After a long and busy summer, we thought it would be useful to summarise the recent decisions made in respect of CPR36.
In Knight & Anor v Knight & Ors (Costs) [2019] EWHC 1545 (Ch) HHJ Matthews (sitting as a High Court Judge) was asked to consider whether or not a Part 36 offer, made pre-issue, and made inclusive of costs was a valid Part 36 offer, thereby carrying the costs consequences applicable under CPR36. HHJ Matthews held that an offer that attempted to limit costs was not a valid Part 36 offer and therefore did not carry the costs consequence of a Part 36 offer. The decision is also of importance given it provides the Court’s view on the issue of when indemnity costs are applicable if a Claimant beats their own offer at trial. HHJ Matthews considered the factors in CPR36.17 (5) and stated that “A mere failure to accept a reasonable offer is not enough. That happens every day of the week, with both parties acting reasonably and in accordance with the advice that they are receiving from their professional advisers. So if the matter is to be taken “out of the norm” there must be something more, something which prompts the court to visit the paying party with a special mark of condemnation. I see nothing of that kind here” (paragraph 31). The Judge therefore found, in accordance with the rule under CPR36.17 (3), that it would be unjust to allow indemnity costs.
FZO v Adams & Anor [2019] EWHC 1286 (QB) (23 May 2019) is a claim whereby the Claimant obtained judgement in the sum of £1,112.390.70 beating their own previous Part 36 offer. In accordance with CPR36.17 (4), the Defendant was required to pay the Claimant the additional sum of £75,000. in accordance with CPR36.17 (4) (a), the parties had agreed the period and rate of interest payable. An issue arose as to whether interest should be claimed on the additional sum awarded.
Mrs. Justice Cutts DBE found that “The words “additional” and “amount” seem to me to confer that this is in addition to the award and interest set out in subsection (4)(a) and that if interest were payable on this sum the rule would have said to. I note that where interest is payable consequent to any other paragraph of rule 36.17(4) on any amount it is specifically stated”. This clarifies that interest is not to be claimed upon the additional sum.
White & Anor v Wincott Galliford Ltd [2019] EWHC B6 (Costs) related to an assessment of costs. During the proceedings, the Claimant had made a Part 36 offer solely in relation to hourly rates. At the Detailed Assessment Hearing, the Defendant failed to “beat” the Part 36 offer and consequently the Claimant sought an additional 10% additional amount on the entirety of the profit costs. The parties made written submissions. Deputy Master Friston concluded that the offer made was a valid Part 36 offer in respect of “an issue that arises” and that the offer had been beaten.
Despite this, he found the Defendant had “easily shifted the ‘formidable obstacle’ of proving injustice in this case” and provided his three reasons:
i) Whilst Part 36 is to be used to gain a tactical advantage, the Court did not wish to encourage “mere gamesmanship”. Furthermore, it would be unjust to allow the Claimant to recover an additional amount upon the entirety of the profit costs when the Defendant had only failed to beat the Part 36 offer in respect of “only one component of those costs”.
ii) The Court had to consider its own resources and such offers would not “genuinely encourage settlements”. If the Court was to encourage the making of such offers then “Detailed Assessments (and provisional assessments in particular) would become unwieldy”.
iii) “If the offer had been accepted it would have had almost no bearing on the way in which the parties dealt with the matter” Given the timing of the offer, following the Points of Dispute and Points in Reply having been drafted, the offer “would have saved almost no court time at all, nor would it have prevented the parties from incurring costs of any significant amount”.
In Calonne Construction Ltd v Dawnus Southern Ltd [2019] EWCA Civ 754, the Court of Appeal were required to consider whether a Part 36 offer could validly be made in respect of (i) a counterclaim that was yet to be pleaded; and (ii) specify the rate of interest to be applied after expiry of the relevant period.
The Claimant had sought damages against the Defendant in excess of £500,000 under various heads of contract. During the proceedings, the Claimant had made a Part 36 offer to settle in the sum of £100,000 inclusive of interest and to take into account “the anticipated counterclaim”. Within the 21 day period of that offer, the Defendant countered with their own Part 36 offer to settle the whole of the claim and the counterclaim with the Claimant to pay the Defendant the sum of £100,000 inclusive of interest until the relevant period had expired and interest at a rate of 8% per annum thereafter. At trial, Judgement was entered for the Defendant in a sum in excess of their Part 36 offer. The initial ruling allowed for some of the consequences of CPR36.17 (4) but not all of the consequences on the basis that it would be unjust.
The Claimant appealed on the basis that the Part 36 offer was invalid as it included an unpleaded counterclaim and, secondly, included terms of interest beyond the expiry period.
On appeal, Lady Justice Aplin, supported by Lord Justice Flaux and Lord Justice Hamblen found that “a party is entitled to make a Part 36 offer at any time, including before commencement of proceedings, a party is also entitled to make a Part 36 offer before the counterclaim has been pleaded” and further ruled that there was no provision within Part 36 which precluded the inclusion of interest in the terms. As such the appeal was dismissed and the matter remitted to the Judge for reconsideration.
Parsa v Smith and Another Case Nr C84YX807, unreported related to the issue of whether late acceptance of a Claimant’s Part 36 offer, just one week before trial, in a fixed costs case amounted to “exceptional circumstances” under CPR 45.29J. With regards to interpreting the policy behind the fixed costs scheme, the Court relied on the decision of Moore-Bick LJ in Solomon v Cromwell [2012] 1 WLR 1048 (CA) finding that to allow satellite litigation arising from Part 36 offers in RTA portal claims “would undermine the fixed costs regime”. Upon considering the construction of CPR36.20, the Court found that there was no windfall for the Claimant unless CPR45.29J applied.
In Horne -v- Prescot (No 1) Ltd 2019 1322 (QB), the Court found that a Part 36 offer which specifically excluded interest remained a Part 36 offer. The matter related to costs assessment proceedings whereby the Claimant offered to accept £82,000 “exclusive of interest” and that the offer also did not include the costs of assessment. The Court found that interest on costs was fundamentally different to interest on damages. It is of note that this decision is contradicted by the decision in Ngassa v The Home Office & Anor [2018] EWHC B21 (30 November 2018) heard by Master Rowley and also contradicts the first instance decision in the case of King v Corporation of London which has been appealed and is to be heard by the Court of Appeal in November 2019.
In Invista Textiles (UK) Ltd & Anor v Botes & Ors [2019] EWHC 1086 (Ch), in considering his decision of first instance as to the consequences of CPR36.17, Mr. Justice Birss found his decision to be correct. The Claimant had beaten their own Part 36 offer on what the Judge found to be a small element of the claim. It was found that the Defendant was unable to accept the Part 36 offer due to the costs consequences which have flowed from such an acceptance (CPR36.13). It was found that the Defendant had been successful overall and consequently the Defendant was awarded 71% of their costs.
The Claimant appealed asserting the facts provided to the Judge at first instance had been incorrect. It was established that the Defendant had returned to the Claimant upon the offer and confirmed that the relief was acceptance but disputed the costs consequences. Mr. Justice Birss found it would be unjust for the Defendant to be penalised and that in his judgement, the offer “was not a genuine offer to settle”. This decision can be considered similar to that referenced earlier, White & Anor v Wincott Galliford Ltd [2019] EWHC B6 (Costs), and supports the view that the Court will not encourage “mere gamesmanship”.
JLE v Warrington and Halton Hospitals NHS Foundation Trust [2019] EWHC 1582 (QB) dealt with an appeal against a decision by Master McCloud not to allow the Claimant the additional sum set out in CPR36.17 (4) (d) on the basis it would be unjust to do so. The matter stemmed from a clinical negligence claim whereby the Defendant was ordered to pay the Claimant’s costs. During the assessment proceedings, the Claimant made a Part 36 offer in the sum of £425,000 inclusive of interest. The offer expired on the last working day prior to the assessment hearing commencing.
The offer was not accepted and the Claimant’s Bill was assessed at £431,813.05 inclusive of interest with the Claimant having beaten their own offer by just under £7,000. Orders were made in respect of CPR36.17 (4) (a) – (c) but not CPR36.17 (4) (d) on the basis it would be injust to do so. This decision was based upon the relatively small sum by which the offer had been beaten, the level of reduction to the Bill overall and the large size of the 10% bonus relative to the margin by which the offer was beaten.
Mr. Justice Stewart allowed the appeal and stated that “if this case qualifies for withholding the additional award, that would be a green light to similar arguments in many, many other detailed assessments. It would also be a serious disincentive to encouraging good practice and incentivising parties to make and accept appropriate offer”. Mr. Justice Stewart further stated that “I would find that the 10% in subparagraph (d) is all or nothing. It must be awarded in full unless it is unjust to do so” (This is contrary to the decision reached in White & Anor v Wincott Galliford Ltd [2019] EWHC B6 (Costs) whereby it was found a partial additional sum could be awarded should it be just to do so).
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