Bolt Burdon Solicitors v Tariq & Ors

On 13th April 2016 I handed down my reserved judgment in this case and made the Order in terms largely agreed by the parties in the light of that judgment. The only issue upon which I was required to adjudicate was time for payment.

In summary, the relevant terms of the Order for present purposes were as follows:

Three issues were specifically identified for further determination, in the absence of agreement, namely:

The expectation was that there would be a further hearing to deal with these matters, in the absence of agreement. Regrettably it was not possible to find a date convenient to all parties and the court. Instead it has been agreed between the parties that I should deal with these matters on the basis of written submissions.

To this end, I have written submissions dated 3rd May 2016 from Mr Edwards on behalf of the defendants, and written submissions dated 24th May 2016 from Mr Mallalieu on behalf of the claimant. I specifically gave counsel the opportunity of making any further written submissions by 1st June 2016, but neither wished to do so.

I shall deal with each of the three outstanding issues in turn.

The claimant made two Part 36 offers, dated 16th February 2015 and 19th October 2015. The judgment against the defendants was at least as advantageous as the proposals contained in the Part 36 offers. Thus the provisions of CPR 36.17 are engaged.

CPR 36.17(4) provides as follows:

“(4)

Subject to paragraph (7), where paragraph (1)(b) applies, the court must, unless it considers it unjust to do so, order that the claimant is entitled to-

(a)

interest on the whole or part of any sum of money (excluding interest) awarded, at a rate not exceeding 10% above base rate for some or all of the period starting with the date on which the relevant period expired;

(b)

costs (including any recoverable pre-action costs) on the indemnity basis from the date on which the relevant period expired;

(c)

interest on those costs not only exceeding 10% above base rate; and

(d)

provided that the case has been decided and there has not been a previous order under this sub-paragraph, an additional amount, which shall not exceed £75,000, calculated by applying the prescribed percentage…. to

(i)

the sum awarded to the claimant by the court…”

Where the “amount awarded by the court” is up to £500,000, the prescribed percentage is “10% of the amount awarded”. Where the amount awarded is above £500,000, the prescribed percentage is 10% 0f the first £500,000, and 5% of any amount above that figure (subject to a maximum of £75,000). It is agreed that the sum which would be payable if a further “additional amount” is ordered would be £2,631.15, a mixture of 10% and 5%, because the “amount awarded by the court” would be over £500,000.

The “additional amount” is, in effect, a further head of damages, and is intended to provide a reward of real value to a claimant who makes a successful claimant’s Part 36 offer.

Mr Mallalieu submits that the claimant is plainly entitled, as part of the “additional amount”, to an award of 10% of the contractual interest to which the claimant was entitled and which has been awarded under paragraph 1 of the Order. Because this was contractual interest, it is part of the “sum awarded to the claimant by the court”. He refers to the notes at7.0.10 of the White Book where, as the first example of interest on debts, there is listed “Interest by contract- Interest pursuant to contract may be claimed and awarded as a specific sum.”

Mr Mallalieu submits that there is nothing in the wording of the rule to exclude the interest element of the sum awarded when calculating the “additional amount” payable. Indeed, it is striking that , by contrast, sub-paragraph 4(a) of the Rule specifically provides that the claimant is entitled to interest on the whole or part of any sum of money awarded “excluding interest”.

On behalf of the defendants Mr Edwards submits that, as a matter of construction, sub- paragraph 4(d) does not entitle the claimant to an additional amount in respect of interest. He relies upon the decision to that effect of HHJ Purle QC (sitting as Judge of the High Court), in Watchorn v Jupiter Industries Ltd [2014] EWHC 3003 (Ch). That was a claim by the liquidator of a company for relief in respect of the assignment of trademarks at an under - value. The judge awarded damages in the sum of £360,000, representing the value of the trademarks as a going concern at the relevant date. The judge also awarded interest at the judgment rate from the relevant date at 3% above base (see paragraph 54 of the judgment). The claimant had done better than the Part 36 offer he had made, so the provisions of CPR36.17 applied, albeit in the previous form prior to the recent amendment. Nothing turns on this.

The judge first considered whether the claimant should receive interest at an enhanced rate, pursuant to what is now sub-paragraph 4(a) of the Rule. He concluded that the interest sanction should be at the highest end of the scale, so that 10% above base rate was the appropriate rate (see paragraph 72).

Turning to the calculation of the “additional amount” under what is now sub-paragraph (4) (d) of the Rule, the judge said, at paragraphs 76-77:

“76.

I do have to consider, however, to precisely what part of my award the prescribed percentage applies in calculating the additional amount. The basic monetary award is £360,000, to which interest has been added, for part of the period at 10% above base. I have also awarded costs.

77.

It is conceded by the liquidator that, in calculating the additional amount, I ignore the amount of any costs awarded, even though the costs will, eventually, be translated into a monetary award. There is no concession regarding interest, however. Mr Dean says I apply the prescribed percentage to all the interest I have awarded. Mr Eaton Turner says I do not apply the prescribed percentage to interest at all.”

The judge then set out the relevant provisions of the Rule, including what is now sub- paragraph (6):

“Where the court awards interest under this rule and also awards interest on the same sum and for the same period under any other power, the total rate of interest may not exceed 10% above base rate.”

He continued:

“79.

As I have awarded 10% above base rate for part of the period in question, it might be thought that the effect of sub-rule (5) is to preclude me from applying an additional amount in respect of interest.

80.

As a matter of strict construction, any amount payable under [CPR 36.17(4) (d)] does not fall within [(6)] because the court is not awarding interest under (d); it is simply awarding “an additional amount” calculated in a particular way. However, the commercial effect would be to turn what is a maximum interest rate of 10% above base (when ordered) into 11% above base, which is surprising.

81.

In those circumstances it seems to me that what the court is looking at under (d)(i) is the basic monetary award not including interest. Accordingly, in my judgment, [CPR 36.17(4)(d)] does not require the court to apply the prescribed percentage to an award of interest, in just the same way as (except in the case of a non- monetary claim, where costs are expressly mentioned) the prescribed percentage does not, on the concession made before me, apply to costs.”

Mr Edwards submits that I should follow the same approach in the present case, and refuse to apply the “additional amount” calculation to the contractual interest element of the sum awarded. Mr Mallalieu submits that I am not bound by this decision and should not follow it. He points out that the judge does not appear to have considered the significance of the specific mention of “excluding interest” in sub-paragraph (4)(a), in contrast to the absence of any such mention of those words in sub-paragraph (4)(d). He also points out that the interest the judge was excluding in calculating the “additional amount” was itself interest awarded at the enhanced rate under sub-paragraph (4)(a), whereas in the present case the interest in question was contractual interest forming part of the sum awarded.

I accept Mr Mallalieu’s submissions. In my view the wording of the Rule is clear. The additional amount is calculated by applying the prescribed percentage “to an amount which is… the sum awarded to the claimant by the court.” Whatever the position may be in respect of interest awarded as a matter of discretion (e.g. pursuant to s.35A Senior Courts Act 1981), the court here has awarded interest at 8% as part of the sum to which the claimant was entitled contractually. As the notes in the White Book at 7.0.10 make clear, that is to be regarded as part of the sum awarded “as a specific sum.”

Had it been the intention always to exclude interest from the calculation of the “additional amount”, nothing would have been simpler than to repeat the words “excluding interest” which appear in sub-paragraph (a) in relation to the entitlement to enhanced interest where these special sanctions apply. As a matter of statutory construction, the inclusion of the words “excluding interest” in one part of the Rule but the omission of the same words in another part, is a strong indication that there was intended to be a difference. The situation in Watchorn was different in that the interest of the award was itself enhanced interest awarded under sub-paragraph (4)(a) of the Rule. The judge was concerned that the effect of allowing interest to be included in the calculation of the “additional amount” would be to award a total rate of interest exceeding 10% above base rate, contrary to sub-paragraph (6) of the Rule, although he acknowledged that the “additional amount” could not strictly be regarded as interest at all. The circumstances of that case were so different that I feel in no way constrained to adopt the same approach.

Mr Edwards has a second point. By sub-paragraph (4) of CPR 36.17 the requirement that the court must order that the claimant is entitled to an “additional amount” is qualified by the words “unless it considers it unjust to do so”. Mr Edwards submits that it would be unjust to do so in this case. He points out that the rate of contractual interest (8% per annum) was far higher than the claimant’s true costs of borrowing would have been. So by virtue of the contract the claimant had already been over compensated for being out of their money. In those circumstances it would be unjust for the court to award an “ additional amount” on that interest. Mr Mallalieu has not replied specifically to that point in his written submissions.

CPR 36.17(5) sets out a number of matters which the court must take into account in considering whether it would be “unjust” to grant the relief to which a claimant was otherwise entitled where these provisions are engaged. None of those matters is relied upon by Mr Edwards. They relate to the circumstances surrounding the Part 36 offer. It is correct, however, that the court must take into account “all the circumstances of the case”.

In my judgment Mr Edwards’ submission is misconceived. The parties contracted for interest at 8% if the sum due was not paid on time. That entitlement became part of the overall award. There has been no claim for enhanced interest under sub-paragraph (4)(a) of the Rule, as there could have been. The “additional amount” is clearly designed as a penal sanction to mark a defendant’s failure to accept a Part 36 offer when he should have done, and to reward the claimant for a commendable attempt to settle the case. The make up of the overall sum to which the prescribed percentage is applied is immaterial.

Accordingly I shall order that in addition to the sums payable at paragraph 2 of the interim order of 13th April 2016, the defendants shall pay the claimant as part of the “additional amount” to which the claimant is entitled under CPR 36.17(4)(d), the sum of £2,631.15.

The parties are now in agreement on this issue. Under CPR 36.17(4)(c) the claimant is entitled to interest on the costs that have been awarded at a rate not exceeding 10% above base rate. It is now agreed, as I understand it, as proposed by the defendants at paragraph 22 of Mr Edwards’ written submissions, that interest should be paid at a rate of 4% above base rate from the date on which the work was done or the liability for the disbursement was incurred, or 9th March 2015, whichever is the later.

By paragraph 4 of the Order dated 13th April 2016, the defendants are to pay the claimants costs of the claim and counterclaim. The costs are to be on the standard basis up to and including 9th March 2015 and on the indemnity basis thereafter. By paragraph 5 of the Order the defendants were to pay the sum of £70,000 on account of costs. This was the agreed interim figure. The issue is whether any further sum must be paid on account of costs.

On behalf of the claimant, Mr Mallalieu submits that I should have particular regard to the fact that the claimant had an approved cost budget of £142,921. CPR 3.18 provides that where there is to be an assessment of costs on the standard basis, the court will not usually depart from the last approved or agreed costs budget unless there is good reason to do so.

Mr Mallalieu refers to a series of first instance decisions in which, for this reason, a payment on account representing a very substantial proportion of the approved costs budget has been awarded: see Pink v Victoria Secrets [2014] EWHC 3258 (Ch), where the figure was 90%; Excelerate Technology v Cumberbatch [2015] EWHC 204 (QB), also 90%: Kellie v Wheatley& Lloyd [2014] EWHC 2886 (TCC) 98%. Mr Mallalieu also points out that because the bulk of the costs must be paid on the indemnity basis, proportionality does not apply and the benefit of the doubt as to reasonableness will be given to the claimant. Mr Mallalieu submits that the appropriate payment on account should represent 90% of the approved budget, even though arguably an even higher amount could be justified.

Mr Edwards concedes that it will be for the defendants on a detailed assessment to persuade the court that there is good reason to depart from the costs budget. He accepts in principle that, rather than the customary figure of 50% where there has been no costs budget and the costs have been ordered on the standard basis, a higher payment on account of costs would be appropriate in these circumstances, even as much as 90%.

Mr Edwards submits, however, that it is relevant that in approving the costs budget Master Yoxall commented that the pre-action sum of £20,403 and the costs management conference figure of £20,106 “seemed high”. Thus he submits, on a detailed assessment the court would need persuading that these two sums, totalling £40,509, were reasonable.

I have difficulty with this submission. Whatever Master Yoxall may have said about these figures the fact is that the sums were approved as part of the budget.

Mr Mallalieu has not made any submissions in response to this particular point. He has not challenged the assertion that Master Yoxall made these observations.

I am satisfied that it is appropriate to order a payment on account of costs which, in total, is well in excess of what has been paid already. However, exercising a degree of caution in the light of Master Yoxall’s reported observations, I shall limit the amount to a total of 80% rather than 90% of the costs budget. Accordingly the total figure will be £114,336, of which£70,000 has already been ordered. The balance of £44,336 will be payable 14 days from the date of my Order.

I shall leave it to counsel to draft and agree the precise terms of the Order, in the light of this further judgment. As the claimant has succeeded on the issues which remained contested, the costs of and incidental to the determination of these consequential matters must also be paid by the defendants.