Alison Grant & Ors v FR Acquisitions Corporation (Europe) Ltd & Anor

Further to my main judgment handed down on 11 October 2022, the parties have largely agreed a draft form of Order, including the terms of Declarations to give effect to that judgment and provision for an interim payment on account of costs by Firth Rixson. (Footnote: ¹) However, there remain two issues for my determination:

The Administrators were the successful parties, and it is not in dispute that Firth Rixson should pay the Administrators’ costs of the Application. As stated above, Firth Rixson have accepted that they should make a payment on account of those costs. The issue is not as to the incidence of costs but as to the application of CPR Part 36 and its consequences.

It was not disputed either that CPR Part 36 applies in principle to the Application: CPR 12.1(1) of the Insolvency Rules 2016 provides that “the provisions of the CPR (including any related Practice Directions) apply for the purposes of proceedings under Parts 1 to 11 of the Act with any necessary modifications, except so far as disapplied by or inconsistent with these Rules”. CPR Part 36 is not disapplied by or inconsistent with the Insolvency Rules 2016, and no relevant modifications to CPR Part 36 are required.

There are, in essence, three questions in dispute:

The starting point is the terms of the Administrators’ Offer. The key part of the Administrators’ Offer read as follows:

The Administrators’ Offer was open for acceptance for 21 days from the date when it was made. This period expired on 8 May 2020 (the “Relevant Date”).

As at the Relevant Date, the sums owing (Footnote: ²) by Firth Rixson to LBIE in respect of the Dollar Swap amounted to principal of US$53,629,230.05 plus accrued contractual interest (conservatively estimated to amount to at least US$3,253,950), i.e., US$56,883,180.05 in total, and £8,149,086.21 in respect of the Sterling Swap. In relation to interest:

The Administrators’ Offer thus provided, in effect, for a small discount or ‘haircut’ to the principal amount owing under each Swap and a complete write-off of the accrued interest on the Dollar Swap.

The Administrators presented the total discount proposed in their Offer as therefore amounting to at least US$3,347,801.05 and £814,969.21 (compared to the total sums owing to LBIE as at the Relevant Date). (Footnote: ³) Firth Rixson summarised the effect of the Administrators’ Offer as being that they should settle the proceedings in return for a very limited haircut to the Principal Amounts claimed under the Master Agreements:

As indicated in paragraph 4(1) above, Firth Rixson’s principal and “threshold” argument was their “disconnect point”. This argument focused and was based on the stipulation in the Administrators’ Offer of immediate payment (within 14 days) of the Administrators’ Offer amounts. In particular in that regard, Firth Rixson emphasised that the Administrators’ Offer required payment irrespective of whether the “Relevant Steps” were taken and what were then (as they are still) continuing Events of Default. They submitted that the inclusion in the Administrators’ Offer of relief which would never have been sought or available in the proceedings, was thus a proposed benefit extraneous to the claimant’s asserted rights, and was no part of the declaratory relief they sought and obtained, produced what they described as “a fundamental disconnect between the terms of the Part 36 Offer and the matters in issue in the proceedings.”

Firth Rixson submitted further that in consequence, or as an aspect of the “disconnect”, the Administrators’ Offer did not satisfy the specific requirements of a valid Part 36 offer as prescribed by CPR 36.5(1). Pursuant to CPR 36.5(1)(d), a valid Part 36 offer must “relate to” the whole or part of a claim or to an issue that arises in the claim: it cannot be said to “relate to” a claim which has not been advanced, and likewise cannot properly be said to “relate to” a claim if it includes relief which could not have been and has never been advanced. Further, in light of (and as a further illustration of) the “disconnect” it was not possible fairly to compare the Administrators’ Offer with the declaratory relief they have achieved: they were, Mr Auld KC submitted, as “chalk and cheese”.

Firth Rixson submitted in the round that my main judgment and the declaratory relief the Administrators have obtained does not provide an outcome “at least as advantageous as” the proposals in the Administrators’ Offer. Firth Rixson’s payment obligations remain contingent on the Relevant Steps being taken and also on no new Events of Default occurring in the meantime. The Administrators’ Offer (if it had been accepted) would have put the Administrators in control of a substantial sum of money (to invest or distribute as they wished) and would have avoided any ongoing or future counterparty risk: it was, according to Firth Rixson, clearly far more favourable to the Administrators than their Offer.

The Administrators rejected the “disconnect” argument. They submitted that their offer engaged with the matters in dispute and offered a genuine means of resolving the points in issue. The fact that the Administrators’ Offer included the provision for payment within 14 days did not signify otherwise or result in it not being compliant with Part 36.

Further they dismissed the suggestion, which was advanced in oral submissions with enthusiasm by Mr Stephen Auld KC for Firth Rixson, that the “proceedings have nothing to do with money”. They submitted that the declarations granted in terms now agreed, “are as good as money [up]on the Relevant Steps being taken, subject only to the entirely theoretical possibility of new Events [of Default] occurring”; and they made the point that Firth Rixson had offered nothing to suggest any more than a theoretical or “fanciful” possibility of any such supervening Event of Default. Once the “fanciful” was stripped away, as it should be, there should be no difficulty in comparing the result achieved with the Administrators’ Offer.

In the round, the Administrators submitted that the relief they had obtained would result in payments without the discount they had offered; and that such relief was thus plainly “at least as advantageous” to them as the proposals in their Offer.

CPR 36.5 defines the required form and content of a valid Part 36 offer as follows (in relevant part):

The premise of this gateway provision is that a Part 36 offer must “relate” to the claim or part of a claim, or an issue arising in it. In Hertel v Saunders [2018] EWCA Civ 1831; [2018] 1 WLR 5852, the Court of Appeal clarified (upholding the decision of Morgan J) that, once proceedings have been commenced, an offer must be made by reference to the pleaded issues if it is to qualify as a Part 36 offer: after the commencement of proceedings, offers by reference to intimated but not yet pleaded claims will not satisfy the requirements of CPR 36.5.

However, CPR 36.5 must also be read subject to CPR 36.7 which extends the application of Part 36 to offers made before the commencement of proceedings (as the Administrators’ Offer was in this case). CPR 36.7 states (in relevant part) as follows:

In Hertel v Saunders, the Court of Appeal appear to have accepted (at [27]) that “the position pre-commencement is inevitably different to that which exists after commencement of the proceedings”. Whilst making the point (at [28]) that pre-action protocols and practices should ensure that “claims/parts/issues are therefore not nearly so difficult to identify before commencement of the proceedings…” as might otherwise be thought, Coulson LJ (with whom Lewison and David Richards LJJ agreed) appeared to accept that an offer in respect of proceedings which are not yet commenced might qualify as a Part 36 offer even if not specifically tied and restricted to a defined claim/part/issue.

Then in Calonne Construction Limited v Dawnus Southern Limited [2019] EWCA Civ 754 the Court of Appeal made clear that Hertel v Saunders had no application to offers in respect of prospective proceedings; and that (following the earlier case of AF v BG [2009] EWCA Civ 757) provided the prospective claim was identified, genuine, and clear in nature (see [17] in Calonne) a genuine offer to settle it stating the matters prescribed in what is now CPR 36.5 should be compliant. Thus, the only real difference in this context between extant and prospective proceedings is that in the case of extant proceedings the offer to be complaint, must “relate” only to pleaded (as distinct from less formally defined) claims/parts/issues. In both contexts, the question is whether the offer does “relate” to the claims/parts/issues. No other connecting link is required.

I am satisfied that the Administrators’ offer did “relate to” the claim as already advanced for the purpose of CPR 36.5. After inviting further submissions on the point, I have concluded that (a) the test (in CPR 36.5) that the offer must “relate” to the claim/part/issue is less exacting and does not require the exact correlation suggested by Firth Rixson: it means simply that the offer must be made by reference to identified claims and offer proposals in respect of it/them; and (b) provided of course that the offer is genuine, and clear in nature (see paragraph 20 above) the comparison required can reasonably be undertaken by identifying whether the relief obtained in the proceedings was in broad terms more advantageous to the claimant than its offer.

However, other aspects of the disconnect argument have certainly given me pause for thought. In particular, I have been troubled by the fact that it is difficult to weigh and translate into an acceptable discount the more innominate or uncertain advantages that Firth Rixson may legitimately have perceived the continuation of a period of suspension might afford (including, for example, cash flow, exchange rate concerns or investment plans amongst others, as well as the possibility of some supervening new Event of Default). Further, during the contractually agreed period of suspension there is always the possibility, however theoretical, that a new Event of Default will arise which may be of a “continuing” nature such as not to bring the suspensory condition to an end upon cessation of the Administration. The Administrators’ Offer to that extent may be said to have re-written the contract rather than to have offered a beneficial variation in the way it was performed.

I have concluded, however, that neither the fact that the offer includes a term which could not, in the particular form in which it was put forward, have been achieved by the claim, nor the fact that the value of a contractual right to defer payment may not easily be calculated to determine whether its foreclosure is more or less advantageous than the price offered (by way of discount on the payment obligation), makes inapplicable or unreasonable the comparison directed by CPR 36.17.

Of course, where (as here) the offer included terms which, if accepted, would have accelerated the due date for payment and foreclosed the contractual right to a suspensory condition and thus to rely on any new Event of Default, the comparison cannot be purely mathematical. In claims, like the claim here, which cannot be said to be exclusively money claims, and must take into account more innominate considerations, the assessment is necessarily a broader one. Thus, in Carver v BAA plc [2008] EWCA Civ 412 at [30] Ward LJ quoted Rix LJ’s observation, in the course of argument in that case, that the test must be more “open textured”; and in his judgment he stated that it “permits a more wide-ranging review of all the facts and circumstances of the case in deciding whether the judgment, which is the fruit of the litigation, was worth the fight.”

That requires identification of what was really the crux of the dispute. Here the crux of the dispute was whether the suspensory condition would survive the termination of the administration; the possibility of a supervening Event of Default was not in reality canvassed or germane. Firth Rixson fought on a point of principle and lost, and in all realistic likelihood, once the Relevant Steps have been accomplished, have to pay substantially more than they would have had to pay had they accepted the Administrators’ Offer.

In that context the reality, after nearly 15 years of administration, is that the possibility of some supervening Event of Default is much more theoretical than real: it is, in my view, approaching the fanciful to suppose that a new Event of Default will arise between now and the time of cessation of the administration. As appears from my judgment to explain the grant of a three-year extension of LBIE’s administration (see [2022] EWHC 2995 (Ch)), the only substantial outstanding matters relate to litigation in the USA for which full provision has been made.

I have taken into account also that the Part 36 rules themselves envisage, and absent contrary agreement between the parties require, payment within 14 days of any offer to pay or accept a single sum of money, subject to express agreement between the parties to the contrary. CPR 36.14(6)(a) provides as follows:

I consider that I am also reinforced in my conclusion by the fact (as I perceive it) that the real gist of the dispute was a point of principle whether the Events of Default would continue after the cessation of Administration: and it would be odd if there was no way for the Administrators to have made a compliant Part 36 offer by proposing some financial discount on what would be the result if they succeeded on that point of principle. Put another way, the real point in dispute was whether Firth Rixson should be required to pay upon cessation of the administration; and it would be odd if a genuine and clear offer to settle a dispute which in the end would be about the payment of money could not be brought within CPR Part 36 by including a monetary discount in respect of the various uncertainties and foreclosure of the suspensory condition.

I also have borne in mind that if the only objection to the offer had been the provision for payment within 14 days, it was open to Firth Rixson to seek agreement for later payment and/or to make a counter-offer to take into account of the matter. As it was, Firth Rixson offered a payment of only $2 million, illustrating that the real dispute was whether they would ever have to pay at all, even at the end of the administration of LBIE.

In the circumstances, in my judgment, the fact that in this case the Administrators’ Offer included a term for accelerated payment of a debt not yet due, which acceleration could never have been part of or obtained by the claim (or prospective claim) but for which a discount for early payment was offered, did not prevent it being compliant with CPR 36.5. In my judgment, the Administrators’ Offer complied with Part 36.

The second issue thus arises (see paragraph 4 above), which is what test should be adopted in determining whether the declaratory relief to which I have held the Administrators are entitled “is at least as advantageous to [them] as the proposals contained in [their] Part 36 offer”, and more particularly, whether the arithmetic test prescribed in CPR 36.17(2)(b) applies.

CPR 36.17(2) provides that for the purposes of determining the issue:

I do not accept Firth Rixson’s argument that these proceedings were not “about money”. Plainly they are and always have been so: the question being whether the sums specified in the Swaps will become due on termination of the Administrators’ appointment. The Declarations sought and obtained in terms now agreed require payment of money as soon as the Relevant Steps are accomplished, subject to the theoretical possibility of a supervening Event of Default, as Mr Bayfield submitted.

However, whether the proceedings constitute a “money claim” for the purposes of CPR 36.17(2) is a different question, as is the post-threshold question (insofar as it arises) whether Declarations constitute an “award” of “any sum of money” for the more particular purposes of CPR 36.17(4).

As to the former question, in my judgment, the proceedings were not framed as a “money claim”. That is so even though if the Administrators were successful (as they have been) the consequence of the Declarations would and will be that Firth Rixson would and will become, after accomplishment of the Relevant Steps and in the absence of any Event of Default in the meantime, obliged to pay a settled and liquidated sum of money, as the proposed and agreed draft order accurately records. Accordingly, it is not sufficient to compare arithmetically what was offered with what ultimately will be received. Further, the fact that the suspensory condition remains in place must be taken into account. The extent of that benefit to Firth Rixson and concomitant disadvantage to the Administrators depends on the extent of that duration: presently the duration envisaged is three years from 30 November 2022, being the extension granted for the Administrators’ appointment by my Order dated 25 November 2022. But that cannot be entirely certain, just as, although very unlikely, it cannot in theory at least be entirely certain whether any Event of Default may arise in the same period. In my judgment, these matters in combination mean that the mechanistic or mathematical test prescribed by CPR Part 36.17(2) is not applicable.

It is nevertheless appropriate first to consider whether, assuming continuation of the suspensory condition, the discount offered was real and substantial in mathematical terms. The mathematics are that the Administrators will obtain under the declarations more in money terms than they would have obtained under their offer, even allowing for the fact that they would have received earlier payment under the latter.

In that connection, after the oral hearing I asked the Administrators for:

My purpose was to double-check that in mathematical terms the payments required by the declaratory relief will exceed the amounts of the offer, even allowing for the fact that the Sterling Swaps imposed no interest during the period of suspension, whereas payment within 14 days if the Administrators’ Offer had been accepted would have resulted in the Administrators earning interest or other return on the money paid. I also wished to consider the possibility of exchange rate benefit.

The answer provided as to (a) in paragraph 37 above was that

By way of comparison, the Administrators’ Offer proposed discounts of approximately £815,000 in respect of the Sterling Swaps and US $3.35 million in respect of the Dollar Swaps, so that the payments required by the declarations will comfortably exceed what the Administrators would have received under their Offer, even allowing for interest.

As to (b) in paragraph 37 above, both on and after 9 May 2020, the Administrators clarified that their usual practice has been to retain sums collected in dollars in that same currency, rather than to exchange them for any other currency – that remains the Administrators’ usual practice at the time of writing. The Administrators would have retained the sums in dollars in part because there is a substantial potential liability of the LBIE estate denominated in dollars. For completeness: (i) the Administrators have (at earlier stages in the course of LBIE’s administration) on occasion exchanged dollar sums for other currencies where they considered it appropriate to do so (ii) the Administrators’ general practice has historically varied with the currency in question (for example, the Administrators have generally exchanged Euros for Sterling, as at one time during the course of LBIE’s administration, Euro balances attracted negative interest rates).   

Next must be brought into account the theoretical possibility of there arising in the future some further Event of Default. As it seems to me, the discount offered, though relatively small, can fairly be considered to be more than adequate recompense for this possibility which, as previously explained I think very unlikely indeed to arise.

In my judgment, CPR 36.17(1) applies. CPR 36.17(2) does not; but the relief to which they are entitled is “at least as advantageous” to the Administrators as their Offer, so as to trigger the consequences set out in CPR 36.17(4), unless I am persuaded that any is “unjust”.

CPR 36.17(4) provides that the Court must [my emphasis] “unless it considers it unjust to do so” order that the claimant is entitled to:

When considering whether it would be “unjust” to make the orders specified in CPR 36.17(4) the Court must take into account “all the circumstances of the case” (CPR 36.17(5)) including (but not limited to, see paragraph 46 below):

The principles for determining whether it would be “unjust” to make the orders in question were summarised by Briggs J (as he then was) in Smith v Trafford Housing Trust [2012] EWHC 3320 (Ch) at [13] (as approved by the Court of Appeal in Webb v Liverpool Women’s NHS Foundation Trust [2016] 1 WLR 3899). The following four principles are relevant:

In Lilleyman v Lilleyman (No. 2) [2012] EWHC 1056 (Ch), another decision of Briggs J, he said at [16]:

In Downing v Peterborough & Stamford Hospitals NHS Foundation Trust [2014] EWHC 4216 (QB), Sir David Eady (sitting as a High Court Judge) observed at [61] that:

In exercising its circumscribed discretion, the court must have regard to the objective of the provisions of CPR 36.17(4), which Sir Geoffrey Vos, when Chancellor of the High Court sitting in the Court of Appeal described in OMV Petrom SA v Glencor International AG [2017] 1 W.L.R. 3465 at [32] as being “…in large measure, to encourage good practice” and to incentivise both the making and acceptance of genuine Part 36 offers. Sir Geoffrey Vos accepted that this could result in awards which are “not entirely compensatory”. Briggs LJ (as he then was) described the approach as being both “carrot and stick” and as operating ‘pour encourager les autres’ (see PGF II SA v OMFS Company I Limited [2013] EWCA Civ 1288 at [40] and [56]).

The court must also have regard to all the circumstances of the case, which may include (but again are not limited to): (i) whether the defendant took entirely bad points or whether it had behaved reasonably in continuing the litigation, despite the offer, to pursue its defence; (ii) what level of disruption can be seen to have been caused to the claimant as a result of a refusal to accept (at [38]). In the context of (i), where (as here) the dispute can fairly be regarded as “all or nothing” or “binary” litigation in the sense of there being no room for the court to make a partial award, the court is entitled to and should assess the reasonableness of the offer having regard to the amounts at stake, the discount offered and the prospects of success: see Ritchie and Others v Joslin and Others [2011] 1Costs LO 9 at [47] (a decision of HHJ Behrens sitting as a High Court Judge).

I turn to the application of this approach in this case, and to deal in turn with each of the four consequences specified in CPR 37.17(4). In addition, the relevant “circumstances” rendering it “unjust” to grant relief may not necessarily be identical for each of the four orders the Court can make under CPR 36.17(4) (OMV Petrom SA v Glencor International AG at [23]).

Firth Rixson’s primary position is that in all the circumstances of this case it would be unjust to grant any of the additional relief provided for under CPR 36.17(4).

Firth Rixson especially relied on the following:

In making the determination whether it would be unjust to make the orders sought, however, there must also be taken into account (by reference to the mandatory requirements of CPR 36.17(5) in particular) the fact that in this case:

The principal point left to determine is whether the binary nature of the issue, its complexity and the reasonably balanced nature of the competing arguments, and/or Firth Rixson’s reasonable conduct are sufficient to warrant total or partial derogation from the ordinary consequences stipulated by CPR 36.17(4) on the basis that in the circumstances their application would be unjust.

Adopting Briggs J’s explanation at [15] in Smith v Trafford Housing Trust (see paragraph 46 above) of the essential purpose of Part 36 as being “to visit costs consequences upon parties of whom it can properly be said that they ought to have settled by accepting the other party’s offer, rather than taken the matter to trial” the litmus test, as I see it, is whether this was (“unusually”, Briggs J suggested) “a case properly taken to trial by both parties” notwithstanding the genuine offer which the Administrators’ offer comprised and which would have brought the dispute to an end. That, in my view, requires there to be considered once again what the offeree reasonably hoped to achieve from the litigation which was denied it by the offer, and whether the rejection of the offer was, in all the circumstances, sufficiently justified that it would be unjust for the loss of the point in issue to result in consequences more onerous than those incidental to litigation in the ordinary course.

In my judgment, this case is on the cusp. The point of interpretation raised by the proceedings was, in my view, arguable, and the amount at stake was plainly considerable. Further, and most important perhaps, Firth Rixson has retained, despite the result, such amorphous and uncertain advantage as there may be to it, beyond the discount it was offered, of not having actually to pay until conclusion of the administration of LBIE.

Against that, it seems to me appropriate to take into account that Firth Rixson was pressing for a somewhat counter-intuitive result (that it should never have to pay a large sum of money which it owes its counterparty, even when that counterparty is fully solvent and is no longer subject to any insolvency proceedings). It is notable that (as appears from the introduction to the Administrators’ Offer) once the Court of Appeal had decided that the effect of Section 2(a)(ii) of the ISDA Master Agreements was to suspend but not extinguish the liability (see paragraph 35 of my main judgment), LBIE was able to reach agreement with most, if not all, the other counterparties which had been withholding sums owed to LBIE in reliance on Section 2(a)(ii) of the ISDA Master Agreements for the settlement of their debts. Further, the fact is that the effect of the Administrators’ offer was to provide for a benefit by way of discount in excess, in all likelihood, of the time value in monetary terms of delayed payment.

In circumstances where I consider that to achieve an egregious result Firth Rixson have resorted to a theoretical possibility of some supervening Event of Default which in my view is barely more than fanciful, it seems to me that Firth Rixson cannot complain that it is unjust the effect of the Administrators’ Offer was to “up the ante” in the event that the dispute was decided against Firth Rixson. In my judgment, it is not “unjust” for there to be some additional consequences of failure over and above those which would ordinarily follow the loss of contested litigation.

I do not, therefore accept Firth Rixson’s primary argument that the circumstances of this case offer a sufficient basis on which to conclude that it would be unjust to visit on Firth Rixson any of the various consequences prescribed by CPR 36.17(4). However, in all the circumstances, I consider that it would be unjust to impose relief which is quasi-penal in nature. I turn to consider the application of each of the sub-paragraphs in CPR 36.17(4), and certain specific arguments advanced by Firth Rixson in that regard.

Firth Rixson submitted that CPR 36.17(4)(a), which provides for the claimant to be entitled to “interest on the whole or any part of any sum of money (excluding interest) awarded”, is only applicable in cases where the judgment includes the award of a sum of money, and that the declaratory relief as to the contractual consequences that may arise if and when the Relevant Steps are taken which had been sought and obtained by the Administrators does not constitute any such “award”.

The Administrators submitted that the effect of the declarations in this regard, though prospective, was in substance that the sums due under the Swaps were required to be paid when the Relevant Steps were taken and that as a matter of substance the Court will thereby have “awarded” a “sum of money” within the meaning of CPR 36.17(4)(a).

In my judgment, CPR 36.17(4)(a) applies only to an award for the immediate payment of sums of money (excluding interest). I do not consider that it was the intention of the rule to provide for an award of interest in respect of sums which are not yet immediately due and payable. To that extent, I agree with Firth Rixson’s submissions in this regard.

Further, even if (contrary to my view) CPR 36.17(4)(a) is applicable, I would consider it unjust to apply it in circumstances where it is common ground (and always has been) that Firth Rixson is under no obligation to make payments to LBIE for as long as Events of Default are continuing (which they are, and may be so for up to three years or even longer if the administration process is once again extended).

If I am wrong in that regard also, I would not have awarded interest at a rate higher than that specified in the relevant contract between the parties: none being so specified in the case of the Sterling Swaps. I well appreciate that the provision enables and probably envisages the payment of interest at a higher rate of interest at the going rate (“the enhanced rate” though that is not to exceed 10%). I also appreciate that an award pursuant to CPR 36.17(4) may not be entirely compensatory. But in this case, the fact that no payments are yet due would, in my judgment, render it unjust to provide for any enhancement.

Firth Rixson did not advance specific additional arguments in support of their contention that CPR 36.17(4)(b), which provides for costs to be paid on the indemnity basis, did not apply even if the Administrators’ Offer was held to be a compliant Part 36 offer.

The purpose of ordering costs on an indemnity basis, though outside the context of Part 36 unusual, is compensatory and not penal. It is intended to ensure a more realistic and complete level of cost recovery for the paying party. In my judgment, it is not unjust that Firth Rixson should have to pay costs on the indemnity basis. I therefore order Firth Rixson to pay costs on the indemnity basis from the date on which the “relevant period” expired, being 21 days after the date of the Administrators’ Offer.

Decisions as to whether to award an enhanced rate of interest on costs (that is to say, higher than the rate (if any) which would otherwise be chosen under section 35A of the Supreme Court Act 1981) are to be regarded separately from decisions as to the rate of enhancement.

The provision for an enhanced rate of interest to be paid was described by Chadwick LJ in McPhilemy v Times Newspapers Ltd (No. 2) [2001] EWCA Civ 933 (at [23]) as being intended “to redress…the element of perceived unfairness which arises from the general rule that interest is not allowed on costs paid before judgment…” The objective is compensatory.

In relation to the decision as to the rate of enhancement, such awards are not entirely compensatory, but nor can they be considered “penal”: OMV Petrom SA v Glencore International AG [2017] 1 WLR 3465. The Court has a discretion to include a non-compensatory element to the award, but the level of interest “must be proportionate to the circumstances of the case” (at [38]).

In my judgment, it has not been shown in this case that an award of interest on costs to compensate for the cost of money (or the loss of the use of money) would be unjust; and it is therefore directed by CPR 36.17(4)(c).

The Administrators submitted, relying on the notes at 36.17.4.3 of the White Book, that the conventional rate would be 4% above the base rate. They explained that their proposed rate of 6% offered, in effect, a discount on the norm to reflect the fact that the base rate was lower for part of the period in which interest would fall to be paid. Firth Rixson submitted that a 6% rate would be disproportionate and that the appropriate rate would be about 2%.

Although sharply rising interest rates now tend to dislodge the memory of historically low rates, it should be remembered that the base rate in March 2020 was just 0.1% and was not raised until December 2021 and then only to 0.25%. Even after a further rise in February 2021 it stood at 0.5%. Having regard to the low rate for much of the period after the date of the Administrators’ Offer, I consider that the rate of 6% proposed by the Administrators would be disproportionate, even adopting 4% over base rate as the norm. However, the rate of 2% proposed by Firth Rixson seems to me to be inadequate having regard to the purposes of the provision. I propose to adopt the rate of 4.5% as fair having regard to all the circumstances of the case.

Firth Rixson relied on their general points in support of their overall position that none of the consequences of CPR 36.17(4) should apply in the circumstances of the case; but they did not put forward any more specific considerations to support a contention that it would be particularly unjust to grant an order for “an additional amount” as provided for by CPR 36.17(4)(d).

The notes at 36.17.4.4 in the White Book suggest that the provision was originally introduced further to the Review of Civil Litigation Costs: Final Report (21 December 2009). It was there noted that the costs sanctions against a defendant for failing to accept a claimant’s offer to settle generally amount to less than the sanctions against a claimant for failing to beat a defendant’s offer, resulting in there being less incentive for a defendant to accept a reasonable offer from the claimant than for a claimant to accept a reasonable offer by the defendant. The notes in the White Book go on that the new provision “therefore deliberately rebalanced Part 36 by increasing the claimant’s reward for making an adequate offer.”

Rule 36.17(4)(d) states that the “additional amount” is to be calculated by applying the prescribed percentage to an amount which is either “the sum awarded to the claimant by the court” or “where there is no monetary award, the sum awarded to the claimant by the court in respect of costs…” The latter test would be applicable here; and the amount concerned would be the maximum of £75,000.

I was not shown any case in which CPR 36.17(4) was engaged where an order was not made under CPR 36.17(4)(d). Such an order is not compensatory; it is in the nature of a prescribed reward to encourage offers and their acceptance and is part of the regime introduced “to encourage good practice” (per Sir Geoffrey Vos C. in OMV Petrom SA v Glencor International AG at [32]). Remembering Sir David Eady’s admonition in Downing v Peterborough & Stamford Hospitals NHS Foundation Trust (at [61]) that a judge “should not be tempted to make an exception merely because he or she thinks the regime itself harsh or unjust”, it does not seem to me that I have been provided with any sufficient reason specifically referable to this provision why, under the regime, the Administrators should not be entitled to the specified reward in the maximum figure. I have concluded that I am required to make such an order accordingly.

Firth Rixson seek permission to appeal the decisions in my main judgment now reflected in the agreed draft Order on the basis that:

The contrary argument of the Administrators is that, stepping back to consider the merits and appropriate disposition of the case as a whole, Firth Rixson’s position that it should never be required to pay any amounts under the Swaps notwithstanding that its counterparty is fully solvent and after the taking of the Relevant Steps will no longer be subject to any insolvency proceedings is so lacking in merit that there should be no realistic prospect of the Court of Appeal concluding that the ISDA Master Agreements work in that way. In any event, the Administrators urged me to refuse permission and leave it to the Court of Appeal to decide whether permission should be granted.

I consider that (a) the points in issue are of some complexity and it is not unrealistic to suppose that another court might reach a different conclusion (b) the amounts at stake are considerable and (c) the issues are plainly of some general commercial interest. I shall grant permission to appeal.

Counsel provided to me a draft form of order recording the matters agreed and leaving for completion the matters outstanding which I have now determined. I would invite them to agree the insertions required to conform with this decision, and to lodge an agreed draft Order with my clerk.