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Part 36 Costs Consequences: Swift v Carpenter

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To recap, some of the Civil Procedure Rules Part 36 Costs Consequences include:

  • A part 36 offer accepted within the relevant period; usually, 21 days, will mean that the receiving party will be awarded costs to be assessed on the standard basis up to the date of acceptance. If the offer is accepted after the expiry of the relevant period, they will bear their own costs from the date of the expiry period to the date of acceptance.
  • If the Claimant is to obtain a judgment at Trial of an award for damages amounting to more than or equivalent to the Part 36 offer made, then the Defendant will be liable for the Claimant’s costs. The Claimant is also entitled to interest on those costs.
  • If an agreement for a sum is reached by way Part 36, the paying party usually has to pay the sum within 14 days of acceptance.

 

Swift v Carpenter and Another [2020] Costs LR 1547

 

At appeal, the Claimant successfully recovered damages exceeding a Part 36 offer made by the Claimant in the sum of £800,000, in August 2018. The Claimant was therefore successful in receiving an uplift on the damages under Civil Procedure Rules 36.17(4) alongside indemnity costs after the expiry of the offer, interest on damages and costs on the standard basis.

The respondent argued that the costs of appeal up to 24 July 2019 should not form part of the Part 36 costs consequences. This argument failed in Court. An adjournment on the appeal was necessary because the Claimant was yet to formulate the case. The responded relied on the case of Cheeseman v Bowaters [1971] 1 WLR 1773, but the Claimant distinguished this case.

The Court of appeal held that the Claimant was entitled to costs of the appeal, on the standard basis, until the Part 36 offer came into effect and the Claimant was then entitled to costs on an indemnity basis after the Part 36 offer, made by the Claimant, expired.

In relation to interest, the maximum amount which can be awarded under CPR 36.17(4) is 10% above the base rate. However, for the Court to award this, it needs to be demonstrated that this award is proportionate. The case in this instance was deemed to be unusual as it was a legal dispute where there had been a long period from the Part 36 offer and the judgment.

It was therefore decided that the interest rate to be awarded should be no more than the base rate of 4.5%. In relation to interest on costs, the Claimant and her Solicitors had entered into a Conditional Fee Agreement. The Solicitors argued that due to the financial risks taken to proceed with the case gave merit to the maximum interest rate on costs, however, this argument was not accepted, and the rate of 4.5% was awarded.

The respondents argued that the appeal costs, which ran up to and also including the adjournment of the appeal, should not be subject to Part 36 costs consequences. They argued that the appellant should bear these costs. This was because the appellant herself sought an adjournment to formulate her case. The respondent relied on the case of Cheeseman v Bowaters [1971] 1 WLR arguing that adjournment came after a Part 36 offer.

The respondent also disputed that interest rates at higher than the base rate should be awarded. The appellant distinguished the case of Cheeseman v Bowaters [1971] 1 WLR on its facts and again highlighted the financial risks involved in progressing the matter to Trial after the Part 36 offer was made.

At appeal the Court held:

“In our view, the appellant has been successful in the appeal, has beaten the level of her own without prejudice offer, and the respondent’s Part 36 offer of 11 October 2018. We accept that the adjournment added to costs and that the reformulation of the case was necessary to provide the relevant evidence so as to reach the conclusions set out in the judgment. Efforts to settle the case after the adjournment are not relevant to the costs before the adjournment.”

Costs of the appeal were awarded to the appellant; however, indemnity costs were only allowed to run from the day before the adjourned hearing, 23 July 2019.

The respondent also raised issues in relation to an application made by the appellant to rely on further expert evidence. The respondent argued that this application was only necessary because the appellant failed to understand the directions correctly. The Court agreed with the respondent here as the appellant also conceded to the error made, however, this point was confined to the application to call the experts witnesses and not for the work they did on the case.

The respondent went on to request that the applicant pays the costs of the application that was made to oppose the appellant’s application to call the expert witnesses. The Court refused the respondent’s contested application and held that the appellant’s application to call the expert witnesses was reasonable, given that the expert evidence was important to the case.

The Court concluded:

“In our view, there is no call for the rate of interest “to be greater than purely compensatory” so as to foster settlement, given the facts in this case. Therefore, we accept the respondent’s submission that the appropriate rate of interest is 4.5% on the additional damages.”

Interest on both damages and costs was awarded at the base rate as per the respondent’s argument, and the respondent was ordered to make an interim payment.

 

How Can ARC Costs Assist?

 

ARC Costs are a team of specialist Costs Draftsman and Costs Lawyers who can assist you in your costs matters. We can provide specialist legal advice on all issues relating to costs, including part 36 cots consequences. We can provide our specialist advice in relation to both Claimant Part 36 offers and Defendant Part 36 offers.

We hold vast experience in assisting both the receiving party in recovering their costs and the paying party in disputing any unreasonable costs they may be liable to pay.

We will assist you in all matters relating to costs, from preparing the Bill of Costs, preparing Points of Dispute or replying to the same and assisting you and representing you at Detailed Assessment. We will be able to negotiate with your opponents throughout the case.

We can also assist with any costs matters before your case has concluded, such as the preparation of Precedent H or Statement of Costs for Trial.

Should you wish to discuss your query with us, please do not hesitate to contact us. You may email us on info@arccosts.co.uk or call us on 01204 397302. Alternatively, you may fill out the contact form at the top of the page, and a specialist costs expert will contact you to discuss your case.

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