England and Wales High Court (Queen's Bench Division) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		18/02/2010

Mr Justice MacDuff
 


1. This Judgment addresses issues arising out of the operation of part 36 of the Civil Procedure Rules.
2. In June 2009, following a trial of the issue of quantum in this case, I made an award of damages in favour of the Claimant. I awarded damages together with conventional interest, as well as making an order (agreed by the parties) for periodic payments. On a conventional basis, the award (if one capitalises the periodic payments) amounted to approximately £6.1 million. At the end of the trial, I reserved judgment. When I handed down judgment (as I say in June 2009) I was told that there were significant arguments to be advanced upon the issue of costs, and that a day should be set aside for those arguments. I heard the parties' submissions upon costs on 21st September 2009 and reserved this Judgment, which I am handing down today.
3. As stated, the issues arise out of part 36 offers, and involve consideration of that rule. There is the additional potential complication arising out of the fact that there have been changes made to part 36 between the date of the earliest offers and the trial.
4. I must deal with the relevant background facts. I need to go back to the spring of 2006. At that time, there had been an order for a split trial on liability, with quantum to follow later. Thus, at that time, the expert evidence upon quantum issues – or most of it – had not yet been obtained. In fact, liability had already been established, but there remained a real issue as to whether the Claimant had been guilty of contributory negligence. Although Mr Methuen, on behalf of the Defendant had contended (in his skeleton argument for the liability trial) that contributory negligence might be assessed at 50%, he conceded to me that realistically, he had been hoping for a reduction of 25% or, at best, 33%.
5. On 12th April and 8th May 2006 the Defendant made part 36 offers which the Claimant rejected. Those are now of no more than passing interest.
6. On 23rd May 2006, the Claimant himself made a part 36 offer of settlement to the Defendant. He made alternative offers: a conventional lump sum of £3.4 million, alternatively a lesser lump sum plus periodical payments. (It is common ground, as one might imagine, that the second offer, when capitalised, was of similar value to the first.) I will refer to this as the May 2006 offer.
7. This was an offer to settle the whole case, not just the liability issue. It was an offer which, at a relatively early stage, amounted to a genuine attempt to compromise everything – it took account of the risks inherent in the first trial (contributory negligence), as well as the uncertainties of quantification. At that early stage, (before much of the expert evidence had been obtained) it was impossible for the parties to have any real handle on individual heads of damage. They could only approach the likely assessment of damages with a broad brush. This was a genuine attempt at overall compromise, with a concomitant large saving of costs, at a time when there were many unknowns.
8. Within a very short time (on 31st May 2006) the Defendant's representatives rejected that offer. They did so in a telephone conversation. That rejection was then reported in a letter of the same date from the Claimant's solicitor.
9. On 26th and 27th June 2006 the first part of the case came on for trial before Wilkie J, who gave judgement for the claimant, for damages to be assessed, with no reduction for contributory negligence.
10. On 3rd July 2006, Messrs Stewarts, on behalf of the claimant, wrote a letter to the defendants.

Whilst you have indicated your client's rejection of the claimant's part 36 offer of 23rd of May 2006, in addition to which the 21 day time period for acceptance has expired, for the avoidance of doubt on the issue, we would like to clarify that whilst the claimant was prepared to settle on those terms during the 21 day acceptance period, he is no longer prepared to do so, now that we have the judgement of Mr Justice Wilkie, confirming there is to be no deduction for contributory negligence, the claimant believes that he is likely to recover a higher settlement figure…..

…… We put you on notice that the claimants will continue to rely on his part 36 offer in relation to his entitlement to interest and costs. That offer was genuine, and, had it been accepted within the 21 days, would have concluded the court proceedings at that stage, avoiding all further costs. Therefore, the claimant will, if he recovers damages in excess of the two alternatives he proposed in that letter, be seeking to recover interest on those damages at 10% above the base rate, interest on costs, and an indemnity costs order…..

11. In support of the assertion that he would continue to rely upon the offer, the Claimant referred in the letter to the case of Stokes Pension Fund v Western Power Distribution [2005] 1 WLR 3595.
12. It is the second paragraph of the letter which encapsulates the principal dispute between the parties. The claimant now seeks an indemnity costs order, from the date of that offer, as well as additional interest. It is the defendant's case that, the offer having been withdrawn (or otherwise not available) there is no such entitlement.
13. Before I consider the argument on that point, I need to complete the narrative. Over the next 18 months or so, the parties prepared for a trial on quantum. I have been provided with a helpful chronology, as an appendix to the defendant's skeleton argument. I do not need to repeat the detail, except to note, en passant, that, (i) at no time did the Defendant make any application, either formal or informal to accept the May 2006 offer. It was well understood between the parties that such an application would have been resisted, and that any formal application would have been doomed to failure. Mr Methuen, in submission, suggested that such an application would have been a charade; (ii) on 24th July 2006 the claimant's solicitor wrote, "We would not want to actively engage in a discussion concerning the current value of the claim until we have obtained an updating report from the claimant's lead medical expert….." and (iii) the defendant made a further part 36 offer (on 29th of August 2006), which was rejected. In fact, this offer almost exactly reproduced the Claimant's pre-trial offer, and, in one sense, could be viewed as an attempt (albeit via a different route) to accept that which had been offered before the trial, ie the May 2006 offer.
14. It is of some interest that, following that last offer (the August 2006 offer), the Claimant's solicitors wrote, noting that the offer was no better than the May 2006 offer and "consequently the Court would be highly likely to exercise its discretion to award indemnity costs, interest on costs and it is arguable that may even extend to interest on damages as well... Would you please clarify whether the Second Defendant is prepared to revise the terms of this offer to reflect the fact that it will not have beaten the one made by the Claimant on 23 May 2006". The Defendant made some concessions (in a letter of 9th October 2006) but was unwilling to revise its offer in relation to costs.
15. I can move forward, to 28th of May 2008, shortly before the trial on quantum. The defendant made a part 36 offer (the May 2008 offer). It was an offer to pay a lump sum of £3 million, plus annual periodical payments of £260,000, indexed to Ashe 6115. It is common ground that, in capital terms, that was the equivalent of a total offer of around £6.8 million. The offer was rejected by the Claimant.
16. At trial, the Claimant presented a schedule of loss amounting to approximately £7.9 million, in capital terms. The defendant's counter schedule amounted to the capital equivalent of around £5.9 million. Most heads of damage were agreed. However, there remained a gap of approximately £2 million. (In fact, the schedule and counter schedule were both expressed as a part lump sum, with substantial periodic payments.)
17. After a trial lasting several days, I awarded the agreed periodic payments of £260,000 per annum (appropriately indexed), plus a lump sum of £2.317 million. This represented an equivalent capital value of around £6.1 million. It followed, to use the phraseology of part 36, that the Claimant had obtained a judgment which was more advantageous than the May 2006 offer, but that he had failed to obtain a judgment more advantageous than the May 2008 offer.
18. It is agreed between the parties that the Defendant should have its costs from the date upon which the May 2008 offer should have been accepted, that is to say the 21st day after 28th May 2008. There is a small point as to whether that date should be moved on by a few days to take account of a request for clarification. And there is also an argument as to whether, if the Claimant succeeds upon the principal argument (see below) his total award may become "more advantageous" than the sum offered by the Defendant. If so, it is suggested that the Defendant would not then be entitled to its costs from that date.
19. However, the first and principal issue is concerned with the effect of the May 2006 offer. It is necessary to consider the rule. Since the offer was made, the terms of the rule have changed. The main purpose of the change was to dispense with payments into court. Now, in broad terms, part 36 offers are made in the same way, whether made by Claimants or by Defendants. But there were other changes also, which may need to be considered. For the moment, it is sufficient to note that the May 2006 offer was made under the old regime; the quantum trial took place under the new.
20. The relevant parts of CPR 36, as in force in 2006, may be summarised as follows.

•    Part 36.5 dealt with the form and content of a part 36 offer. The offer had to be in writing and expressed to remain open for 21 days from the date on which it was made. It also made provision for acceptance after the conclusion of the 21 day period or after the start of a trial. Of particular note for present purposes, part 36.5(8) provided that "If a part 36 offer is withdrawn it will not have the consequences set out in this Part".

•    Rule 36.21 prescribed the "costs and other consequences where the claimant does better than he proposed in his part 36 offer". It applied only after the "advantageous" judgment was given after "a trial". (This provision has been amended in the new rule; nothing turns on this change.)

•    (Parts 36.5 and 36.21 have been replaced in somewhat modified form by the new parts 36.2 and 36.14)

21. Where (as in this case) the Claimant obtains a more advantageous judgment than the proposals in his part 36 offer, part 36.21 (2) provides that "the court may order interest on the whole or part of an sum of money (excluding interest) awarded to the Claimant at a rate not exceeding 10% above base rate for some or all of the period starting with the latest date on which the defendant could have accepted the offer without needing the permission of the court". By part 36.21 (3) (a) and (b) "the Court may also order that the claimant be entitled to his costs on the indemnity basis from the latest date when the defendant could have accepted the offer without needing the permission of the court and interest on those costs at a rate not exceeding 10% above base rate". (I will hereafter refer to these "costs and other consequences" as "enhanced consequences".)
22. By part 36.21 (4) "where this rule applies, the court will make the ...enhanced consequences) orders ….. unless it considers it unjust to do so".
23. Part 36.21(5) provided that, in considering whether it would be unjust, the court must take into account all the circumstances of the case, including the circumstances which were thereafter set out.
24. Thus a step by step approach is required:

•    First, the court must consider whether the enhanced consequences provisions apply. This depends entirely upon whether the May 2006 offer had been withdrawn, within the meaning of Part 36.5(8).

•    Secondly, if it were not withdrawn, the court must consider whether or not it would be unjust to make an enhanced consequences order, having regard to all the circumstances of the case, including those specified in 36.21(5).

•    Thirdly, if it would be just to do so, the court must exercise its discretion as to several further matters: (i) whether to award interest upon the whole or only part (and if so which part) of money awarded to the Claimant, (ii) the appropriate rate of interest up to a maximum of 10% above base rate; (iii) whether to award interest upon those sums and at that rate for a whole or only part of the period (and what part of the period); (iv) similar questions as to the period for the award of indemnity costs; and (v) similar questions as to rate of interest upon the indemnity costs. This third step, discretionary as it clearly is, also requires a consideration of what would be just.

25. I must consider the first step; whether the court is empowered to make an enhanced consequences order; whether CPR 36.21 is engaged. [In fact, to make the matter clear, the transitional provisions provide that for this part of the exercise, the operative rule is the new CPR 36.14. The question is thus whether CPR 36.14 is engaged.] This question depends entirely upon whether the May 2006 offer was withdrawn by the letter of 3rd July 2006. The Claimant's argument is that, by that date, there was no extant offer remaining. The offer had been made, and it had been expressly rejected. The ordinary principles of contract apply, and (notwithstanding that the offer had been made within the context of part 36) there was nothing to withdraw.
26. Here reliance is placed upon the words of Dyson J, as he then was, in Pitchmastic v Birse Construction [19.05.00 unreported]; "I do not accept …... that there are special principles for deciding whether a contract of compromise has been made in the context of existing litigation. The question falls to be decided by the application of the ordinary rules of offer and acceptance…The offer of 6th March was terminated upon its rejection the same day……if the offer terminated upon its rejection, and if it was not subsequently revived …., I do not see how new life can be breathed into the offer merely because it was relied on when it came to the question of costs. The relevance of the offer at the stage of the arguments as to costs was that the offer had been made and rejected. That was a historical fact and Birse was entitled to rely on it in arguing issues about costs."
27. Reviewing an earlier decision of the Court of Appeal, Bristol and West Building Society v Evans Bullock and Co [05.02.96 unreported] he noted that a Calderbank offer had been made and subsequently withdrawn. It was held that the offer should have been accepted; "The question that arose was how that impacted on the question of costs. It was held that, although the offer was no longer operative in the sense of being available for acceptance, the effect of the letter still remained in relation to costs. So too here. Although the offer of 6th March was not withdrawn, it ceased to be capable of acceptance once it had been rejected by Pitchmastic."
28. These observations were clearly obiter. The issue before the court was whether or not the action had been compromised. Moreover, the remarks were not dealing with whether an offer had been withdrawn by the offeror, but solely with where it had been rejected by the offeree. And I must remind myself that it is Mr Methuen's submission that, although the May 2006 offer had been rejected (as in Pitchmastic) it had also been subsequently withdrawn (notwithstanding the normal law of contract). It is also clear that the practices surrounding Calderbank offers, and the small branch of jurisprudence which had developed in that area pre CPR, have many significant differences from the regime created by part 36.
29. The potential significance of the remarks of Dyson J can be stated in two propositions:

•    That contract law governs offers under part 36 and rejection sees the death of the offer, so that there was no offer to withdraw at the date of the letter of 3rd July 2006.

•    That, notwithstanding that the offer was no longer available for acceptance, it was a "historical fact" which should be capable of consideration on costs arguments; even to the point where the offer had two independent lives – one for acceptance by the other party, and one for the purpose of part 36. That the first was dead did not mean that the second died with it.

30. Mr McDermott also relies upon Scammell v Dicker [2001] 1 WLR 631 to support this part of his argument. This case was also concerned with whether or not an action had been compromised. An offer had been made under CPR 36 (by a Defendant). The offer was expressed to remain open for 21 days (as it had to do to comply with part 36). However, some four days later, the Defendant withdrew the offer. The Claimant sought to accept the offer within the 21 days. The judge at first instance held that the offer could not be withdrawn unilaterally within the 21 days. He relied upon the fact that it was expressed to be a part 36 offer, open for 21 days. However, the Court of Appeal found otherwise. Part 36 was there to enable a party to obtain the advantages provided by the rules. It did not seek to exclude the general law of contract and an offer could thus be withdrawn at any time prior to acceptance.
31. Mr McDermott relies upon this case to support what was said by Dyson J in Pitchmastic. The normal rules of contract apply. Thus, if an offer has been rejected, there can be no question of its subsequently being withdrawn. Although Scammell might be decided differently today under the revised part 36, the fact remained that the Court of Appeal held that, when looking at offers made under part 36, the normal rules of contract apply.
32. In his judgment, Aldous LJ touched upon the very issue which I have to determine. "Our attention was drawn to the judgment of Dyson J in Pitchmastic v Birse, in which it was held that an offer once rejected could not be accepted. Of course, that reflected the established law of contract. However, the judge went on to express a view as to the effect of part 36. Insofar as he did so, it appears to me that his observations were obiter. I prefer to express no view on the effect of rejection of a part 36 offer – in particular whether … the offeror can keep the advantages of having made a part 36 offer while at the same time treating it as at an end due to its rejection." (per Aldous LJ [2001] 1 WLR at pages 637-8) That, of course, is the very issue upon which I am required to express a view.
33. It is common ground between the parties that the offer was in fact rejected. But Mr McDermott advanced his argument upon a second alternative front, which did not rely upon what one might call the contract rejection point. Even if there had been no rejection, the offer would have lapsed – overtaken by the liability trial. It was no longer available for acceptance. The offer was expressed to be open for 21 days. Thereafter, it could only be accepted with permission from the Claimant or by order of the court. Certainly, there could be no question of acceptance once the draft judgment on liability had been given to the parties. In that sense, an offer would always be "withdrawn"; the offeror would no longer allow the offeree to accept it. The offer was only available for unilateral acceptance for 21 days, and no court would order that it could be accepted, once there had been a judgment on contributory negligence and a consequent shift in the landscape. At that stage, an application by the Defendant to accept the offer would have been refused by the court. Thus, it was not available for acceptance. But it had not been "withdrawn" within the meaning of the rule. It retained its potency in relation to costs, although it was no longer on the table as an available offer.
34. This analysis is further supported by the submission that the whole purpose of making the offer was (a) to try to achieve an early settlement acceptable to all parties notwithstanding (at that time) the many unknowns (including the risks of a finding of contributory negligence) and (b) to take advantage of the enhanced consequences provisions, if the offer was not accepted. If, as soon as liability had been determined, and the offer was no longer capable of acceptance, the Claimant were to lose the benefit of the offer which he had made only a few weeks earlier, the whole purpose of making the offer in the first place would have been lost.
35. This, it seems to me, is a powerful argument. The Defendant argues that there would be injustice in allowing an offer, which is no longer available for acceptance, to sit in the background operating against him. It may be fair to penalise him (if penalise be the right word) for the short period between the offer and the judgment on contributory negligence, but not for any longer period.
36. There is a superficial attraction to that argument. How can it be fair to require him to pay enhanced costs and interest over a period when he could not accept the offer, as it was no longer available for acceptance? The answer, as Mr McDermott suggested, is (i) that he should have accepted the offer when it was available; (ii) that he was on notice for those 21 days of the risk he would take if he failed to take the offer; and (iii) having failed to do so, he could and should have appreciated his costs risk at the conclusion of the contributory negligence trial, and taken protective steps, by making a realistic part 36 offer himself.
37. The case of Stokes Pension Fund v Western Power Distribution [2005] 1 WLR 3595, to which the Claimant had referred in the letter of 3rd July 2006 was principally concerned with a failure to make a payment into court by a Defendant who made a part 36 offer (an issue which can no longer arise in view of the changes to the rule). However, there is a wider significance. In that case, long before the matter came to trial, the offer had been withdrawn (or at least unavailable for acceptance). Nevertheless, the court held that the offer should have been accepted in the 21 days available, and the Defendant was entitled to its costs of the whole action from the date by which the Claimant should have accepted.
38. That, of course, was a different case in that the offer was made by a Defendant (not a claimant) and the court was concerned with simple costs and not with the enhanced consequences provisions. It is, however authority for the proposition that an offer which is no longer available for acceptance may remain alive for costs purposes.
39. If Stokes Pension Fund was a case where the offer had come from a Defendant, Capital Bank v Stickland [2004] EWCA Civ 1677 was concerned with a Claimant's offer and the enhanced consequences provisions. In that case, several months before trial, the Claimant made a part 36 offer which was expressed to be open for 21 days. The letter giving the offer expressly indicated that it was made "provided it is accepted by your client by no later than 31st December 2003". The offer was not accepted. Two days prior to trial the Defendant purported to accept the offer but was told that it was no longer available, and that any application to the judge would be opposed. The judge refused to allow the offer to be accepted. At the trial, which followed, the Claimant obtained a "more advantageous" judgment and applied for what I have called an enhanced consequences order. The judge awarded indemnity costs and interest upon them for the whole of the period from the date upon which the offer should have been accepted (31st December 2003). This decision was upheld in the Court of Appeal.
40. That authority also demonstrates that an offer which is no longer available for acceptance may, nevertheless, retain its costs potency.
41. I return to the words of Part 36.5(8): "If a part 36 offer is withdrawn it will not have the consequences set out in this Part". What is the meaning of "withdrawn"? Where, after the end of the 21 day period, the offeror is put in a stronger position (than when the offer was made) by some change in circumstances, he is entitled to refuse an application to accept. I cannot conceive that it was intended that this should be a "withdrawal", removing the costs potency of the offer. Where there has been a material change in circumstances, and the 21 day period has expired, the offer has not been "withdrawn" for the purpose of the rule. It may have lapsed; it may be no longer available for acceptance; the offeror may inform the offeree that it is no longer on the table. But it retains its costs potency.
42. In my judgment, it is only where the offer is unilaterally withdrawn at a time where the offeree could have accepted it, whether within the 21 day period or later with the leave of the court, that rule 36.5(8) applies.
43. It will be appreciated that this judgment is concerned with the rule in force in 2006. The re-drafted rule bears consideration. Now, the offer cannot be withdrawn (or made less advantageous to the offeree) during the 21 day period without the court's permission; CPR 36.3(5). After 21 days, the offeror may withdraw the offer or change its terms by serving written notice of the withdrawal / change; rule 36.3(6) and (7). Costs consequences (including what I have called the enhanced consequences) do not apply where the offer has been withdrawn or made less advantageous and the offeree has beaten the less advantageous offer; Rule 36.14 (6). However, in those cases, the court is required to consider the offer in its historical context and have regard to rule 44.3 [see particularly rule 44.3 (4) (c).]
44. I mention the new rule only because, as it seems to me, the matter is even clearer now. It reinforces the view that I have reached: that the May 2006 offer was not withdrawn within the meaning of the old rule 36.5(8). It matters not, in my judgment whether, as here, it had been rejected, or had merely been left in place until judgment in the contributory negligence trial. Once the trial had taken place, the offer had plainly lapsed for acceptance purposes. But it retained its costs potency.
45. In reaching this conclusion, I should also say that I have considered the wider scheme of the cost provisions, within the context of the Overriding Objective. I have read carefully the judgment of Lord Woolf MR, as he then was, in the case of Petrograde v Texaco [Court of Appeal 23rd May 2000 unreported]. I have paid particular attention to the early paragraphs of the Judgment where he gave an overview of the provisions of part 36 with particular reference to offers made by Claimants and the enhanced consequences provisions.
46. If I were to accept the submissions made by Mr Methuen on behalf of the Defendant, it would mean that the Claimant would have benefited not at-all from making the May 2006 offer. If I limited my order to the short period up to the end of the liability trial (Mr Methuen's secondary position) the Claimant would be seriously short changed. His was not just an offer to deal with liability (an offer, say, to accept 10% contributory negligence against the risk of a finding of 25%) in which case the enhanced consequences would have applied only up to the end of the liability trial. The offer, as previously stated, took into account all possible future contingencies, and, if it had been accepted, would have resulted in a full and final settlement and a huge saving in time and costs. The Claimant should have the benefit.
47. I have also considered what the Defendant could have done to protect himself, after the end of the liability trial. Mr Methuen asks rhetorically: what could he have done? He could not have been expected at that early stage to offer the sum of more than £6 million, which he eventually needed to do. He had no proper schedule and no sufficient information. However, an offer of, say, £4 million or a little more, would have given him a strong platform from which to resist this application. That would have been a genuine attempt to duplicate the Claimant's earlier offer, against the new landscape. It would have been an acknowledgement of the fact that the contributory negligence argument had been lost. It would not have provided the Defendant with costs protection for his own costs in view of the eventual award. But it would have provided a strong argument, two years later, to resist an application for an enhanced consequences order.
48. It follows that rule 36.21 (as it was in 2006) is engaged and that, the "court will make ...an enhanced consequences order) unless it considers it unjust to do so"; part 36.21 (4).
49. I now move on to deal with the second stage, and ask myself whether or not it would be unjust to make the order. This is a question which effectively answers itself. It would be unjust, for the reasons set out above, if the Claimant were to be deprived of the benefits of his offer. There is no injustice to the Defendant. Those arguments advanced by Mr Methuen (set out in his written submissions, and developed in oral argument) are little to the point on the broad question to be considered at stage two. They come into their own at stage three, when I have to consider the extent and nature of the enhanced consequences order. Provided that the order is proportionate and fair to both parties, it is entirely just for an order to be made.
50. The third stage. What order should I make? The potential range of orders is enormous. There are two parts to it:

•    enhanced interest on damages;

•    indemnity costs with or without enhanced interest

51. As to interest on damages, there are four decisions to be made:

•    Whether to award enhanced interest; if so

•    The period over which the interest is to be awarded

•    The part of the award which should attract the enhanced interest

•    The rate of interest to be awarded up to a maximum of 10% above base rate.

52. As to the costs:

•    Whether to award indemnity costs

•    The period over which the Claimant should have his indemnity costs

•    Whether to award interest on those costs

•    If so, the rate of interest, up to a maximum of 10% above base rate.

53. At this stage, it is necessary to consider the arguments advanced on behalf of the Defendant as to the justice of the case, as well as looking at general principles. In summary, Mr Methuen submits:

•    At the date of the Claimant's May 2006 offer, the claim appeared to be very much smaller (to both parties) than it later turned out to be. Of more significance, the pleaded schedule of loss was significantly smaller than it was in its final form some two years later. For example the annual claim for care was £122,000; less than one half of the final agreed figure. It was thus difficult if not impossible at that stage for the Defendant to make its own offer – and impossible to judge the level of offer needed to provide adequate protection.

•    No further signed schedule was forthcoming from the Claimant until May 2008, some two years later. It was not until then that the Defendant was able to appreciate how the pleaded case had increased in value. Moreover, the schedule was served late (in breach of an order requiring it to be served by February 2008). As soon as it had the schedule, the Defendant made its own offer (the May 2008 offer) which turned out to be an adequate one.

•    There was significant delay in moving to the trial on quantum, caused by the Claimant's purchase and rebuilding of Archers Post, a course of action which the court subsequently held to be unreasonable. This delay enabled the Claimant to formulate a much larger claim than had first appeared in his original schedule. It caused some of the experts' reports to be delayed, as well as delaying the production of a final schedule. It also delayed the trial. During this period, it would be unfair to the Defendant to be required to pay the enhanced interest for the whole period, when the Defendant had no control over the timetable or the Claimant's actions. The longer the Claimant delayed, the higher the award would be; it cannot be fair and proportionate to require the Defendant to pay additional interest at high rates for the whole of this period. It cannot be fair that the Claimant's lawyers are able to recover indemnity costs (for example) at a time when, the longer they take to get the case to trial, the more they are likely to recover.

54. Mr Methuen's submissions incorporate, at least in part, the matters listed in CPR 36.21 (reproduced in the new part 36.14) – for example that the court should have regard to the information available to the parties at the time when the offer was made; see part 36.21 (5) (c). Also, Part 36.21 (5) (d) may have some relevance. There is force in Mr Methuen's submissions. The submissions were designed to resist the application in its entirety; to persuade me that it would be unjust to make the order. They are relevant to the wider question – what order should I make? As I have already noted, there is a wide range of options available to me within rule 36.14 (formerly rule 36.21). My aim should be to make an order that is proportionate and just to both parties.
55. Interest on damages. I have no doubt that it is just to make an order that the Defendant should pay enhanced interest upon at least part of the damages.
56. The period. Over what period should enhanced interest be awarded? It seems clear that the starting date should be the date by which the May 2006 offer should have been accepted; that is to say the 21st day after the making of the offer. Prima facie, the period should end at the time when the May 2008 offer should have been accepted by the Claimant. In broad terms that would be a period of 2 years. On any view, the making of an adequate offer by the Defendant should bring to an end his liability to pay enhanced interest.
57. However, there is a case for reducing this period to some extent having regard to the Defendants' submissions that the case could and should have been more fully particularised at a somewhat earlier stage, and / or brought more speedily to trial. In my judgment, there is some strength in this argument, although the delay, such as it was, was not great. I have decided to reduce the period to one of 21 months (1.75 years).
58. The part of the award. Upon which part or parts of the award should the enhanced interest be granted? Although the rule provides that the court may order interest to be paid at an enhanced rate upon "a whole or part of any sum of money awarded" I have reached the conclusion that it would be wrong to make any award of interest, enhanced or otherwise, in respect of those damages which were awarded for future losses and future expenditure, that is to say those damages which would not attract interest in the normal way. There is some authority to support this conclusion. In Petrograde itself, Lord Woolf envisaged that, where the court would otherwise award interest, it could, where these provisions applied, order the interest to be paid at "more than the going rate." Upon damages for future losses, where interest is not awarded, there can be no "going rate". In a case (for example) of breach of contract, where the damages all represent past loss, it would be normal to award interest on the full amount of the award. If part 36.21 ...now part 36.14) applied, it might be appropriate to award that interest at higher than the "going rate" on the whole of the award. But not where interest would not normally be awarded at-all. This was the view of the Court of Appeal in respect of libel damages in McPhilemy v Times Newspapers [2001] EWCA Civ 933. "Given that, in a defamation action, it would generally be unjust to award interest upon the damages, let alone at an enhanced rate, it becomes more important that a part 36.21 order is made as to costs….." (my emphasis); per Lord Justice Simon Brown, as he then was, at paragraph 28. This was also expressed by Eady J in Jones v Associated Newspapers [2007] EWCA 1489 (QB). Where interest would not normally be awarded upon damages, it would be inappropriate to award enhanced (or any interest) upon those damages under the old part 36.21 (now 36.14). Accordingly, I have decided that it would be appropriate to award enhanced interest upon past losses only, and not upon future losses.
59. The rate of interest. What of the rate at which interest on past losses should be awarded, noting, as I do, that the total rate of interest is not to exceed 10% above base rate; see 36.21(6) [now 36.14(5)]. I clearly have a very wide discretion. There is little or no guidance, certainly not in the Rules, upon how the rate of interest should be selected. Of course, it is necessary to remind myself that the provision is not intended to be penal; it is to provide the Claimant with more generous compensation, taking account of the fact that he made an offer which should have been accepted and that he has been caused the added stress of more prolonged proceedings, and to wait longer for his compensation, albeit that in this case there have been substantial interim payments. He should be rewarded (proportionately) for his successful offer.
60. Although there is no help as to how the rate of interest should be divined, I should remind myself that Lord Woolf envisaged that the court would award something above "the going rate." It seems to me that the starting point (for determining the rate of interest to award under the enhanced consequences provisions) will depend upon the nature of the case and the basis upon which interest would normally be awarded. There are widely different interest rates in different types of case (see paragraph 7.0.17 in the current White Book). The rates of interest normally given in commercial cases, debt recovery cases, and personal injury cases (for example) will be different. And the approach may need to be modified depending upon the availability and cost of money at the relevant time, and the rate of return which could be obtained.
61. It seems to me that the starting point should be to use the approach mentioned by Lord Woolf, and to award interest at something more than the "going rate". Although the rule provides that the maximum should be no more than 10% above base rate, there is nothing to say that the court has to express the rate with reference to the base rate. In some commercial cases, interest is awarded with reference to base rate. But for past losses in personal injury cases, the award is normally made for special damages using the special account rate. In other cases interest is calculated by reference to the commercial rate, the judgment debt rate and so on.
62. In my judgment, the starting points are these. Damages for past losses (special damages if you like) are calculated at special account rate, which, although it may vary from time to time, was in fact stationary at 6% for the whole of the relevant period. Interest on general damages for pain suffering and loss of amenity is fixed at 2%. I propose to make awards in respect of those two heads of damages at a couple or more percentage points above those going rates. Of course, this encompasses the interest which has already been awarded. When I handed down my Judgment, I was presented with agreed figures of £16,775 and £9,690 for interest upon special damages and general damages respectively. Those, I think, are incorporated into an Order which has already been made. I was not privy to the calculations, but I can set out my understanding of how the calculation would have been made. The calculation for special damages is intended to award 6% interest upon every item of loss or expenditure from the time that the loss occurred or the expenditure was incurred to the date of judgment. (If the losses are spread broadly across the time frame, the interest is usually calculated at half rate for the full period.) The calculation also takes account of interim payments, so that interest is only calculated for the period when the Claimant was kept out of his money. That, I assume, is how the interest was computed in the present case. Although past losses amounted to almost £900,000, the interest was agreed at £16,775.
63. My intention is this. For a period of 21 months (1.75 years) I propose to revisit the award of interest upon special damages and award interest at 4% above the going rate, that is to say an overall rate of 10%. Thus for that period, the Claimant is entitled to an additional 4% over and above that which has already been awarded. It will also take account of interim payments. Rather than ask the parties to perform a detailed recalculation, I will do this now with a broad brush. The starting point is to take the £16,775 and apply a factor of 4/6. That produces an additional sum of £11,183. I then have to discount to take account of the fact that the original amount was awarded as interest from the date when the loss or expenditure occurred (going back to the date of the accident) until the date of judgment. The extra interest is only payable for a period of 1.75 years, ending in June 2008. My broad brush produces an award of an additional £9,000 after discounting. I have kept in mind that, during the relevant period, base rate varied between 4.5% and 5.75% an average of, say around 5%. Thus I am effectively awarding interest at approximately 5% above base rate upon the special damages.
64. So far as interest upon general damages is concerned, I propose to award interest at double the "going" rate for the period of 1.75 years. Thus the Claimant is entitled to an extra 2% on £225,000. The extra interest is thus £225,000 x 2% x 1.75 = £7875. I will round this up to £8,000. Thus the total additional award of interest will be £17,000.
65. Finally, costs. I award the Claimant his costs on a standard basis up to the 21st day after the May 2006 offer. Thereafter the Claimant should have his costs on the indemnity basis up to the 21st day after the making of the May 2008 offer. I do not extend the 21 day period – as I was asked to do – on the basis of the request for clarification. I note that, regardless of that request, the Claimant expressly rejected the offer well within the 21 days. Thereafter, the Defendant should have its costs on a standard basis.
66. I do not award any enhanced interest upon those indemnity costs. The order itself, together with the additional interest awarded upon the damages, is reward enough. I remind myself that the award must be proportionate, and must be fair. An order for additional interest of £17,000 with indemnity costs for two years is, it seems to me, a just and proportionate order, particularly as there is a conditional fee arrangement in place. Additionally, I award the indemnity costs for the whole two year period (not the period of 21 months).