An offer to settle intended to be made under CPR 36 must be made in accordance with rule 36.5 in order to have the cost consequences specified in Part 36. Rule 36.5(4) provides that "a Part 36 offer which offers to pay or offers to accept a sum of money will be treated as inclusive of interest" until the end of the period specified in the Rule.

Horne (as executrix of the estate of Edward Horne, deceased) v Prescot (No.1) Ltd [2019] EWHC 1322 (QB) (unrep)

The appellate court decided that the Part 36 offer made by the claimant was a valid Part 36 offer, even though it specifically excluded interest. 

Background

On 5 March 2018, the claimant's solicitors made an offer under Part 36 to settle the whole claim (in this case detailed assessment proceedings). They offered to accept £82,000, exclusive of the costs of the assessment and exclusive of interest. The defendant did not accept the offer. 

On 9 July 2018 the claimant's costs were assessed at around £121,000 (including the costs of the detailed assessment itself which were around £20,000). Given that the costs awarded to the claimant exceeded the settlement sum, it followed that the claimant was entitled to the benefits of achieving a judgment which was more advantageous than her Part 36 offer. 

The defendant appealed the decision on the basis that an offer "exclusive of interest" was not a valid Part 36 offer.

Decision

The appellant court dismissed the appeal on the basis that:

  • Firstly, there were no issues regarding interest that the Master had to decide as interest did not feature in the detailed assessment proceedings. The claimant's offer was made for the whole of the claim in such proceedings and there was no severable part of that claim which concerned interest.
  • The court also confirmed that, in detailed assessment proceedings, an offer which is silent as to interest would be taken to be inclusive of interest as per CPR 47PD.19, so it was prudent for the claimant's solicitors to specifically exclude interest from the offer. CPR 47PD.19 provides that "Where an offer to settle is made, whether pursuant to Part 36 or otherwise, it should specify whether or not it is intended to be inclusive of the cost of preparation of the bill, interest and VAT. Unless the offer states otherwise it will be treated as inclusive of interest".
  • Secondly, even if the Judge's interpretation of the first point was wrong and interest was part of the claim, the Judge concluded that it would still be a valid Part 36 offer as it would be an offer to settle part of the claim representing the principal sum in the detailed assessment proceedings but without interest. He also made it clear that CPR36.5(4) is a not a mandatory provision as it does not use the word "must", as it is the case elsewhere in the Rule (CPR36.5(1) and CPR36.5(3)). 

Ngassa v The Home Office & Anor [2018] EWHC B21(unrep)

The Court decided that an offer which excludes interest is not a valid Part 36 offer as it does not comply with the strict requirements set out in CPR 36.5. Again, the offer made in the context of a detailed costs assessment.

Background

On 6 November 2017, the claimant purported to make a Part 36 offer which provided that he was prepared to accept £45,000 exclusive of VAT and interest to settle the whole costs claim. The costs were assessed at around £52,000 which was more than the settlement sum proposed. 

Decision

The Master dismissed the claimant's arguments that this was a valid Part 36 offer arguing that:

  1. Firstly, CPR Part 36 is a self-contained procedural code and that only an offer which complies with such code will have the cost consequences set out in Part 36. On that basis the Master suggested that 47PD.19 (which relates to the procedure for assessment of costs) is not intended to set out the procedure for making a valid Part 36 offer but is merely there to assist the court when exercising its general discretion as to costs.
  2. Secondly, the Master's view was that CPR 36.5(4) is a mandatory provision because it provides that an offer "will" be treated as inclusive of interest.  He said: "[t]o describe the rule as not expressly prohibiting an offer being made which is exclusive of interest seems to me to ignore the plain words of the rule.

The Master also pointed that the offer should be capable of bringing the matter to a conclusion. Otherwise, if interest is excluded there would be further argument as to what interest should be awarded.

Conclusion

There is a clear conflict between these two decisions. But we understand that the Court of Appeal is expected to consider this point later in the year in another case, King -v- Corporation of London.