CPR 36.17: Enhanced Interest Awarded on Appeal
Telefonica UK LTD v The Office of Communications
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CPR 36.17 governs the costs consequences of the Claimant beating their own offer at Trial, or where they receive an award which is equal to or more than an unaccepted Defendant’s part 36 offer. In this instance, the Court must order the following enhancements to the Claimant as per CPR36.17(4):
- Interest on money recovered– not higher than 10% over the base rate
- Costs on the indemnity basis
- Interest on costs – not higher than 10% over the base rate
- An additional amount of 10% on the first £500,000 and 5% on any amount above but capped at £75,000.
These enhancements are to be applied to the Claimant unless the Court deems it unjust to do so under CPR 36.17(5).
Telefónica UK Ltd v The Office of Communications  EWCA Civ 1374
Within this case, it was held by the Court of Appeal that a High Court Judge relied on ‘irrelevant considerations’ when refusing to award enhanced interest on the sum and on indemnity basis costs to a Claimant who beat their own Part 36 offer at Trial.
In this case, the Claimant was successful in a claim worth £54 million, which was in relation to licence fees paid to Ofcom. The Claimant was successful in its claim for £3 million in interest after making Part 36 offers of around £1.5 million less, both inclusive of interest and without interest.
The High Court Judge provided a Costs Order awarding indemnity costs to the Claimant from 21 days after the first offer and an additional sum of money in the sum of £75,000 under CPR 36.17(4). However, the Judge in question refused to offer enhanced interest rates on neither the principal sum nor the indemnity costs awarded. The Judge held that to award enhanced interest rates would be unjust under CPR 36.17 (5).
In making this decision, the Judge took into account a number of factors which he considered to be relevant, including, that the Ofcom were acting reasonably in pushing the matter to Trial and that the Part 36 offers only provided a slight discount on the amount being claimed, even though he did deem these offers to be genuine attempts to settle.
The High Court Judge also held that awarding an enhanced interest rate produced a very high amount of around £3.2m and he went on to state that “given the circumstances of this case and in particular the very high nature of the offers… and given the other benefits which I have already referred to, it does appear to me that it would be disproportionate, and accordingly unjust, to impose this further sanction on Ofcom”.
In conclusion, enhanced interest rates were not awarded at the High Court because Ofcom’s reasonable conduct would render it unjust to award the enhanced rates.
The matter went to the Court of Appeal and Lord Justice Phillips gave a unanimous ruling stating it was:
“difficult to see the relevance of the level of the offers given that the key factor is that the defendant could have avoided the need for the proceedings (or most of the proceedings) by accepting one of the offers, and been in as good a position as it was after the trial”.
It was held that it would be justifiable if the offers proposed were not deemed to amount to a genuine attempt to settle due to their value being a high percentage of the value claimed. However, the High Court Judge had accepted these offers to be genuine attempts to settle.
The Court of Appeal held that the level of the offers should not be the main basis of assessment when considering the proportionality of enhanced interest rates, let alone in finding that an award for enhanced interest rates would be unjust.
It was held by the Court of Appeal that the High Court Judge had reintroduced the approach of Carver which was overturned due to “effectively and improperly declining to implement part 36 because of the small margins involved”.
Phillips LJ continued “second since the Court has a wide discretion as to the rate of enhanced interest to award, there is limited (if any) scope for consideration of disproportionality in deciding whether it is unjust to make any such award…
“For example, if the Court considered that any significant element of enhanced interest would be disproportionate, it could award a very low or even nominal enhanced rate. But it would not be entitled to refuse to make an order for enhanced interest at all on that ground.”
The Court of Appeal clarified that the Rules of CPR 36.17, namely CPR36.17(1)(b), provides the provisions for a successful Claimant to be able to receive enhancements. There is no suggestion within CPR 36.17 that undermines the entitlement to an enhancement simply because you have received other benefits from beating a Part 36 offer.
Phillips LJ held that the issue in question was not the Ofcom’s reasonable conduct of the case. The facts of the case were that the Ofcom had continued to fight the case until Trial and at Trial failed to obtain an award which was better than the Claimant’s offers. The Court of Appeal held that this in itself gave the Claimant their entitlement to enhanced interest on costs.
Phillips LJ went on to conclude “Although the decision involved a value judgment and an exercise of discretion, the judge took into account irrelevant considerations, contrary to clear statements of principle in the authorities, and failed to take into account his discretion as to the rate of interest.”
The appeal was allowed, and the total interest payable was awarded at a total of 3.5% above the base rate on both the principal sum and costs.
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