The High Court in Abdulrahman Mohammed v The Home Office  EWHC 2809 (QB) has ruled that the additional 10% uplift on damages which the court is entitled to award for beating a Part 36 offer means an uplift both on damages and on interest.
Abdulrahman Mohammed is a citizen of Somalia who has been seeking asylum in the UK, and during that time had been a prolific and violent offender in the UK. For his violent actions Mr Mohammed was sentenced to a number of lawful incarcerations, however in an attempt to keep track of him, Mr Mohammed was also unlawfully imprisoned for 445 days, despite having committed no crime. As a result of this incarceration he brought a claim for unlawful imprisonment, for which the Home Office ultimately accepted liability, albeit on the day before trial. The claimant at a hearing to assess damages was awarded £78,500. Seven months prior to that award of damages Mr Mohammed via his solicitors made a Part 36 offer of £70,000.
Following the award of damages it was conceded by the defendant that interest on such damages should be at 2% per annum from the date of service of the proceedings to judgment.
At the time of judgment, the claimant brought the Part 36 offer to the court's attention and submitted that pursuant to civil procedure rule 36.17 (4) the court must:
award interest on the whole or part of any sum of money excluding interest at a rate not exceeding 10% above base rate starting with the date on which the offer expired;
order costs including any recoverable pre-action costs on the indemnity basis from the date on which the offer expired;
award interest on those costs at a rate not exceeding 10% above base rate;
and award an additional amount which shall not exceed £75,000 calculated by applying the prescribed percentage set out below (namely 10%) to the sum awarded to the claimant.
In this case the defendant sought to challenge the enhanced interest on the award of damages.
The Deputy High Court Judge, Mr Edward Pepperall QC, made comment on the fact that some may question why a foreign citizen, who has been a criminal in the UK, ought to be entitled to compensation. The Judge rightly pointed out that there are few principles more important in a civilised society than that ‘no person should be deprived of their liberty without lawful authority’. Pepperall QC restated the fact that it is essential where a person has been unlawfully imprisoned the judiciary must act in an independent manner to hold the executive to account, regardless of the content of any individual’s character. Therefore, despite Mr Mohammed's previous wrongdoings, he was entitled to damages against the state. However, while the claimant was entitled to damages Home Office challenged whether the damages should be enhanced, given the content of Mr Mohammed’s character.
Pepperall QC commented that through the hard-work and diligence of his solicitors, the claimant prosecuted the case in a reasonably efficient and proper manner. It was highlighted that the awards for enhanced interest were in large measure, to encourage good practice.
The defendants case was that while the claimant was entitled to proper compensation the court should temper its award of interest to reflect the claimant's character.
Pepperall QC was less interested in this than he was of the conduct of the parties during the litigation. He drew much from the reforms of Lord Justice Jackson and the need to conduct litigation efficiently at proportion of costs. Pepperall QC was also critical of the defendant's failure to accept what was in the judge's opinion a pre-eminently reasonable offer the judge expressly stated “…The Home Office should have recognised the weakness of its defence significantly earlier than 4:03 PM on the afternoon before trial“ and ”specifically, the Home Office should have re-evaluated this case on receipt of the Part 36 offer. Had it done so, it should, in my judgement, have recognised that the offer should have been accepted. That said, it is plainly more desirable that a party should undertake a last-minute reassessment and make a late concession of liability than it should persist in a bad defence.”
Given all of that the judge awarded an enhanced interest on the award at a rate of 6% over base from issue until judgment and awarded indemnity costs for the same period. The judge set out at two Courts of Appeal authorities which supported his enhanced interest on costs namely McPhilemy v Times Newspaper Ltd  EWCA Civ. 871 and OMV Petrom SA v Glencore International AG  EWCA Civ. 195.
What this means for you
In a well-reasoned judgment the court has set out that enhanced interest on damages and indemnity costs will follow where a Part 36 offer, reasonably made, has not been accepted. With this in mind practitioners will have to think long and hard about whether to accept Part 36 offers. It is also likely to encourage those seeking settlement to make reasonable offers as early as possible.