Gamal v Synergy Lifestyle Ltd [2018] EWCA Civ 210 

The facts

Although this was not a casualty claim, it is an interesting case where the court determined whether a payment on account of the sums claimed would reduce the amount of the paying party’s Part 36 offer.

The case involved a claim for defective building work. The claimant had sought £151,000 in respect of work carried out to a house that was occupied by the defendant. The invoice provided was fraudulent and had been issued in collusion with the claimant to enable her to obtain more monies from a trust fund.

In 2015 the defendant made a Part 36 offer of £15,000 and made a payment of £6,600 in 2013 and a payment of £10,000 in February 2016.

In May 2016, the judge assessed the value of the works actually carried out at £36,389 and deducted the sum of £16,600 that had already been paid by the defendant.

It was held that the Part 36 offer equated to the gross sum of £32,000 less the £16,600 already paid so the claimant had beaten the defendant’s Part 36 offer.

The defendant’s case was that the revised sum payable after VAT had been deducted was less than its Part 36 offer. It was submitted that the claimant had failed to beat their Part 36 offer so costs consequences applied under CPR, r. 36.17 in the defendant’s favour.

The claimant’s case was that the sum of £10,000 paid by the defendant in February 2016 should be taken as a payment on account of liability so had the effect of reducing the defendant’s Part 36 offer to £5,000.

Court of Appeal decision

The Court of Appeal held that the payment of £10,000 was a payment on account of liability and reduced the amount of the defendant’s Part 36 offer. It was stated that the position would have been different if the defendant had clearly stated, at any time prior to judgment or acceptance of the Part 36 offer that it was not to be treated as having the effect of reducing the Part 36 offer.

It was specifically concluded that it was open to the paying party to clarify the purpose of the payment. The presumption that a payment on account of liability would reduce a corresponding Part 36 offer unless expressly stated otherwise, did not lead to any uncertainty.

As a result, it was held that the judgment obtained by the claimant was more advantageous than the defendant’s Part 36 offer.

What this means for you

This case importantly shows that payments on account of liability will result in a corresponding reduction in the amount of a Part 36 offer unless the paying party clearly states that it is not to be treated as having that effect.

It is important to bear this point in mind when making any payments on account of liability, damages and/or costs. In cases where interim payments have been made, it should be noted that these payments will reduce any corresponding Part 36 offer when it comes to assessing whether a claimant has equalled, beaten or failed to beat their opponent’s Part 36 offer.

In the event that interim payment(s) have been made, it is recommended that a Part 36 offer clearly states whether it is gross or net of these payments to make clear the total amount of the offer and what the claimant would receive if accepted. The courts will deduct any corresponding payments from the Part 36 offer, in order to compare like with like, when assessing potential costs consequences under CPR, r. 36.17 following judgment.