Part 36 offers made exclusive of interest not valid, Court of Appeal rules
It is not possible to make a valid Part 36 offer exclusive of interest either generally or in the context of detailed assessment proceedings, the Court of Appeal has ruled in a case involving a local authority.
In King v City of London Corporation [2019] EWCA Civ 2266, which was published on Bailii last week, Lord Justice Newey said the issue as to whether an offer exclusive of interest could be made under CPR Part 36 either generally or at least in the context of proceedings for detailed assessment of costs under CPR Part 47 was a matter on which judges had taken divergent views, he added.
In the present case, His Honour Judge Dight, upholding Deputy Master Campbell, concluded that an offer exclusive of interest could not be a valid Part 36 offer.
In contrast, in Horne v Prescot (No 1) Ltd [2019] EWHC 1322 (QB), [2019] 1 WLR 4808, Nicol J, dismissing an appeal from Master Nagalingam, held that, at least in the context of detailed assessment proceedings, an offer excluding interest could be an effective Part 36 offer.
The Court of Appeal were told that differing opinions had also been expressed by other costs judges.
The background to King v City of London Corporation was that on 15 February 2017, the parties agreed a consent order settling a claim by the appellant, Mr King. The order provided for the respondent, City of London Corporation, to pay him £250,000 plus costs "to be assessed if not agreed on the standard basis".
Mr King served his bill of costs and detailed assessment proceedings ensued. On 12 December 2017, Pure Legal Costs Consultants made a settlement offer on Mr King's behalf in a letter to the City's solicitors. The letter was headed "Part 36 offer" and said:
"The Claimant hereby offers to accept £50,000.00 in full and final settlement of the costs detailed within the Bill only.
“This offer is made pursuant to CPR 36. The offer is open for 21 days from deemed service of this letter. If the offer is accepted in this time the Defendant shall be liable for the Claimants costs in accordance with CPR 36.13.
“The offer relates to the whole of the claim for costs within the Bill and takes into account any counterclaim, but excludes interest."
The City not having accepted that offer, there was a detailed assessment hearing before Deputy Master Campbell on 13 June 2018. Mr King's bill was assessed at £52,470 excluding interest.
On the basis that the £52,470 was more advantageous to him than the £50,000 he had offered to accept, Mr King argued that CPR 36.17 applied and, hence, that the costs consequences set out in CPR 36.17(4) should follow.
The Deputy Master, however, concluded that the offer of 12 December 2017 was not a valid Part 36 offer and so that CPR 36.17 was not applicable.
Mr King appealed, but Judge Dight, sitting with a Costs Judge as an assessor, dismissed the appeal. Judge Dight concluded that "it is not possible, in respect of ordinary substantive claims, to make an offer that is compliant with Part 36 but which excludes interest" and that the position was no different as regards offers made in detailed assessment proceedings.
Dismissing Mr King’s appeal, Lord Justice Newey said: “In my view, it is not possible to make a valid Part 36 offer exclusive of interest either generally or in the context of detailed assessment proceedings. Further, I do not consider that there can be any question of taking the offer of 12 December 2017 to have been inclusive of interest when it stated precisely the opposite.”
Lord Justice Arnold said he had “reluctantly” come to the conclusion that he agreed that the appeal should be dismissed. But he added that the issue merited consideration by the Civil Procedure Rules Committee.
He said: “In my opinion there are arguments in favour of permitting Part 36 offers to be made which are exclusive of interest, at least in assessment proceedings if not in the general run of claims. If the Committee decides, however, that offers exclusive of interest should not be permitted, then I would suggest that rule 36.5 be amended to say so in terms. At the very least, PD47 paragraph 19 should be revised.”
Lord Justice Coulson agreed that the appeal should be dismissed.
