Mr Francis King v City of London Corporation  EWCA Civ 2266
The substantive litigation was concluded by a consent order providing that the Defendant would pay to the Claimant £250,000 plus costs to be assessed if not agreed on the standard basis. The Claimant duly commenced assessment proceedings by serving a Bill of Costs. Within the assessment proceedings the Claimant made an offer by letter headed “Part 36 offer” wherein they offered to accept £50,000 “in full and final settlement of the costs detailed within the Bill only.” The letter went on to state “The offer relates to the whole of the claim for costs within the Bill and takes into account any counterclaim, but excludes interest.” The matter was not capable of settlement and proceeded to a detailed assessment hearing where the Bill was assessed at £52,470 excluding interest. The Claimant argued he had beaten his Part 36 offer and thus sought the consequences set out at CPR36.17(4). The Deputy Master however concluded that the offer was not a valid Part 36 offer so that CPR 36.17 was not applicable. The Claimant appealed that decision with the Appeal subsequently dismissed. A second Appeal was therefore brought to the Court of Appeal.
Dispute before the Court of Appeal
There were three issues to be determined by the Court of Appeal:
- Can a Part 36 offer generally exclude interest?
- If not, can a Part 36 offer nevertheless exclude interest in the context of detailed assessment proceedings?
- Is the offer made on Mr King’s behalf on 12 December 2017 to be treated as inclusive of interest as a result of CPR 36.5(4)?
On the first issue it was held that a Part 36 offer, generally, could not exclude interest if it were to be a valid Part 36 offer. It was determined that any tension that existed between the Rule and the Practice Direction must be resolved in favour of the Rule, as the Practice Direction “has no legislative force”. The Court repeated that Part 36 is a “self-contained procedural code” that is “carefully structured and highly prescriptive”. An offer exclusive of interest is not an offer in respect of part of a claim. “Part 36 proceeds on the basis that interest is ancillary to a claim not a severable part of it.” The comparison was made that with Part 36 a party could not make a valid offer providing for different costs consequences than those set out in Part 36, so too a party could not make a valid Part 36 offer without including interest.
On the second issue the Court held it was no more possible to make a valid interest exclusive Part 36 offer in assessment proceedings than it was in the substantive claim. The basis being CPR 47.20(4) provides for Part 36 to apply to assessment proceedings save for some modifications, none of which bear upon the issue.
The third issue was similarly resolved in favour of the Defendant. The offer was explicit in not including interest the Claimant could not therefore rely on the Rules to argue it should be treated as inclusive of interest as such would “grossly distort the offeror’s intentions”. The correct position is that the offer excluded interest and therefore by reference to CPR 36.5(4) it is not a compliant Part 36 offer.
The Court of Appeal has once again taken the view that Part 36 is a self contained code that is “designedly, relatively inflexible” and repeated the view of Moore-Bick LJ in Gibbon that Part 36 is “a carefully structured and highly prescriptive set of rules”. If a party wishes to make an offer which does not meet the requirements they are free to do so outside of the regime, i.e. with a Calderbank offer. However, any party wishing to obtain the benefits of a Part 36 offer must also accept any detriment of such an offer (such as on interest or costs consequences). It is essential therefore that when making a Part 36 offer proper regard is had to the regime to ensure the offer is valid. A beaten Part 36 offer for a Claimant provides a real benefit such that a successful challenge to the offer validity may present a get out of jail free card to a Defendant. Likewise for a Claimant, as in this case, an invalid Part 36 offer will diminish what was otherwise an excellent result.
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