Part 36’s self-contained procedural code continues to attract some discretion

Wed, 20 Feb 2019

Costs lawyer specialist Stephen Goodfellow of No5 Barristers’ Chambers highlights a continuing theme of limited discretion in interpreting CPR 36, in recent case law.

Although Part 36 is viewed as a ‘highly-prescriptive’ self-contained procedural code, as stated in Gibbons V Manchester CC [2010] EWCA Civ 726, some practical interpretation and discretion has been approved by the courts. 

The two most recent cases relate to the interpretation of CPT 36.17, which states:

"(1) Subject to rule 36.31, this rule applies whereupon judgment being entered-

  1. a claimant fails to obtain a judgment more advantageous that a defendant’s Part 36 offer; or
  2. judgment against the defendant is at least as advantageous to the claimant as the proposals contained in a claimant’s Part 36 offer.

(4) Subject to paragraph (7), where paragraph 1(b) applies, the court must, unless it considers it unjust to do so, order that the claimant is entitled to-

(a) interest on the whole or part of any sum of money (excluding interest) awarded, at a rate not exceeding 10% above base rate for some or all of the period starting with the date on which the relevant period expired

(b) costs (including any recoverable pre-action 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

(d) provided that the case has been decided, and there has not been a previous order under this sub-paragraph, an additional amount which shall not exceed 75,000 (Up to 500,000 10% of the amount awarded)

In JLE (a child) v Warrington and Halton NHS Foundation Trust [2018] 12 WLUK 450, Master McCloud, held that the court could apply the ‘unjust’ test separately to each of the penalties (4)(a) - (d).  This was contrary to the claimant’s argument that CPR 36.17 did not permit the court to select some but not all of the penalties and that a discretion to award different penalties would remove the certainty of this self-contained procedural code. 

Despite the wording of CPR 36.17(4) indicating that the test is to be applied globally, as it refers to (a), (b), (c) and (d), the Master held that "the penalties are indeed severable, and such has become the practical interpretation of the rule” (paragraph 25 of the judgment).  He awarded penalties (a), (b) and (c) but declined to award (d), an additional sum of 10%, as that would be unjust in view of the narrow margin that the judgment had bettered the offer and the much larger additional sum that would have been awarded under (d).

The decision in JLE was with reference to and following the earlier Court of Appeal case of Thinc Group Limited v Kingdom [2013] EWCA Civ 1306, where the ‘unjust’ test was interpreted as meaning "unless and to the extent of”, rather than a strict all or nothing test.  Thus, permitting a discretion as to whether to apply the penalties and to their extent. 

Meanwhile, in Britned Development Limited v ABB AB [2018] EWHC 3152 (Ch) Mr Justice Smith, re-iterating that Part 36 is a ‘self-contained procedural code’, held that a Part 36 Offer, which was withdrawn after trial but before judgment, could not avail itself of the automatic costs consequences of CPR 36.17. Such a result would clearly be contrary to CPR 36.17, which applies upon judgment being entered, and it would be more than just an issue of practical interpretation.  However, the offer could be taken into account as a factor when assessing costs under CPR 44 and, when doing so, it was held that it would be unjust for the offeror to pay the other party’s costs.

Two other recent cases of note, where the courts have applied a practical interpretation of the CPR 36, are Bentley Design Consultants Limited v Sansom [2018] EWHC 2238 (TCC) and Hertel v Saunders [2018] EWCA Civ 1831

In Bentley, Mrs Justice Jefford DBE determined that an offer to settle "the whole of this claim”, only applied to the subject matter of the pleadings as at the date of the offer. It did not apply to a second property, which subsequently became part of the claim, after amendment of the Particulars of Claim. 

Similarly, the Court of Appeal held in Hertel that a Part 36 offer must relate to "the whole of the claim or to part of it or to an issue that arises in it”, under CPR 36.5(1)(d).  Accordingly, an offer in respect of an intended claim that had been set out in a draft amended claim form but never consented to and formally pleaded, was not a Part 36 offer.  It should be noted that whilst Part 36 offers can apply pre-commencement/ issue, once a claim has commenced the offer only relates to those matters pleaded.  It was also stated that the parties’ original erroneous belief that the offer was a valid Part 36 offer, and their labelling of it as such, was irrelevant, as "the parties cannot agree that an offer or an acceptance is in accordance with Part 36 if, on analysis, it is not” (paragraph 23 of the judgment).

Despite Part 36 being a self-contained procedural code, intended to provide certainty for the parties using it, there continues to be discretion in the interpretation and application of it.

Stephen Goodfellow is available for in-house training at any of No5's offices or Counsel can come directly to your offices.  Please contact us to discuss your training requirements.

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