In the matter of Evelyn Horne v Prescot (No. 1) Ltd –  EWHC 1322 (QB), Jamie Carpenter (Claimant/Respondent) was pitched against Benjamin Williams QC (Respondent/Claimant) in a matter before Mr Justice Nichol on 7 May 2019 (judgment 24 May 2019).
An appeal against an assessment of costs by Costs Judge Nagalingam.
Costs following the assessment – £121,017.16 (inclusive of costs of the assessment allowed at £20,018.39)
Exclusive of costs – £91,807.06
By letter dated 5 March 2018, Solicitors for Horne had offered to accept £82,000.00 exclusive of costs of the assessment and “exclusive of interest” (emphasis added) – the offer was made in accordance with CPR 36.
The paying party, on the assessment, argued that the offer was not an offer within Part 36 by reason of the offer being exclusive of interest, the Costs Judge however considered the offer, “was capable of being, and in this case was indeed, a valid Part 36 offer”, and given that the costs assessed, “very substantially exceeded the Claimant’s offer,” the Claimant was entitled to the benefits that flowed from Rule 36.17.
Mr Williams relied on the Practice Direction to Part 47 – paragraph 19.
‘Costs of detailed assessment proceedings – rule 47.20: offers to settle under Part 36 or otherwise Where an offer to settle is made under Part 36 or otherwise, it should specify whether or not it is intended to be inclusive of the cost of the preparation of the bill, interest and VAT. Unless the offer states otherwise it will be treated as inclusive of these.’
The Claimant’s offer made was worded:
‘Without Prejudice save as to costs – Part 36 offer
The Claimant hereby makes an offer to settle in accordance with CPR Part 36. This offer is intended to have the consequences of Section 1 of Part 36.
If the Defendant accepts this offer within 21 days of the date it is received the Defendant will be liable for the Claimant’s costs in accordance with Rule 36.13. After 21 days the Defendant may only accept this offer if we agree the liability as to costs. If this cannot be agreed the Court will make an Order.
This offer relates to the whole of the Claimant’s claim for the costs of the action excluding interest and excluding the costs of assessment.
There is no counter claim to the Claimant’s claim.
The offer is that the Claimant shall accept the sum of £82,000 in full and final settlement of her claim for costs exclusive of interest and exclusive of the costs of assessment.
This offer is acceptable only by your serving written notice of acceptance.’
Mr Carpenter submitted that Part 36 precluded an offer which was, “exclusive of interest” and thatit was no different in the particular circumstances of detailed assessment proceedings.
Mr Carpenter stressed that Part 36 established a highly prescriptive regime requiring strict compliance if a litigant wished to have the substantial benefits which could follow a successful Part 36 offer, referring to Gibbon v Manchester City Council  1 WLR 2081.
Responding Mr Williams argued that r36.5(4) does not preclude a Part 36 offer being made exclusive of interest.
The Court considered its discretion to award indemnity costs and/or enhanced interest.
As would be anticipated Mr Carpenter argued that it would not be a proper exercise of the Court’s discretion as to costs referring to F & C Alternative Investment (Holdings) Ltd v Barthelemy (No 3).
The issue of interest on damages and interest on costs occupied the Court in some detail and reference to the full judgment (available on BAILII).
Nichol J found that the Costs Judge had come to the right conclusion but accepted that the issue was a construction of the rules and therefore it was not merely whether the Costs Judge was entitled to reach the conclusion he did, but whether he was correct.
Nichol J considered it, “necessary and desirable” to start with the context in which the offer had been made, namely detailed assessment proceedings and found that the part interest plays in such proceedings was, “qualitatively different from the part that interest plays in substantive proceedings,” observing that it is the original judgment which obliges a party to pay costs and interest on costs will, ordinarily be payable from the date of the judgement until payment of costs. There is no requirement for the receiving party to claim, plead or prove anything more in the detailed assessment proceedings to be entitled to interest whereas in the substantive proceedings, the source of entitlement to interest can vary and that sometimes the power to award interest derives from statute, but the differences are “significant”.
That a Costs Judge has no power to alter the rate of interest under the Judgments Act, either on the assessed costs or on the costs of the assessment proceedings was acknowledged.
Nichol J likened the Bill of Costs to Particulars of claim with the Points of Dispute treated as the Defence when considering the issues in the litigation when finding the offer made was, “for the whole of the claim in the detailed assessment proceedings.”
It is worth noting the full analysis of Nichol J:
i) The bill of costs would not have included interest. The bill of costs and the notice to commence the Detailed Assessment proceedings had been served well within time. No application had been, or could reasonably have been, made under r.47.8 to disallow part of the period on which Judgment Act interest would run. Interest was simply no part of what the Master would have to decide. Interest did not feature in the claim which was the detailed assessment proceedings.
ii) Accordingly, the offer of 5th March 2018 was rightly described as relating to the ‘whole of the claim’, that is the whole of the claim in the detailed assessment proceedings. There was no severable part of that claim which concerned interest.
iii) Interest would be payable on the costs and the costs of the detailed assessment proceedings, but that would be added automatically by virtue of the Judgments Act: it did not need to be claimed.
iv) Because of 47PD.19 it was prudent for the solicitors to specify that the offer was exclusive of interest, otherwise the effect of the Practice Direction would be that the offer would be treated as being inclusive of interest (at least until the conclusion of the relevant period).
v) But this qualification did not alter the fact that interest was not part of the claim and so the offer to settle was of the whole of the ‘claim’.
vi) The qualification that the offer also excluded the costs of the detailed assessment was pure surplusage. It did not affect the validity of the offer as a Part 36 offer. If the offer was accepted, those costs would be payable by the Defendant by virtue of r.36.13(3).
vii) I note that the Practice Direction also says that (unless the contrary is indicated) the offer will be taken to include the cost of preparing the bill. That may strike those unfamiliar with the minutiae of detailed assessment proceedings as curious: it may rather be thought that the cost of preparing the bill was but one aspect of the costs of the detailed assessment proceedings themselves. However, it seems that the bill will also include the costs of preparing (and checking) the bill itself – see 47PD paragraph 5.19 which says,
‘the bill of costs must not contain any claims in respect of costs or court fees which relate solely to the detailed assessment proceedings other than costs claimed for preparing and checking the bill’
viii) The Appellant does not suggest that the offer otherwise failed to satisfy the requirements of Part 36.
ix) The validity of the offer as a Part 36 offer was not affected by the inclusion of the words ‘exclusive of interest’.
This judgement is useful for considering the historical development of Part 36 and for the distinction between substantive proceedings and the costs of the assessment proceedings.
It should be noted that at the hearing of the appeal, the Court was aware of the matter of the appeal in King v City of London Corporation which is listed for hearing in November 2019 on a similar issue, however the parties in the index matter did not seek an adjournment and matters may change, however the decision of Nichol J is detailed and an example of common sense in action.
Gary Knight, Partner and Costs Lawyer