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Practico Blog: The importance of early claimant Part 36 offers

THE IMPORTANCE OF EARLY CLAIMANT PART 36 OFFERS

In Hochtief (UK) Construction Limited and Volkerfitzpatrick Limited v Atkins Limited [2019] EWHC 3028 (TCC) Mrs Justice O’Farrell considered the consequences of a claimant beating its own Part 36 Offer by a nominal sum.

The Court handed down judgment for the claimants against the defendant finding that the claimants had established their claim (in respect of the major part of its claim regarding a bridge), entitling them to damages of £802,475 plus interest of £77,372.but dismissed the part of its claim in respect of an underpass).

The claimant therefore recovered the total sum of £879,847.

In May 2017, the claimant had made a Part 36 offer in the sum of £875,000 and therefore achieved a marginal improvement on that offer.

The claimant’s position was that it had beaten its own Part 36 offer and accordingly it was entitled to recover all its costs on the favourable terms set out in CPR 36.17.

CPR 36.17(4) states that 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 at a rate not 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 set out below to an amount which is—
(i) the sum awarded to the claimant by the court; or
(ii) where there is no monetary award, the sum awarded to the claimant by the court in respect of costs—

The defendant contended that the Court should make an issues-based or partial costs award to reflect that: (i) the claimant beat its Part 36 offer by a very small margin (less than £5,000); and (ii) the defendant was the successful party in respect of the underpass claim.

Mrs Justice O’Farrell ruled that it would be unjust not to apply the consequences of CPR 36.17(4) and that the fact that the claimant had beaten the Part 36 offer by a very small margin did not displace the CPR 36.17 regime: CPR 36.17(1)(b). She further stated that, “The terms of the offer were clear. The Part 36 offer was made at a very early stage in the proceedings, after the letter of claim but before the issue of the formal claim. By that time, extensive investigations and remedial works had been concluded. The parties had sufficient information to make an informed judgment as to the merits of the case. The offer was at a level that indicated it was a genuine attempt to settle the dispute”.

Consequentially she awarded the claimant an enhanced rate of interest of 6%, an additional sum of £65,123 and its costs to be assessed on the indemnity basis.

This case illustrates the importance to claimants of making early competitive Part 36 offers and highlights the additional benefits that can be reaped from the provision, even where the Part 36 offer is only beaten by a nominal sum.