[2019] EWHC 1582

This was a clinical negligence case. In November 2017 the claimant’s solicitors served a Bill of Costs totalling £615k. On 21 June 2018 the claimant made a Part 36 offer in the sum of £425k, inclusive of interest. That offer expired on Friday 13 July 2018, the last working day before the hearing commenced. The Master assessed the bill in the sum of £421k plus £10.7k interest. The claimant therefore beat the offer by just under £7k. The Master ordered the defendant to pay the claimant’s costs of the assessment plus indemnity interest of £10.

CPR r.36.17, as modified by rule 47.20(4), applies where a judgment against the paying party is at least as advantageous to the receiving party as the proposals made in the Part 36 offer. By CPR r.36.17(4), the court must, unless it considers it unjust to do so, order that the claimant is entitled to (a) interest on any sum of money (excluding interest) awarded, at a rate not exceeding 10% above base rate; (b) costs on the indemnity basis from the date on which the relevant period expired; (c) interest on those costs at a rate not exceeding 10% above base rate; and (d) an additional amount, which shall not exceed £75k, calculated by applying 10% of the amount awarded up to £500k, or if the sum awarded is above £500k, 10% of the first £500k and 5% of any amount above that figure.

Here however, the Master noted that having beaten its own offer by £7k on a bill of over £615k, the consequence of allowing the extra 10% on the bill as assessed would be significant, i.e. over £40k. This was a significant sum compared with the very small percentage margin by which the offer was beaten. The Master accepted that the additional sum provisions were not intended to be compensatory. They are intended to be an incentive to settle. That said, she also thought that the rules did provide a discretion according to the “unjust” test. Adopting that test, the Master concluded that the “bonus” of 10% was clearly a disproportionate sum and it would be unjust to award it.

On appeal, Mr Justice Stewart disagreed. In describing the very small margin by which the offer was beaten relative to the much greater size of the bill as a significant factor, the Master had erred in principle. It was not open to the courts to take into account the amount by which a Part 36 Offer has been beaten. The Master was wrongly influenced by the reduction in the size of the bill. Mr Justice Stewart confirmed that the additional award should not be characterised as a “bonus”. It was not meant to be compensatory. As the Jackson Report had said, there is a penal element when the claimant has made an adequate offer. To consider otherwise would be a serious disincentive to encouraging good practice and incentivising parties to make and accept appropriate offers. The 10% figure should be treated as “all or nothing.” It should be awarded in full unless it is unjust to do so.

Mr Justice Stewart’s judgment provides a clear statement of the court’s approach to the consequences of a paying party failing to beat a valid Part 36 Offer after trial.