Civil practice and procedure – CPR Part 36 – Costs – Parties agreeing consent order settling appellant’s claim – Appellant serving bill of costs – Detailed assessment proceedings ensuing – Appellant purporting to make Part 36 offer in settlement of costs claim – Whether offer exclusive of interest possible under Part 36 either generally or in context of proceedings for detailed assessment of costs – Appeal dismissed
On 15 February 2017, the parties agreed a consent order settling a claim by the appellant. The order provided for the respondent to pay the appellant £250,000 plus costs to be assessed if not agreed on the standard basis. The appellant served his bill of costs and detailed assessment proceedings ensued. On 12 December 2017, the appellant made a settlement offer in a letter headed “Part 36 offer” and offered to accept £50,000 in full and final settlement of the costs. The offer was said to relate to the whole of the claim for costs within the bill but excluded interest.
The respondent did not accept that offer and, at a detailed assessment hearing, the appellant’s bill was assessed at £52,470 excluding interest. On the basis that £52,470 was more advantageous than the £50,000 he had offered to accept, the appellant argued that CPR 36.17 applied so that the costs consequences set out in CPR 36.17(4) should follow. However, the deputy master concluded that the offer of 12 December 2017 was not a valid Part 36 offer so that CPR 36.17 was not applicable. The appellant’s appeal against that decision was dismissed.
The appellant appealed to the Court of Appeal. The main question was whether an offer exclusive of interest could be made under Part 36 either generally or at least in the context of proceedings for detailed assessment of costs under CPR Part 47. Three issues fell to be determined: (i) whether a Part 36 offer could generally exclude interest; (ii) if not, whether a Part 36 offer could nevertheless exclude interest in the context of detailed assessment proceedings; and (iii) specifically, whether the offer made on 12 December 2017 was to be treated as inclusive of interest as a result of CPR 36.5(4).
Held: The appeal was dismissed.
(1) While it was desirable for disputes to be resolved by agreement, the self-contained procedural code comprised in CPR Part 36 was carefully structured and highly prescriptive. Although parties were not bound to follow those rules, if they wanted the substantial benefits which flowed from Part 36, they had to follow them in every respect. The regime was, designedly, relatively inflexible: Gibbon v Manchester City Council [2010] EWCA Civ 726; [2010] 3 EGLR 85 followed.
Part 36 proceeded on the basis that interest was ancillary to a claim, not a severable part of it. Just as a party could not make a Part 36 offer providing for costs consequences other than those prescribed by Part 36, so a Part 36 offer, if it offered to pay or accept a sum of money, had to be inclusive of all interest, as CPR 36.5(4) said. Interest could not be hived off. Rule 36.5(4) specified that any offer to pay a sum of money “will be treated as inclusive of all interest”. It was not expressed to be (for example) a rule that applied “unless the offer says otherwise”. The rule applied to every offer that wanted to be treated as a Part 36 offer.
(2) The appellant’s argument that, because the word “must” was not used, this was not a mandatory provision and the words “will be treated as” gave rise to some form of rebuttable presumption, was rejected. The word “must” was not always required to convey a mandatory meaning. The words used in CPR 36.5(4) were sufficient to convey a mandatory requirement: that all sums offered by way of a valid Part 36 offer were deemed to be inclusive of interest: Godwin v Swindon Borough Council [2001] EWCA Civ 1478 followed.
(3) An offer which sought to compromise the principal claim, but which excluded interest, could not be an offer within CPR 36.2(3). The claim for interest was not truly a part of the principal claim for that purpose, but a separate issue which, for purposes of convenience, simplicity and certainty, was deemed to have been taken account of in the offer of the single sum. In that way, interest could be regarded in a similar way to costs: it might be in issue in any given case, but it was subservient to the principal claim, and was therefore dealt with separately under Part 36.
If the proposition (that the offer could exclude interest because it was an offer for only part of the claim) was tested by reference to the rule, it led to an uncertain result. If an offer was made for the part of the claim which excluded interest, that did not stop that same offer being deemed to be inclusive of interest by operation of CPR 36.5(4). The recipient would not know whether it included interest (which was what the rule required) or excluded interest (which was what the offer might say). Certainty and clarity were vital in the proper operation of Part 36, and that interpretation would make for neither.
(4) Although it was important that Part 36 continued to operate in a way that promoted settlements and provided proper protection for a party taking a realistic view of its position at the outset, in costs assessment proceedings, that could easily be achieved by an offer letter that expressly addressed the interest on costs and identified the period for which such interest was offered.
Accordingly, it was not possible to make a valid Part 36 offer exclusive of interest either generally or in the context of detailed assessment proceedings. Furthermore, the offer of 12 December 2017 could not be taken to have been inclusive of interest when it stated precisely the opposite.
(Per Arnold LJ) The issue raised merited consideration by the Civil Procedure Rules Committee. There were arguments in favour of permitting Part 36 offers to be made which were exclusive of interest, at least in assessment proceedings, if not in the general run of claims. If the Committee decided, however, that offers exclusive of interest should not be permitted, rule 36.5 should be amended to say so in terms.
George McDonald (instructed by Pattinson & Brewer) appeared for the appellant; Jamie Carpenter (instructed by BLM) appeared for the respondent.
Eileen O’Grady, barrister
Click here to read a transcript of King v City of London Corporation
