin v W Portsmouth and Co Ltd [2016] EWHC 2301 (QB)
In Lowin v W Portsmouth and Co Ltd [2016] EWHC 2301 (QB) the Queen’s Bench Division of the High Court held that where a receiving party matched or beat its own Part 36 offer in provisional assessment proceedings it was entitled to costs on the indemnity basis under CPR 36.17(4) which overrode the cap of £1,500.00 plus VAT and court fees contained in CPR 47.15(5).
The decision thus followed the Court of Appeal’s reasoning in Broadhurst v Tan and Taylor v Smith [2016] EWCA Civ 94 (23 February 2016) where it ruled that a claimant matching or beating its own Part 36 offer received indemnity costs, not fixed costs and that those indemnity costs were to be assessed on the open basis and not by reference to fixed costs. Whatever the original status of the parties, that is claimant or defendant, in provisional assessment proceedings for all intents and purposes the receiving party is the claimant. Thus the argument was that where the costs cap applied, indemnity costs could be assessed and awarded but would be subject to the cap – see Nizami v Butt [2006] EWHC 159 (QB).
In Broadhurst the High Court rejected that approach. CPR 47.20(4) considered how Part 36 should apply to Part 47 and it applies to the costs of a detailed assessment, with modifications. There was a conflict between CPR 47.15(5) and Part 36 because CPR 47.15(5) potentially derogated from the entitlement to costs on an indemnity basis under Part 36. Here the court said that the correct view was that taken by the Court of Appeal in Broadhurst, namely that CPR 36.14 continued to have “full force and effect”. Had the Draftsman of the Rules Committee wished Part 36 to be modified so that the cap would remain then that would have been stated. The High Court further stated that the dislodging of the cap would incentivize parties to accept reasonable costs offers because if they did not do so they would be at risk of substantial costs under Part 36. The Broadhurst v Tan decision stated that “The same principle appears to apply to provisional assessment and thus a receiving party who matches or beats its own offer will get indemnity costs.”
10% UPLIFT & ENHANCED INTEREST
Furthermore, In Bolt Burdon Solicitors v Tariq & Others [2016] EWHC 1507 (QB) (22 June 2016) the Queen’s Bench Division of the High Court held that where a claimant matches or beats its own Part 36 offer it is entitled to the 10% damages uplift on contractual interest as well as on the principal sum. The court held that it was not unjust to order the defendant to pay the uplift on the interest in this case as the claimant had not made a claim for enhanced interest on the damages under CPR 36.17(4) and the parties had agreed the interest rate in the contract.
The provision for an uplift when a claimant matches or beats its Part 36 offer was clearly designed as a penal sanction to mark a defendant’s failure to accept a Part 36 offer when he should have done and to award the claimant for a commendable attempt to settle the case.
As the court said here:- “ The “additional amount” is, in effect, a further head of damages, and is intended to provide a reward of real value to a claimant who makes a successful claimant’s Part 36 offer.”
The court also pointed out that in CPR 36.17(4)(a), which deals with enhanced interest of up to 10% above base rate on any award where a claimant matches or beats its own Part 36 offer, the rule specifically states that that enhanced interest shall not be payable on any interest element of the award.
the rule specifically states that that enhanced interest shall not be payable on any interest element of the award.
The proper construction of r.36.17(4)(d)(i) is clear. In calculating the additional amount, the court should take into account the gross award that would have been made, but for Part 36. This is the sum the court was about to award when taken to the Part 36 offer. Such assessment therefore includes basic interest, whether awarded pursuant to contract (as in Bolt Burdon) or to the court’s discretionary power, but excludes any enhanced interest awarded under r.36.17(4)(a).
In Mohammed v The Home Office [2017] EWHC 3051 (QB) Mr Edward Peperall QC (sitting as a Deputy High Court Judge) considered the appropriate award for interest and additional damages when a claimant had beaten their own Part 36 offer. This involved consideration of the additional interest that should be awarded and precisely what was included in the 10% additional award of damages.
“In my judgment, the proper construction of r.36.17(4)(d)(i) is clear. In calculating the additional amount, the court should take into account the gross award that would have been made but for Part 36. That is the sum that the court was about to award when taken to the Part 36 offer. Such assessment therefore includes basic interest, whether awarded pursuant to contract (as in Bolt Burdon) or to the court’s discretionary power, but excludes any enhanced interest awarded under r.36.17(4)(a).”
On the facts of this case a rate of 6% over base additional interest on damages was appropriate. Similarly the additional interest on costs was 6% over base. The additional 10% damages was awarded on the basis of the basic interest awarded but did not include the enhanced interest awarded under CPR 36.17(4)(a).