[2022] EWHC 1882 (TCC)

If a defendant fails to beat a Part 36 Offer to Settle made by a claimant, under CPR 36.17 (4), the Court must, unless it considers it unjust to do so, order that the claimant is entitled to interest at an enhanced rate (not exceeding 10% above base rate), costs on the indemnity basis, interest on those costs at an enhanced rate and an additional amount calculated as a specified percentage of the sum awarded in damages.

CPR 36.17 sets out five factors that the Court must take into account when deciding whether it would be unjust to make the normal order, namely:

(a) the terms of any Part 36 offer;

(b) 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;

(c) the information available to the parties at the time when the Part 36 offer was made;

(d) the conduct of the parties with regard to the giving of or refusal to give information for the purposes of enabling the offer to be made or evaluated; and

(e) whether the offer was a genuine attempt to settle the proceedings.

Here, the judgment awarding £765,094.40 to Omya exceeded a Part 36 offer made by Omya in the sum of £756,287.05. As AEL said, the judgment exceeded the offer “albeit by a very small margin”. AEL argued that, as a consequence, the offer relied upon by Omya was not a genuine attempt to settle the proceedings.

Deputy High Court Judge Ter Haar QC commented that, whilst the mathematical proportion of the offer to the amount claimed is a potentially relevant factor, it is not in itself determinative of whether an offer is a genuine attempt to settle the proceedings. The discount offered here was just £8,806.95 (1.15%), albeit it rose to 5% if interest was taken into account, but the Judge said this was a case in which there was never likely to be (and, in the end, there was not) any significant debate as to quantum. The offer was also made at a relatively early stage, which was consistent with a genuine attempt to settle. The offer was in all the circumstances:

“a genuine attempt to settle – an entirely sensible course for a commercial enterprise such as the Claimant which had no interest in the proceedings being dragged out and faced risks that important witnesses might not appear at trial. These matters indicate to me that the Claimant had every incentive to try to achieve a settlement and that this was not, as in some cases posited in the authorities, a cynical attempt to manipulate a scheme designed to encourage settlement.”

As to the rate of interest, Omya sought the full 10%. AEL said the court should either award interest at a commercial rate, (in 2018, interest rates were at 0.75% over base dropping to 0.1% in March 2020) or at most at a rate of 4% over base. The Judge referred to the case of OMV Petrom SA v Glencore International AG [2017] EWCA Civ 195, where the CA said that the court has a discretion to include a non-compensatory element in its award under CPR 36.17(4)(a), but that the level of interest awarded must be proportionate to, among other factors:

(a) the length of time that had elapsed between the offer and judgment;

(b) whether the defendant took entirely bad points or whether it behaved reasonably, despite the offer, in pursuing its defence; and

(c) the general level of disruption caused to the claimant by a refusal to negotiate or to accept the Part 36 offer.

The White Book, (which provides judicial guidance on the interpretation of the court procedural rules) noted that whilst OMV was a high value fraud case, where the defence had been founded on lies and the CA ordered interest at the full 10% over base, there was no default rule in favour of interest at that rate.

Here, the Judge noted that there was a significant period between the date of the offer (June 2020) and the date of judgment (December 2021) where “the defence pursued was wholly implausible and that it was unreasonable to pursue that defence.” Against that, proportionality required the Judge to take into consideration the maximum rate of enhanced interest permitted under Part 36 and prevailing commercial rates. The result was that a figure of 5% was deemed appropriate.