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CPR Part 36: Additional interest and additional payment - CPR 36.14

Feltham v Freer Bouskell (Costs)
15 July 2013
High Court (Ch D)

Davison v Leitch
18 October 2013
Court of Appeal

Feltham v Freer Bouskell

Facts

The Claimant brought a professional negligence claim against the Defendant firm of solicitors under the principle set out by the House of Lords in White v Jones back in 1995, that the assumption of responsibility by a solicitor towards his client extended also to an intended beneficiary who was reasonably foreseeably deprived of his intended legacy as a result of the solicitor’s negligence.  Readers may recall that we reported on the decision in the substantive issues last month.

The Claimant had made a Part 36 offer on 10 May 2013 in the sum of £700,000, just before trial.  The Claimant was awarded £712,801.60 at trial.  As the Claimant beat her own Part 36 offer, it fell to the court to determine whether the Claimant should be entitled to the benefits of Part 36.14 of the CPR, specifically:

  • r.36.14(3)(a) - which provides for the court to make an award of interest on the award at up to 10% above base rate;

  • r.36.14(3)(d) - which provides for the court to award an additional amount of 10% on the first £500,000 awarded and then 5% of any amount awarded between £500,000 to £1m, the additional award not to exceed £75,000.

When considering whether to award the additional interest and additional payment, r36.14 (4) requires the court to take into account all the circumstances surrounding the case, including:

  • the terms of any Part 36 offer;

  • the stage in the proceedings when any Part 36 offer was made, including in particular how long before the trial started the offer was made;

  • the information available to the parties at the time when the Part 36 offer was made;

  • the conduct of the parties with regard to the giving or refusing to give information for the purposes of enabling the offer to be made or evaluated.

The Defendant argued that it was unjust to order an additional sum to be paid, stating that the Claimant's Part 36 offer was made at the last minute and that the Claimant raised a key allegation for the first time during the course of opening, which was not pleaded.  The Defendant also argued that the Claimant had not disclosed important documents until just before trial. 

Findings

Awarding the Claimant some of the benefits prescribed under Part 36, Mr Charles Hollander QC found that:

  • The appropriate rate for interest under Part 36.14 (3)(a) in this case was 3.5%, in addition to the base rate which was a "generous uplift in usual rates".  To award a rate of 10% on top of the base rate "would be effectively penal".  

  • Accepting the Defendant's arguments, the Judge declined to award an additional amount in the sum of £75,000 under Part 36.14(3)(d). 

The Claimant was not to be penalised further and she was awarded all her costs of the action and indemnity costs from 3 June (which was the last date that the Defendant could have accepted the Claimant’s Part 36 offer).  The Judge also awarded the Claimant interest on her costs from 3 June onward at 3.5% above base rate (in line with his award for interest on the substantive claim) in accordance with Part 36.14(3)(c).

NB. The Defendants are appealing the court’s decision in the substantive action, which is scheduled to be heard in March of next year.

Davison v Leitch

Facts

The Claimant brought a claim for damages arising from a serious obstetric injury suffered during the delivery of her first child whilst under the care of the Defendant.  The Claimant had been employed as an equity sales trader in the City and had a highly successful banking career.  As a result of the Defendant's negligence she had a reduced earnings capacity and presented a substantial claim for past and future loss of earnings, together with a claim for loss of congenial employment.

On 11 September 2013 the Claimant made a Part 36 offer in the sum of £900,000.  The case was initially listed for trial during a trial period which commenced on 2 October and would have been heard on that date but for the fact that the Claimant was not ready for trial.  The case ultimately proceeded to trial on 10 October when the Claimant was awarded an amount in excess of her Part 36 offer.  As in Feltham, the Claimant then looked to take advantage of the additional benefits set out under r36.14(3) and the court considered whether she should be awarded those additional benefits having regard to the test set out in r36.14(4).

Findings

Mrs Justice Andrews held that:

  • The trial should have started on 2 October and, in those circumstances, the Claimant’s Part 36 offer would not have been effective and the rule would not have applied. 

  • Given that the trial on 2 October did not proceed because the Claimant was not ready it would not be unfair to the Defendant for some of the consequences of Part 36.14 to be visited upon him but it would probably be unfair for all of them to apply.

In accordance with Part 36.14(3)(c), the court ordered interest to be paid on those costs from the last date the Part 36 offer could have been accepted at a commercial rate of 2% above base rate.  Whilst the Claimant was awarded an additional sum of £75,000, in accordance with 36.14(3)(d), the judge felt that it would be unfair to award an uplift of interest on the damages as well and declined to do so.

Comment

The Claimants’ conduct in both of these cases was such that the court did not feel that it was appropriate to award all of the benefits of Part 36.14(3) and the Defendants were able to salvage something from the defeat.  Both of these cases give some helpful steer as to likely levels of penalty interest under r.36.14 (3.5% in the Feltham case and 2% in the Davidson case).

Contact

For further information please contact Marcus Davies, Professional Support Executive, on 0161 603 5146

This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.

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