Kerry Underwood

PART 36 CHAOS UPDATE

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A shorter version of this blog first appeared on the Practical Law Dispute Resolution Blog.

Just 11 new decisions at High Court level or above with the courts all over the place as the civil and criminal justice systems in the country break down.

Time to remember the wise words of Lord Neuberger when President of the Supreme Court

Without lawyers, judges and courts, there is no access to justice and therefore no rule of law, and without the rule of law, society collapses.

You have been warned.

CAPPED COSTS TRUMP PART 36 INDEMNITY COSTS IN PROVISIONAL ASSESMENT

In Lowin v Portsmouth [2017] EWCA Civ 2172   

the Court of Appeal, in overturning the decision of the High Court and restoring the decision of the Costs Master, held that in provisional assessment proceedings under CPR 47 the costs cap in CPR 47.15(5) applied even when a party was entitled to indemnity costs under CPR 36.17(4)(b), where it had matched or beaten its own Part 36 offer.

There was nothing in the rules to suggest otherwise and CPR 47.20(4) expressly provided that Part 36 applied to the costs of a detailed assessment subject to four express modifications and among those there was no mention of CPR 47.15(5) and thus it was not modified in anyway.

Had it been intended that that rule was to be disapplied on a costs assessment on the indemnity basis under CPR 36.17(4)(b), then there would have been an express reference to it in either or both of the provisions or in CPR 47.20(4).

The Court of Appeal disagreed with the judge below’s view that there was tension or conflict between the rules.

The cap did not prevent an assessment on the indemnity basis, but simply limited the amount that could be recovered.

The reference in CPR 36.17(4)(b) to an entitlement to “costs” was not to be read as an indemnity in relation to all of that party’s costs. That would create an unjustified distinction between indemnity costs and costs under CPR 44.3(1).

This seems a muddled confusion as indemnity costs orders are still subject to detailed assessment and are routinely made in non-capped costs cases.

Here, the Court of Appeal considered that its own decision in

Broadhurst v Tan [2016] EWCA Civ 94

where it held that Part 36 overrode the fixed costs rules where a claimant matched or beat its own offer at the trial, was not relevant, as there, there was a direct conflict between the rules as to fixed and assessed costs, with completely different provisions.

Comment

Whatever the policy rights and wrongs, I do not follow the logic of this decision.

Surely the very fact that none of the four express modification to Part 36 deals with the cap, then Part 36 does apply; otherwise the continued existence of the cap would have been stated as an exception to the usual Part 36 consequences.

In any event, we now have five different lines of authority in relation to the interplay between Part 36 and fixed and capped costs.

  1. Fixed costs are disapplied and the usual Part 36 consequences apply; –

Broadhurst v Tan [2016] EWCA Civ 94

 

  1. Capped costs impose an upper limit even when an indemnity costs order is made; –

Lowin v Portsmouth [2017] EWCA Civ 2172 

  

  1. Capped costs do not impose an upper limit when an indemnity costs order is made; –

Phonographic Performance Ltd v Hagan (trading as Lower Ground Bar and Brent Tavern) [2016] EWHC 3076 (IPEC)

 

  1. Capped costs do not impose an upper limit when an indemnity costs order is made, but those indemnity costs should be a fixed percentage increase as per Lord Justice Jackson’s proposal;-

Martin and another v Kogan and others [2017] EWHC 3266 (IPEC)

  

  1. Capped costs can be waived by the court before the end of the case; –

Aarhus convention cases

 

In fairness (4) can be regarded as having replaced (3) in the Intellectual Property Enterprise Court.

Interestingly here the Court of Appeal commented on the Phonographic Performance decision, but did not say it was an error of law, nor that it should not be applied, in spite of a submission to that effect.

 

“43.        It is also unnecessary to consider the alleged effect in relation to claims in the Intellectual Property Enterprise Court under Section IV Part 45, Aarhus Convention claims or to comment upon HHJ Hacon’s decision in the Phonographic case and whether the Judge gave proper consideration to the effect of her construction upon the provisional assessment regime which was intended to be low cost and to the alleged practical difficulties which would arise from her construction. It is equally unnecessary to consider whether the Judge gave proper weight to the alleged practical difficulties arising from her conclusions.”

 

PART 36 INDEMNITY COSTS TRUMP CAPPED COSTS IN THE IPEC

In Martin and another v Kogan and others [2017] EWHC 3266 (IPEC)

the Intellectual Property Enterprise Court (IPEC) gave guidance on how the court should approach an award of indemnity costs under CPR 36.17(4)(b), where the claimant matched or beat its own Part 36 offer at trial.

HHJ Hacon upheld the principle set out in his earlier decision in

 

Phonographic Performance Ltd v Hagan (trading as Lower Ground Bar and Brent Tavern) [2016] EWHC 3076 (IPEC)

 

namely that costs caps did not affect an award of indemnity costs under CPR 36.17(4)(b), and did not limit those costs.

The judge suggested that the IPEC should adopt the proposals contained in Lord Justice Jackson’s Supplemental Report on Extending Fixed Recoverable Costs in relation to the pilot scheme for business cases.

Thus, in the absence of serious misconduct by the defendant, CPR 36.17(4)(b) should be applied so that the costs cap on each stage be raised by 25%, increasing the total cap from £50,000.00 to £62,500.00, subject in any case to the discretion of the court.

The judge said that where the defendant made a Part 36 offer which was not beaten, the stage and overall costs caps should remain in place, the point being that the defendant gets its post relevant period costs, and the claimant is deprived of its own costs, even though the defendant has lost.

Removing the caps where a claimant has failed to beat a defendant’s offer would tilt the balance unfairly in favour of defendants.

 

As the judge correctly states:

 

“No question of indemnity costs or an additional amount arises under Part 36 where a defendant makes a successful Part 36 offer because there is no need. Rule 36.17(3) provides that the defendant gets his costs from the date of expiry of the relevant period, plus interest.”

 

Comment

A very sensible decision by a judge who clearly understands Part 36 and its effects, so well done HHJ Hacon.

This judgment was given on 13 December 2017, following a hearing on 4 December 2017, and thus before the decision of the Court of Appeal in

 

Lowin v Portsmouth [2017] EWCA Civ 2172   

 

which was given on 19 December 2017.

 

There, in the context of provisional assessment, the Court of Appeal held that a capped costs regime, as compared with a fixed costs regime, overruled Part 36 and the cap could not be exceeded.

The judgment here is in contrast to that ruling, and thus its correctness must, unfortunately be doubted.

Having said that, the Court of Appeal in the Lowin case considered the Phonographic decision of the same judge to the same effect in the sense that Part 36 indemnity costs overrule the cap, and specifically declined to overturn it, or say that it was wrongly decided.

 

The court also held that where there is a Part 20 defendant that is a separate matter triggering a further potential costs award of up to the cap of £50,000.00.

 

PART 36: DEFENDANT GETS INDEMNITY COSTS ON LATE ACCEPTANCE

In Lokhova v Longmuir [2017] EWHC 3152 (QB)

the Queen’s Bench Division of the High Court ordered a late-accepting claimant to pay indemnity costs from expiry of the relevant period until acceptance.

Once again the court seemed not to take into account the fact that an order on a standard basis is a punishment in itself as the winning claimant is both being deprived of the costs for that period and being ordered to pay the losing party’s costs for that period.

If the conduct warranted indemnity costs in any event, then fair enough, but an award of indemnity costs merely for failing to accept the offer is wrong in principle.

In such circumstances the claimant suffers a triple penalty:

  1. deprivation of costs;

 

  1. payment of costs;

 

  • payment of costs on an indemnity basis.

 

This is brought all the more sharply in to focus by the fact that a late-accepting defendant usually faces no penalty at all and thus can accept late with impunity.

 

Take Paragraph 36 :

 

“36. In my judgment, however, it is also of importance that the Court should be willing to examine the   conduct of those who first refuse and then accept a Part 36 offer. If a claimant’s conduct in this respect is wholly or highly unreasonable, the Court should be prepared to contemplate an indemnity costs order. A readiness to do so should provide a proper incentive for the timely acceptance of fair and reasonable offers.” (My bold)

 

There is no suggestion here of any misconduct beyond accepting late, for which the claimant is doubly punished without indemnity costs.

Also, why do the courts not apply this reasoning in paragraph 36 to late accepting defendants?

 

PART 36: 90% IS GENUINE OFFER OF SETTLEMENT

In JMX (a child by his mother and litigation friend, FMX) v Norfolk and Norwich Hospitals NHS Foundation Trust [2018] EWHC 185 (QB)

the Queen’s Bench Division of the High Court held that a Part 36 offer on liability of 90% of the damages to be agreed or assessed was a genuine offer of settlement within the meaning of CPR 36.17 (5)(e).

The High Court rejected the defendant’s argument that 10% was a token discount as it did not reflect any realistic assessment of the risk of litigation.

Here the time for accepting the offer expired one day before the trial, which the claimant then won.

One of the factors which the court must take into account is whether the office was a genuine attempt to settle the proceedings.

The High Court said:

“14. When an offer to accept 90% is made in a case such as this, I would regard it as a case where the Claimant’s team regard the claim as very strong, but is prepared to offer a modest discount to secure absolute certainty of obtaining substantial compensation. That is what Mr Nolan says prompted the offer in this case and I have no reason to doubt that that was so. Whilst, of course, it is open to the offeror to explain this kind of thinking in the letter making the offer if it is thought helpful, I do wonder whether in most cases it would assist. I can see the letter prompting a reply (sometimes expressed in language that does not help the settlement process) and it may be thought better simply to leave it to the recipient of the offer to assess the offer as it stands.

 

  1. If I was to accede to Mr Westcott’s submissions, it could have the effect that a 90% settlement in the clinical negligence sphere is hardly ever agreed. In my capacity as Judge in charge of the Queen’s Bench Division Civil List, I see a great many settlements in this area of litigation (and in serious personal injury claims not arising from clinical negligence) when I am asked to approve the settlement. I have not, of course, kept any kind of record, but my perception is that a wide variety of “percentage settlements” on liability/causation are agreed and approved by the court, including “90% settlements” from time to time. I can certainly recall several in my own practice in my last few years at the Bar. As I have said, if I were to accede to Mr Wescott’s submissions, I can see that no one will ever offer to accept 90% and the NHSR will never agree to it.”

 

This case follows a long line of cases, including ones where a 95% offer to settle has been held to be a genuine offer to settle.

The White Book commentary on this whole issue is wrong.

 

PART 36: UNCERTAINTY OF PROGNOSIS MAKES NO DIFFERENCE [

In Briggs v CEF Holdings Ltd [2017] EWCA Civ 2363

the Court of Appeal overturned a district judge’s decision not to order a late-accepting personal injury claimant to pay the defendant’s costs from expiry of the relevant period.

The district judge had held that it would be unjust to apply the usual rule as the extent of the injury had not been resolved and the prognosis was uncertain.

The Court of Appeal rejected that approach.

Uncertainty about the claimant’s prognosis is part of the usual risks of personal injury litigation and one of the purposes of Part 36 is to shift the risk to a party which does not accept an offer, and that aim should not be undermined.

To disapply the Part 36 consequences a party must demonstrate injustice, not just uncertainty.

Here, the Court of Appeal noted that it had applied the same principles in

 

SG (A Child) v Hewitt (Costs) [2012] EWCA Civ 1053

 

an extreme case where it had held that the usual costs order would be unjust due to difficulties in forming a prognosis following brain damage to a small child.

That was a “very clear case on the other side of the factual line” and was very different from this case where, simply as one of the contingencies of litigation, it was perhaps difficult to work out how it might turn out.

 

PART 36 AND CHANGE IN CIRCUMSTANCES JUSTIFYING WITHDRAWAL OF OFFER

In Application in Private [2017] EWHC 3606 (Comm)

the Queen’s Bench Division of the High Court reviewed the law on withdrawal of a Part 36 offer during the relevant period when that period included the trial.

The court said that CPR 36.10, dealing with the withdrawal or changing of a Part 36 offer before the expiry of the relevant period, did not allow for the situation where an offer is withdrawn during trial and purportedly accepted during the trial, which requires the court’s permission.

The court held that CPR 36.10(3) applied indirectly where the recipient of the offer needed the court’s permission to accept an offer during the trial.

The court also gave guidance on the “change in circumstances” required for permission to withdraw the offer to be given.

This case related to fees paid to issuers of debit and credit cards by acquirers and was case managed with the Arcadia MasterCard litigation, involving many of the same issues and claimants.

On the day that judgment was given in favour of the defendant, MasterCard, in those proceedings, the defendants here purported to withdraw their Part 36 offer.

The next day, all but one of the claimants purported to accept that Part 36 offer.

The judge here refused to allow the defendants permission to withdraw the Part 36 offer, holding that a judgment handed down in a case involving similar issues was not a change in circumstance meaning that it would be unjust to hold the defendants to their Part 36 offer.

Permission is required to withdraw a Part 36 offer during a trial.

Permission is also required to accept a Part 36 offer during a trial.

If permission is given to accept a Part 36 offer during a trial, then the issue of costs is one for the court, as compared with the ordinary rule where automatic provisions apply unless the court thinks it unjust.

However, in determining the costs consequences, the court took into account the fact the claimants had deliberately chosen not to accept the Part 36 offer for three months while waiting to see how the proceedings progressed.

Here the court allowed the claimants their costs to 21 days after the Part 36 offer was made, and awarded the defendants costs thereafter.

The lengthy decision contains a useful review of the law in this field.

 

PART 36 AND PAYMENTS ON ACCOUNT

In Gamal v Synergy Lifestyle Ltd [2018] EWCA Civ 210

the Court of Appeal held that a payment on account by a party who had made an earlier Part 36 offer reduced that offer by the same sum as the payment on account.

The defendant made a Part 36 offer of £15,000.00 and then made a payment on account of £10,000.00 and the effect of this was to reduce its Part 36 offer to £5,000.00

If a paying party wishes to avoid this consequence, then it should make that clear as soon as possible, preferably when payment is made, although the decision suggests that a party may clarify its position at any time before judgment, or acceptance of the Part 36 offer.

Here the claimant sought £151,000.00 for an invoice for work done on the defendant’s home, but the invoice was fraudulent and concocted with the defendant to obtain payment from the trustees.

The defendant made a Part 36 offer of £15,000.00 and a subsequent payment on account of £10,000.00 and the balance awarded at trial was £14,275.59.

The Court of Appeal held that the £10,000.00 payment had reduced the Part 36 offer from £15,000.00 to £5,000.00 and thus it had been beaten.

Had it not been so reduced the offer would not have been beaten and the defendant would have got costs from the date of expiry of the unbeaten Part 36 offer in the usual way.

 

The Court of Appeal upheld the reasoning of the Court of Appeal in

 

Littlestone v Macleish [2016] EWCA 127

 

on the effect of admissions payments on Part 36 offers to payments on account, holding that a payment on account also reduces an earlier Part 36 offer.

 

PART 36 AND WITHDRAWN OFFERS

In Ballard v Sussex Partnership NHS Foundation Trust [2018] EWHC 370 (QB)

the High Court considered the effect of a withdrawn Part 36 offer.

This was a personal injury case where liability had been admitted.

In January 2016 the defendant made a Part 36 offer of £50,000.00 but withdrew it in February 2017, and made a revised offer of £30,000.00.

At trial in September 2017, the claimant was awarded £23,315.13 and thus failed to beat either offer.

It was common ground that the claimant was liable for the defendant’s costs from expiry of the second offer in March 2017.

However, the trial judge also ordered the claimant to pay the defendant’s costs from expiry of the first, now withdrawn, offer in January 2016 and deprived the claimant of its costs from expiry of that offer.

The wording of the second offer was:

“We write further to our [other] letter today and hereby given the Claimant notice that the Defendant offers to pay compensation as set out in this letter in settlement of the whole of her claim. This is a Part 36 Offer and all previous offers in this matter are withdrawn. This offer is intended to have the consequences of Part 36. The Defendant’s offer is open for acceptance for 21 days from the date you are served with this letter, which we calculate to be until 4.00pm on 01.03.17. This offer can only be withdrawn or altered to be less advantageous to the Claimant before 01.03.17 with the permission of the Court.

The offer is gross of CRU benefits. The date for payment for the purpose of Section 9(1)(b) of the Social Security (Recovery of Benefits) Act (the 1997 Act) is the date of this offer. The CRU Certificate is valid until 15.02.17 and shows £819.43 payable in respect of Employment and Support Allowance. We enclose copy Certificate.

The gross amount of compensation that the Defendant offers to pay is £30,000. It includes all interest accruing up to 01.03.17, CRU benefits (£819.43) and interim payment (£nil).

If the Claimant accepts the Defendant’s offer by 01.03.17, the Defendant will:

  1. Pay the net amount of £29,180.57 within 14 days of the date of acceptance or (in cases requiring an order for payment) the date of the order for payment;
  2. Pay to the Department of Works & Pensions (“the DWP”) recoverable benefits (if any), including deductible benefits (if any), paid to the Claimant up to the date of this offer; and
  3. Pay the Claimant’s reasonable costs up until 01.03.17 or the date of acceptance of the Defendant’s offer, whichever is the earlier, such costs to be agreed or assessed on the standard basis in accordance with CPR Part 36.10. In addition, if approval is required by the Civil Procedure Rules, the Defendant will pay the Claimant’s reasonable costs of obtaining approval of the settlement.

For the avoidance of doubt, if the Claimant fails to obtain a Judgment more advantageous than the offer made in this letter then the Defendant will seek an Order that the Claimant should pay both Parties’ costs from 01.03.17.”

The effect of this offer was that it remained open until the day before the start of the trial. It was not accepted.

The claimant failed to beat it at trial.

The judge at first instance ordered the claimant to pay the defendant’s costs from expiry of the first offer and also deprived the claimant of its costs from then.

On appeal the claimant relied upon the clear wording of the second offer, that is that the defendant would seek costs from 1 March 2017.

Although the letter was silent about the costs from 16 February 2016, the date of expiry of the first offer, a reasonable interpretation was that the claimant’s costs would be met until the expiry of the second offer, even if she failed to better that second offer.

The potential relevance of the first offer stems from CPR 44.2(4)(c):

“(4) In deciding what order (if any) to make about costs, the court will have regard to all the circumstances, including –

“(c) any payment into court or admissible offer to settle made by a party which is drawn to the court’s attention, and which is not an offer to which costs consequences under Part 36 apply.”

The court here then reviewed the case law.

“21.    In Fox v Foundation Piling Ltd [2011] EWCA Civ 790, Jackson LJ, with whom Ward and Moore- Bick LJJ agreed, said two things of relevance to the current issue at [40] and [53] respectively:

(1) “Pankhurst v White …was a personal injuries action in which MacDuff J held that the claimant’s Part 36 offer retained its potency under Part 36 despite having been withdrawn. The case went to the Court of Appeal, but not on that issue. There were special features in Pankhurst and also that case was governed by the old version of Part 36 before the April 2007 amendments. In my view, Pankhurst is not authority for the proposition that a party which withdraws its Part 36 offer under what is now rule 36.3 (6) can reap the benefits of rule 36.14.”

(2) “A Part 36 offer which is subsequently withdrawn ceases to attract the consequences set out in rule 36.14. Such an offer then constitutes an “admissible offer to settle” within rule 44.3 (4)(c).”

  1. My attention has been drawn to a decision of His Honour Judge Hacon in Uwug Ltd & Anor v Ball [2015] EWHC 74 (IPEC) where he said, relying on CPR 44.2(4)(c), that “the usual consequences of a claimant failing to obtain a judgment more advantageous than the defendant’s Part 36 offer do not apply where the offer has been withdrawn … [but] it does not follow that [the defendant’s] first Part 36 offer [should be treated] as if it never happened.” That first offer had been withdrawn.
  1. There is, therefore, a tension between the proposition that an offeror who withdraws a Part 36 offer cannot “reap the benefits” of what is now r.36.17 (and thus, in the present situation, result in the almost inevitable result that all the costs incurred after the expiry of the offer should be paid by the Claimant) and the proposition that such an offer is still “relevant” on the issue of costs.
  1. Given what was said in Fox v Foundation Piling Ltd, the Judge (rightly) accepted that the first offer was potentially relevant on the issue of costs. In the paragraph of his ruling immediately before the paragraph quoted in paragraph 14 above, his thinking is revealed as follows:

“The first Part 36 offer is an offer which falls within [CPR r.44.2(4)(c)] and therefore Mr Loxton asks the Court to make an order reflecting that. Mr Heap opposes it on the grounds … that by withdrawing the original offer, and offering a less advantageous offer, somehow or other it would be unjust for the Court to exercise its discretion as Mr Loxton seeks. I simply cannot understand that argument. In my judgment the Claimant received a generous offer of £50,000 and that offer was on the table and could have been accepted for nearly a year with the costs consequences of Part 36. That it was not is not the Defendant’s fault and is a factor that the Court ought to pay strong regard to.”

  1. Having reviewed the transcript of the telephone call, it is clear that Mr Heap was, as part of his submissions, suggesting that the Defendant was putting the Claimant under unjustifiable pressure shortly before the trial for tactical reasons and that it would be unfair for the Claimant to be held liable for the costs from 16 February 2016. That appears to be the point upon which the Judge was focusing. However, Mr Heap did also say on two occasions during his submissions that the terms of the second offer (which was the only extant Part 36 offer) were such that the Claimant and her advisers were led to believe that if she failed to beat the offer, the only adverse consequence was that she would be liable for the costs after 21 days from the date of the letter – in other words, the costs of the trial. He submitted that this is what the second offer said.
  1. He did not refer specifically to the final paragraph of the letter beginning with the words “for the avoidance of doubt”, but that would plainly have been before the Judge for the Judge to read.
  1. Mr Heap’s argument before me was that whatever might have been in doubt about the impact or otherwise of the first offer after it had been withdrawn, it was resolved by the final paragraph of the letter. Not merely was the consequence that the Claimant would ordinarily be responsible for the costs after 21 days if she failed to better the offer pursuant to r. 36.17, but that was made crystal clear in the letter. The letter did not go on to say “and in that situation we will also be inviting the court to order the Claimant to pay the Defendant’s costs from 16 February 2016” or words to that effect.
  1. Mr Loxton submitted that the effect of this submission was effectively to be setting up some kind of estoppel and that it was necessary for the Claimant to demonstrate some detriment in reliance upon the statement in the letter. I do not, with respect, think there is anything in that point. A party is entitled to take the terms of an offer from a reputable and experienced firm such as Kennedys at face value, certainly in an area (such as clinical negligence) where it has considerable expertise. I do not know whether the argument that found favour with the Judge was the product of an afterthought or whether it had always been the intention to mount such an argument if the Claimant failed to beat the second offer. However, I do not consider that it is fair to the Claimant to send a detailed letter to her solicitors, apparently spelling out the consequences of failing to beat the Part 36 offer and then to argue that something different was intended, particularly where, as here, the consequence of the additional argument would probably diminish the Claimant’s net return from the litigation very considerably.
  1. The Judge was obviously very heavily influenced by the fact that the Claimant could have saved a great deal of expense by accepting the first offer. It is undoubtedly true that such expense would have been saved, but I do not consider it was right to regard the second offer as “irrelevant” with the consequence, if the judge so treated it, that the precise terms of the offer were also regarded as irrelevant. In my judgment, the Defendant cannot escape from the precise terms of the final paragraph of the second offer and as a result it is really the first offer that becomes irrelevant.”

Consequently the High Court allowed the appeal and substituted an order that the claimant get the costs up to and including 1 March 2017, but that she should pay the costs of the trial.

Comment

A sensible decision, with a useful review of the case law.

However, the facts are unusual due to the curious wording of the email from Kennedy’s.

Working on the assumption that most litigators in most firms have a rather better understanding of at least the basics of Part 36, these facts are unlikely to be repeated.

 

PART 36 AND INTEREST

In Triple Point Technology Inc v PTT Public Company Ltd [2018] EWHC 45 (TCC)

the Technology and Construction Court considered the rates and period of interest payable on damages where the defendant had defeated the claim and won its counterclaim, and beaten its own Part 36 offer.

The court made the following findings.

The rate of interest to the date when the “offer expired” should be the US prime rate.

Although the contract to which the litigation related was concluded and largely performed in Thailand for a Thai company, Thai lending rates were irrelevant given the parties’ choice of law (English) and jurisdiction (England and Wales).

Referring to McGregor on Damages, Sweet & Maxwell, 19th ed, 2014, paragraph 18-120, the judge held that it is common, although not always the case to award interest at US prime rate where the currency of loss and damage is US dollars, and that was appropriate here.

The enhanced rate of interest thereafter should be 4% over US prime rate.

 

Unlike in OMV Petrom SA v Glencore International AG [2017] EWCA Civ 195

 

there was no criticism of the claimant’s conduct; it would therefore be “wrong in principle to award the maximum rate of enhanced interest because it would leave nowhere to go.”

Nevertheless, the disruption the litigation caused the defendant after making a reasonable offer to settle should be recognised.

The enhanced rate should run until the date of the consequential hearing.

There was no rule or general practice that enhanced interest should only be payable up to the last day of trial, and this date recognised the time needed to give judgment in complex litigation.

In addition, the date of the consequential hearing was convenient to both parties and there was no reason why interest should not continue until that date.

Exercising its discretion to depart from the Judgments Act 1838 rate –

 

see Standard Chartered Bank v Petroleum [2011] EWHC 2094 followed

 

interest thereafter should be payable at the applicable US prime rate , this being the currency of the contract and losses claimed.

The judge’s reasoning provides guidance on interest rates and periods. It suggest that the longer it takes to hand down judgment, the longer the enhanced rate may return.

Presumably, the reference to date when the Part 36 offer expired refers to the end of the relevant period rather than withdrawal of the offer, otherwise CPR 36.14(4) would not have applied.

 

PART 36: ADDITIONAL AMOUNTS DEFERRED TO END OF THE CASE

 

JMX v Norfolk and Norwich Hospitals NHS Foundation Trust [2018] EWHC 67C (QB)

is the second costs decision on Part 36 in the same case, and the case has not yet been determined.

In the first decision

 

JMX A child by his Mother and Litigation Friend, FMX v Norfolk and Norwich Hospitals NHS Foundation Trust [2018] EWHC 185

 

the High Court decided that a 90% offer on liability was a genuine and effective Part 36 offer.

The issue in this second judgment concerned the additional amounts payable under CPR 36.17(4)(d) which entitles the claimant to:

“(e) provided that the case has been decided and there has not been a previous order under this sub-paragraph, an additional amount, which shall not exceed £75,000.00, calculated by applying the prescribed percentage set out below to an amount which is –

(i) the sum awarded to the claimant by the court; or

(ii) where there is no monetary award, the sum awarded to the claimant by the court in respect of costs – …”

Here the claimant had won on liability and to use the court’s phrase, the claimant had an effective Part 36 offer on liability “in the bag”.

The issue here as to whether the additional amount was yet payable as there had been no “sum awarded to the claimant by the court”.

The court held that the case had not yet been decided as according to CPR 36.3(e) a case is “decided” when “all issues in the case have been determined, whether at one or more trials”.

That was sufficient to dispose of the matter.

The court also held that this did not require a Part 36 offer to cover the whole claim as that would neutralise the clear intent of Part 36, which is to encourage claimants to make offers on specific issues, such as breach of duty, and defendants to give them serious consideration with potential adverse consequences for the defendant if a clearly appropriate offer by a claimant has been rejected.

Thus an effective Part 36 offer on liability triggers the right to additional amounts, but they cannot be determined until after the quantum trial.

It is also the case that there can only one order for an additional amount in any case and CPR 36(4)(d) makes that clear – see the wording above.

Here the court held that was to prevent a claimant getting multiple orders for additional amounts if it beat various of its own Part 36 offers, for example on liability, breach of duty, quantum etc.

The court also rejected the suggestion that the order could be treated as a non-monetary award under CPR 36(4)(d)(ii) as the order was for “damages to be assesses”.

The court also said that if the issue of damages is settled, rather than returning to court, it will be open to the claimant in default of agreement as to the consequences, to restore to the court the issue of the payment of any “additional sum” arising from the Part 36 offer on liability.

Comment

A short, exemplary judgment on some important Part 36 issues.

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Written by kerryunderwood

April 9, 2018 at 2:49 pm

Posted in Uncategorized

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