Part 36 - Judge Declines to Order Additional Uplift Payment

Article

02 September, 2014

In the case of Elsevier Ltd v Robert Munro (2014) [2014] EWHC 2728 (QB) QBD (Warby) 31/7/2014, the issue before the Court was whether the Defendant should be ordered to pay to the Claimant an additional 10% in costs pursuant to CPR 36.14(3)(d). Justice Warby dealt with this matter in a supplemental judgment.

The details of the main case are largely irrelevant; needless to say, the Claimant obtained a judgment "at least as advantageous as the proposals contained in a claimant's Part 36 offer". The consequences for the Defendant are prescribed by CPR 36.14(3), which provides so far as relevant that, unless it is unjust to do so, the claimant is entitled to:

  • costs on the indemnity basis from the date when the relevant period expired,
  • interest on those costs at a rate not exceeding 10% above base rate; and
  • an additional amount of 10% of costs in a non monetary claim and 10% of damages in a monetary claim (up to a maximum of £75,000).

The additional amount payable was introduced in 2013 as part of the Jackson reforms because it was considered by Jackson that under the previous regime "the claimant was insufficiently rewarded and the defendant insufficiently penalised when the claimant has made an adequate offer".

In the Elsevier case, the Defendant resisted the Claimant's application for the additional amount and submitted that the Claimant was not entitled to the additional 10% in costs, and secondly that it would be unjust to make that order. It was argued that the proximity of the offer to the trial meant that there was little time for negotiation; the Defendant had not received the Claimant's witness statements until the final day for accepting the offer, and an order would have a disproportionate effect.

The Judge found that in the circumstances it would be unjust to award the Claimant an additional 10% in costs. Justice Warby stated "It may be that in some cases it would be just to impose such a liability on a defendant." However, in this case, although the Defendant's claim failed he did have a "legitimate" argument. The Judge continued that in the circumstances, given the pace of the proceedings, he considered it would have been harsh to criticise the Defendant for failing to accept the Part 36 offer. He also noted that the Defendant did not receive the Claimant's witness evidence until late in the 21 days for acceptance of the offer. In his view "The imposition of an additional liability would therefore involve an element of penalty that I do not consider it just to impose on this Defendant." The Judge therefore declined to make an order for an additional amount.

This is one of a number of reported cases where the Judge has declined to order an additional payment. Judges appear reluctant to take the step of ordering additional payments pursuant to Part 36.14(d) and it seems that parties will need to have persuasive arguments to convince a court to make the uplift payment of either additional 10% costs in a non monetary claim or an extra 10% of damages in a monetary claim. Whilst the Claimant did not receive an additional payment in this instance, it did obtain indemnity costs and 4.5% above base rate interest on those costs. Defendants need to carefully consider Claimant's Part 36 offers to avoid possible penalties should they fail to obtain a judgment "at least as advantageous to the claimant as the proposals contained in a claimant's Part 36 offer."

For further information please contact Sarah Wilkinson on 01254 662831 or email sarah.wilkinson@forbessolicitors.co.uk

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