Pankhurst v White – claimants’ offers and interest on costs  EWCA Civ 1445 www.bailii.org/ew/cases/EWCA/Civ/2010/1445.html Under CPR 36.14, where a claimant beats his offer at trial, the court has a discretion to award enhanced interest on the judgment sum and the claimant’s costs at a rate not exceeding 10 per cent above base rate.
The Court of Appeal has confirmed, following its earlier decision in McPhilemy v Times (No 2), that the court cannot award enhanced interest under CPR 36.14 on parts of the judgment which do not merit an award of interest, such as damages for future loss or libel damages.
The court also dismissed the claimant’s appeal from the judge’s refusal to award him interest on his costs which were awarded on the indemnity basis in the normal way under CPR 36.14. Jackson LJ described the costs agreement made by the claimant's solicitors as "grotesque" – the conditional fee arrangement (CFA) involved no risk at all for the solicitors as it had been entered into after liability had been established and success was simply defined as the "recovery of any damages". He considered that this was a highly relevant factor and upheld the decision below not to award interest on costs.
This decision follows the approach taken in Montlake v Lambert Smith Hampton Group Ltd, not referred to in Jackson LJ’s judgment, which decided that, where the claimant is funded by a CFA, it would not be fair to award interest on costs since they will not already have been paid. A similar approach was taken in a libel case funded under a CFA, Jones v Associated Newspapers. Claims for interest on costs should be resisted where the claimant is party to a CFA.
This case is also significant because the decision below offers the only guidance we have about the effect of a withdrawn offer since the new version of Part 36 was introduced in April 2007. Unfortunately, this point did not arise on appeal. The court below held that a Part 36 offer made in 2006 before the rules changed would retain its costs potency even where it had been withdrawn or had expired and that this would also be the case where an offer is withdrawn under the new version of Part 36. Although automatic costs consequences do not apply to withdrawn offers under the new CPR 36.14(6), offers that have been withdrawn may be taken into account by the court when exercising its discretion as to costs under CPR 44.3.
The precise way in which the court will approach its discretion as to costs where an offer has been expressly withdrawn under the new Part 36 is still unclear. For example, is the court allowed to award a claimant enhanced interest and indemnity costs where he has withdrawn his offer or is this only possible where CPR 36.14 applies? It is possible that Part 36 will be amended to clarify the position. In 2009, the Civil Procedure Rules Committee (CPRC) was considering whether, following the Court of Appeal decision in Carver v BAA, Part 36 should be amended to specify that the amount awarded is the only consideration in determining whether the outcome is more advantageous in respect of a money offer. The CPRC's proposed consultation on Part 36 was put on hold until after the publication of Jackson LJ's final report on his Review of Civil Litigation Costs last year. The review of Part 36 should now be able to proceed.