Many will recall the euphoria amongst Claimants when Lord Dyson's judgment in Broadhurst & Anor v Tan & Anor [2016] EWCA Civ 94 confirmed that their entitlement to assessed costs under Part 36 prevailed over the Part 45 fixed costs regime in cases where they successfully beat their Part 36 offer. A considerably less warm welcome was reserved for the recent decision in Hurry Narain Purrunsing as the High Court ruled that interest awarded between the expiry of the relevant period of the Part 36 offer and judgment will not be taken into account when determining whether or not the Claimants have secured more than the sum that they had offered to settle for.

 

The Facts

On 20th May 2015, the Claimant made a Part 36 offer proposing to settle the claim at £516,000 inclusive of interest. At trial, judgment was entered for the Claimant in the sum of £470,000 plus interest at the rate of 2.5% above base rate to the date of the judgment totalling £48,983.01. The Claimant invited the Court to make an order for enhanced costs under CPR 36.17(4)(a) on the basis that, by recovering the total sum of £518,983.01 at trial, he had beaten his Part 36 offer.

The Defendants opposed the application by submitting that the Claimant was not entitled to the additional costs sought as he had recovered less than the amount he had originally offered to accept. This argument was advanced on the Defendants' suggestion that, in determining whether the Claimant had bettered his offer, the Court should deduct the interest element awarded from the expiry of the relevant period (£11,936.71) from the sum awarded at trial, as opposed to simply comparing the two amounts in isolation.

 

The Decision

In finding for the Defendants, His Honour Judge Pelling QC accepted that, when considering whether the judgment obtained was “more advantageous” for the purpose of assessing a party’s entitlement to costs under CPR 36.17, the Court should have eliminated from the comparison the additional interest accrued after the expiry of the relevant period. In his reasoning, the Judge applied the plain meaning of CPR 36.5(4) that a “Part 36 offer to pay money is deemed to include all interest down to the date when the relevant period for acceptance of the offer expired”. The Judge accordingly discharged the additional interest as being “immaterial” to the question of whether the judgment obtained was “better in money terms” (CPR 36.17(2)) and agreed that the Claimant had, in fact, failed to beat his Part 36 offer as the resulting sum was calculated at £507,046.30.

The Judge further criticised the Claimant’s "problematic application" for costs on the indemnity basis and expressed the view that the hearing had been both "unnecessary" and "needlessly over-elaborate". Consequently, in addition to having his application dismissed, the Claimant was ordered to pay 40% of the first Defendant's costs and 50% of the second Defendant's costs incurred as a result of the application hearing.

 

Breaking New Ground?

This is the first reported judgment on this issue since the amendments to the Civil Procedural Rules in April 2015. However, it is worth noting that the conclusion reached by HHJ Pelling QC is reminiscent of the Court of Appeal's findings in the case of StephenBlackham v Entrepose UK [2004] All ER (D) 478 (Jul), where the Defendants successfully appealed an adverse costs order on grounds analogous to those relied upon by the Defendants in the present case. While Lord Justice Brook's judgment does not appear in the list of 'cited authorities' considered by the High Court, he too was of the view that "in deciding whether the claimant bettered the Part 36 payment it was necessary to compare like with like" and therefore eliminate the additional interest element. Interestingly, that approach was one already envisaged in the Court's former practice described in the 1999 White Book (Vol 1, note 22/1/10 on page 411) where it was accepted that, when determining whether a payment into Court was adequate at the time that it was made, “trial judges may have to make a special calculation of interest at the end of the trial”.

 

The Wider Picture

In the first half of the year, Courts have seemed heavily proactive in incentivising the use of Part 36 offers to settle cases and penalising unreasonable refusals of good settlements. In addition to the findings in Broadhurst & Anor v Tan & Anor [2016] as detailed above, Defendants were further encouraged to give serious consideration to Part 36 offers following the High Court's ruling in the case of Bolt Burdon v Tariq [2016] EWHC 1507(QB). In that case, Mr Justice Spencer accepted that, where a Claimant who beats his Part 36 offer is also entitled to recover contractual interest, the 10% uplift under CPR 36.17(4)(d) is to be applied to the entirety of the claim and not just to the principal sum.

Accordingly, the judgment in Hurry Narain Purrunsing is important in that it brings some welcome clarification as to what the Courts will take into consideration when assessing whether or not a Claimant's judgment was more advantageous than his Part 36 offer. The decision further eliminates the risk envisaged by His Honour Judge Pelling QC that the applicability of the enhanced costs regime might end up depending on “entirely random events such as when judgment would be given following a trial”. Most notably, the case serves as a firm reminder to Claimants that, despite recent decisions in their favour, the Courts view orders in respect of additional liabilities as “draconian in effect” and will not readily make such orders when the Claimants have failed to give proper consideration to Part 36 offers.