JMX v Norfolk and Norwich Hospitals: Judge considers whether Part 36 offer was a genuine attempt to settle
The court can take various factors into account when deciding whether it would be unjust to order the usual Part 36 costs consequences. A new factor was added in April 2015 under 36.17(5)(e): "whether the offer was a genuine attempt to settle the proceedings". Even before the addition of that factor, though, there was caselaw to the same effect.
In this case, the claimant offered to accept 90% of his claim and went on to beat that offer at trial. The defendant argued that the usual Part 36 costs consequences should not be applied because the offer "did not reflect any realistic assessment of the risks of the litigation" (ie it was significant under-evaluation of the litigation risk) and the offer letter did not explain why only a 10% discount was being offered (something which the White Book suggests would be prudent in such a situation).
The judge held that an argument about how a party perceives the litigation risk will hardly ever succeed: "How one side perceives the risks in a piece of litigation … will almost invariably be different from the way the other side perceives them". The court should adopt a broad brush approach, rather than a mini-trial as to how the case should have looked to the offeror at the time of the offer.
Furthermore, a letter of the kind suggested by the White Book is not a requirement and the judge said that "I do wonder whether in most cases it would assist. I can see the letter prompting a reply (sometimes expressed in language that does not help the settlement process) and it may be thought better simply to leave it to the recipient of the offer to assess the offer as it stands".
The offer here had been a genuine attempt to settle: 10% is not a token discount and, as the claim ran into several million pounds, also represented a significant amount of money.
The judge was also critical of the parties' written submissions about what had taken place at negotiation meetings. The content of those discussions would normally be privileged (although no objections were made here to the disclosure of this information) and the judge thought that reference to such content "in most cases…would not assist deciding whether an offer was a genuine offer of settlement" (although a failure to negotiate at all can affect the exercise of the court's discretion). The judge also awarded interest on indemnity costs of 5% above base rate.
COMMENT: The argument that a successful Part 36 offer was not a genuine attempt to settle is a very difficult one to run. In Jockey Club v Willmott Dixon (see Weekly Update 6/16), an offer of 95% of the claim in an "all or nothing" was held to be a genuine attempt to settle, even though the claimant was unlikely to have been awarded 95% at trial. In reaching that decision, the court took into account not only the percentage of the claim being discounted but also what that equates to in monetary terms (and so this factor is generally less of an issue in large value claims). Only "extreme" offers are likely to fail. It is easy to see why claimants in an "all or nothing" type case are subject to scrutiny, since claimants only have to equal their Part 36 offer in order to obtain the enhanced Part 36 costs consequences to which claimants are entitled (hence a claimant could be tempted to "offer" to accept 100% of its claim in such a case). However, where some concession is being made, it is arguable that, since this exercise is only being conducted because the offeror has achieved a better outcome than its offer, the offer cannot have been unreasonable in the first place.
Bilta v RBS: Judge considers whether claim to litigation privilege had been made out
The defendant in this case sought to withhold documents (including transcripts of interviews with its employees) from disclosure on the basis that they were covered by litigation privilege (the litigation in question being a different one from the present case – namely, litigation between the defendant and HMRC).
In order to qualify for litigation privilege, it must be shown that the relevant communications were made "for the sole or dominant purpose of conducting that litigation". In this case, the interviews took place after HMRC had commenced an investigation into the defendant's activities. The claimant argued that RBS's internal investigation after that point had been conducted to inform itself of its position and to persuade the HMRC not to issue an assessment. The defendant countered that a letter sent from HMRC to it before the interviews took place had changed the investigation into a tax dispute.
The judge agreed with the defendant. It did not matter if the litigation purpose was the sole or merely the dominant purpose of the interview. Referring to the earlier decision of Re Highgrade Traders  (in which the litigation purpose was found to exist because the insurers wanted not only to obtain legal advice but also to ascertain whether to pay a claim), the judge said that "The Highgrade approach would suggest that a subsidiary purpose is subsumed into the dominant litigation purpose". There is no general legal principle that attempts to settle prevented the litigation purpose being the dominant purpose.
Here, the defendant was not spending large amounts of money in the hope of dissuading the HMRC from issuing an assessment, and even if it was, that was only a subsidiary purpose: "Here, fending off the assessment was just part of the continuum that formed the road to the litigation that was considered, rightly, as it turned out, to be almost inevitable". In short, the interviews had taken place because the defendant was "gearing up for the litigation".
COMMENT: The question of whether communications are produced for the sole or dominant purpose of aiding or conducting litigation is necessarily highly fact-sensitive. The key issue is why the document has come into existence. Was it to eventually aid potential litigation or was there an additional, and entirely separate purpose (of equal importance to the party) eg addressing safety issues. This case might be contrasted, for example, with that of AXA Seguros v Allianz (see Weekly Update 09/11), where engineers instructed by reinsurers were held to have been instructed for dual purposes (one to investigate if there had been a breach of a policy condition (which might lead to litigation) and the other to determine quantum (which both the reinsurers and reinsured had a common interest in establishing).
Carrasco v Johnson: Court of Appeal confirms basis for awarding discretionary interest to an individual claimant
When a court awards debt or damages, it has a discretion to also award simple interest, pursuant to section 35A of the Senior Courts Act 1981. In this case, the claimant (an individual) appealed against an award of 3% per annum, and the Court of Appeal re-affirmed the following principles to be applied when a court assesses the rate of pre-judgment interest to be applied:
(1) Interest is awarded to compensate claimants for being kept out of money, rather than to compensate for damage;
(2) The court will consider the position of persons with the claimant's general attributes and the court does not inquire into the detailed financial position of the claimant;
(3) Many claimants do not fall clearly into a category of those who would have borrowed (there is a general presumption that commercial claimants would have borrowed less than individuals) and those who would have put money on deposit, and a fair rate for them may often fall somewhere between those two rates.
Applying those principles to this case, the Court of Appeal recognised that, although the rate awarded may have been lower than the borrowing rate for an individual over the relevant period, it was well above the deposit rate and so fell within the wide boundaries of the legitimate exercise of the court's discretion. Although the borrowing rates for individuals may be higher than that for businesses, it was unrealistic to find that all the money would have had to have been borrowed: "A blended rate may well result in rates comparable to the commercial rate, given the much lower deposit rate". The judge had also been entitled to take into account a delay in the prosecution of the proceedings for 3 years.
Shulman v Kolomoisky: Judge considers whether defendant was domiciled in England when he was served with a claim form
A claim form was served on the defendant in London in May 2017. The claim had no connection with England and so the only basis on which the English court was said to have jurisdiction was that the defendant was domiciled here.
This case therefore involved an investigation by the judge as to whether the defendant was domiciled here or in Switzerland at the time of service. It was common ground that the defendant had intended to leave England and move to Switzerland: the issue was whether that had been achieved by the date of service.
The judge noted that, under English law, a person is domiciled in the UK if he is resident here and the nature and circumstances of residence indicate that he has a substantial connection with the UK (which is presumed to be fulfilled if he has been resident here for the last 3 months or more). After reviewing prior caselaw, the judge noted that for residence to cease, there has to be a distinct break, in the sense of an alteration in the pattern of the individual's life in the UK. An intention to cease residing is relevant but not determinative.
The test is highly fact-specific but in this case it was held that the defendant had taken sufficient steps before April 2017 to move his residence to Switzerland and so was not resident here when the claim form was served on him. He had taken steps to leave before the end of the tax year and he made only one visit to England after the end of March 2017. Furthermore, the judge held that he was resident in Switzerland before April 2017, even though he only had temporary places to stay there at that time.
Khanty-Manisysk Recoveries Ltd v Forsters: Court of Appeal considers the scope of a settlement agreement
The settlement agreement entered into by the parties compromised "claims" which were defined as "any claim, potential claim…whether known or unknown, suspected or unsuspected…whether or not such claims are within the contemplation of the parties at the time of this agreement arising out of or in connection with the Action or the invoice…"
The appellant argued that there were two limitations on the apparent scope of the settlement agreement: (1) the agreement captured only claims that were "realistically supposed to exist" and (2) the agreement did not cover "inconceivable claims".
The leading case on the interpretation of settlement agreements is the House of Lords decision in BCCI v Ali . In that case, it was accepted that, depending on its wording, a settlement agreement can encompass "claims which could not on the facts known to the parties have been imagined", but that there is a "cautionary principle" that the courts "will be very slow to infer that a party intended to surrender rights and claims of which he was unaware and could not have been aware". In BCCI, the relevant claim did not exist in English law at the time of the settlement agreement and so was held not to fall within the scope of the agreement.
However, here the wording of the settlement was wide and "even if the parties did not in fact envisage that such a claim existed it would have been conceivable". Accordingly, the appellant's arguments failed.
ST Shipping v Space Shipping & Anor: Court considers scope of a "stakeholder claim" in CPR r86
CPR r86 provides that "where a person is under a liability in respect of a debt or in respect of any money, goods or chattels and competing claims are made or expected to made against that person in respect of that debt or money or for those goods or chattels by two or more persons", that person (a so-called "stakeholder") may apply to court for a direction as to whom he/she should pay a debt or money or given any goods or chattels.
Of issue in this case was what was meant by "competing claims" in this rule. Teare J concluded that, although many references to a "claim" in the CPR must mean proceedings before the English courts, the context of the relevant rule may require a different definition. That was the case here: it did not matter if the competing claims were claims which will be made in arbitration or in proceedings brought outside of England. An earlier decision in H Stevenson & Son v Brownell  was distinguished on its facts (there, one of the parties was already a judgment creditor).