There are several  interesting aspects of the judgment of Mr Justice Saini in Essex County Council & Ors v Davies & Ors [2019] EWHC 3443. Here I want to look at the part of the judgment that deals with the additional interest rate when a claimant beats their own Part 36 offer.


“The task of challenging costs orders on appeal is a difficult one, as Counsel realistically accepted. The Appellants need to identify an error of law or of principle or some form of irrational exercise of discretion by the Judge. That will be particularly onerous when challenging a decision which simply follows what the rule prescribed as a default”


The judge was considering an appeal by two defendants following their success at trial. The claimants had beaten their own Part 36 offers and the trial judge had awarded additional interest at 10% above base. The defendants, among other issues, appealed that decision.

V. The Interest on Costs Appeal
    1. This appeal raises a short point. It is said that the award of interest on costs at the rate of 10% above base was penal and unreasonably high. The Appellants argue both that no order for interest on costs should have been made and that in any event (assuming an order was justified) the rate was too high. The reasons for the costs orders were set out in the Supplemental Judgment to which I will make reference below.
    2. Given the way in which this appeal was argued, I consider it important to have the relevant rule firmly in mind before entertaining an appeal on what is a matter of discretion.
    3. The material words of Part 36 are as follows (my underlining):
“Costs consequences following judgment
(1) Subject to rule 36.21, this rule applies where upon judgment being entered—

(a) a claimant fails to obtain a judgment more advantageous than a defendant’s Part 36 offer; or

(b) judgment against the defendant is at least as advantageous to the claimant as the proposals contained in a claimant’s Part 36 offer.

(Rule 36.21 makes provision for the costs consequences following judgment in certain personal injury claims where the claim no longer proceeds under the RTA or EL/PL Protocol.)
(2) For the purposes of paragraph (1), in relation to any money claim or money element of a claim, “more advantageous” means better in money terms by any amount, however small, and “at least as advantageous” shall be construed accordingly.
(3) Subject to paragraphs (7) and (8), where paragraph (1)(a) applies, the court must, unless it considers it unjust to do so, order that the defendant is entitled to—

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

(b) interest on those costs.

(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 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—

Amount awarded by the court Prescribed percentage
Up to £500,000 10% of the amount awarded
Above £500,000 10% of the first £500,000 and (subject to the limit of £75,000) 5% of any amount above that figure.
(5) In considering whether it would be unjust to make the orders referred to in paragraphs (3) and (4), the court must take into account all the circumstances of the case including

(a) the terms of any Part 36 offer;

(b) the stage in the proceedings when any Part 36 offer was made, including in particular how long before the trial started the offer was made;

(c) the information available to the parties at the time when the Part 36 offer was made;

(d) the conduct of the parties with regard to the giving of or refusal to give information for the purposes of enabling the offer to be made or evaluated; and

(e) whether the offer was a genuine attempt to settle the proceedings”

    1. In this case, the Judge decided that each of the costs consequences in CPR 36.17(4) was to follow. It is to be noted that the orders must follow unless the Judge decides it would be “unjust” in all the circumstances of the case not to make such orders. The default is accordingly that these are the normal orders unless something out of the ordinary justifies a departure. The Appellants do not complain about the first 3 of the orders which followed (the additional 10% of damages, interest on such sums at base plus 10% and costs on an indemnity basis) but do complain on appeal about the fourth consequential order (interest on costs at 10% above base).
    2. The task of challenging costs orders on appeal is a difficult one, as Counsel realistically accepted. The Appellants need to identify an error of law or of principle or some form of irrational exercise of discretion by the Judge. That will be particularly onerous when challenging a decision which simply follows what the rule prescribed as a default. I was taken in some detail through OMV Petrom SA v Glencore International AG [2017] EWCA Civ 195 by Counsel for Second Appellant but do not consider that case to support the appeal. The Court of Appeal held that the power to award interest on costs (and the enhancement of the rate) was not to be exercised on a purely compensatory basis and a court was to be guided by the aim of achieving a fair result for the Claimant.
    3. As Sir Geoffrey Vos V-C explained (with my emphasis):
“36. In my judgment, the use of the word ‘penal’ to describe the award of enhanced interest under CPR Part 36.14(3)(a) is probably unhelpful. The court undoubtedly has a discretion to include a non-compensatory element to the award as I have already explained, but the level of interest awarded must be proportionate to the circumstances of the case. I accept that those circumstances may include, for example, (a) the length of time that elapsed between the deadline for accepting the offer and judgment, (b) whether the defendant took entirely bad points or whether it had behaved reasonably in continuing the litigation, despite the offer, to pursue its defence, and (c) what general level of disruption can be seen, without a detailed inquiry, to have been caused to the claimant as a result of the refusal to negotiate or to accept the Part 36 offer. But there will be many factors that may be relevant. All cases will be different. Just as the court is required to have regard to “all the circumstances of the case” in deciding whether it would be unjust to make all or any of the four possible orders in the first place, it must have regard to all the circumstances of the case in deciding what rate of interest to award under Part 36.14(3)(a). As Lord Woolf said in the Petrotrade case, and Chadwick LJ repeated in the McPhilemy case, this power is one intended to achieve a fairer result for the claimant. That does not, however, imply that the rate of interest can only be compensatory. In some cases, a proportionate rate will have to be greater than purely compensatory to provide the appropriate incentive to defendants to engage in reasonable settlement discussions and mediation aimed at achieving a compromise, to settle litigation at a reasonable level and at a reasonable time, and to mark the court’s disapproval of any unreasonable or improper conduct, as Briggs LJ put the matter, pour encourager les autres
    1. So, as the Chancellor emphasised, all depends on the circumstances of the case and relevant factors include misconduct by the paying party. An additional factor is that an appeal court is highly unlikely to enjoy the benefit of a detailed knowledge of the conduct of the litigation, in contrast to the trial Judge.
    2. Against that background, I turn to consider the arguments made to me on the appeal. There were essentially four arguments.
    3. First, it was argued that the Judge erred in not “standing back” and considering whether a fourth order (enhanced interest on costs) was just when he had made the first three orders (to which I have made reference above). I reject that submission because it has a touch of unreality. The Judge clearly knew which orders he was making. Further, as will appear below, he was concerned about the conduct of all of the Appellants and that justified his order. There is however a second reason for rejecting the submission. It was not made to the Judge. As Counsel accepted before me, one cannot complain about the unlawful exercise of a discretion on appeal by raising a point which could have been made to the Judge but was not relied upon below.
    4. The second argument was that there would be a windfall to certain of the Respondents or their Solicitors as a result of this order. I was taken through a rough and ready oral financial presentation of the extent of the windfall. I reject this argument. Again, this was not a point made below and it is not open to the Appellants. In any event, I would not have regarded it as a good point. There is always a risk that the costs orders which follow under CPR 36.17 will provide an enrichment beyond actual loss. Indeed, the paradigm is the 10% additional sum under CPR 36.17(4)(d)(i) (as was awarded, without appeal, in this case). It is the deterrent effect (not just financial recompense) which motivates a court in making these orders. The Judge was entitled to make the award which was ultimately based on fairness to the Respondents who were faced (as will appear below) with Appellants who adopted what he considered was an aggressive scorched-earth approach to this litigation.
    5. The third argument made before me was that the Judge erred in finding that it was just for the Appellants to pay interest on legal costs before judgment in accordance with CPR 36.17(4)(c) when the Respondents, having engaged their lawyers on a CFA basis, were not obliged to pay the fees until after judgment. I reject that argument. First, there is nothing disapplying the rule in such cases (and indeed even those who are publicly funded may benefit from the rule: KR v Bryn Alyn Community (Holdings) Limited [2003] EWCA Civ 383[2003] CP Rep 39 at [23]). Further, the Respondents did in fact incur substantial expenses by way of disbursements.
    6. The fourth argument was that the Judge was mainly concerned with the misconduct of the First and Third Appellants in making his draconian costs orders yet his orders were also made against the Second Appellant (who, it is argued, had not behaved in any manner calling for criticism).
    7. In order to address this submission, I need to set out some parts of the Supplemental Judgment. It will be readily appreciated that the Judge had formed a negative view of the conduct of all of the Appellants:
“4. … I bear in mind that the defendants have argued every conceivable point in this case. For example, they have argued:
Whether the first and third defendants were occupiers within the meaning of the Occupiers’ Liability Act 1957 (the Act);
Whether the first and third defendants were in breach of section 2 of the Act;
Whether the first and third defendants were acting jointly;
Whether the second defendants were in breach of the Act, statutory duty and their common law duty;
Whether there was exposure for a two-year period or only on one occasion. This involved the Court spending considerable time analysing expert engineering evidence, lay evidence, legal expert engineering evidence and medical evidence;
Causation, requiring the Court to look in great depth at each of the nine claimant’s medical history;
The quantum of general damages;
The quantum of special damages, with very limited exceptions.
5. Secondly, I have made findings that the first defendant’s evidence has been wholly misleading and untruthful. By way of example [the Judge then set out a substantial number of extracts from the Judgment]
Rate of interest on additional amount
6. I conclude, having considered the circumstances of the case and having stood back and looked at the matter in the round, that the appropriate additional interest on the monies owing to the claimants is 10.75%, and I so order.
Indemnity costs on Part 36 offers
7. I order that the defendants pay costs on an indemnity basis from 21 days after the claimants’ Part 36 offers expired.
Rate of interest on costs
8. The claimants are seeking interest on their costs at 10.75%. I have already observed that substantial costs were incurred by the defendants arguing every conceivable point, and I have made serious findings of misconduct by the first and third defendants. I conclude that the appropriate rate of interest on the claimants’ costs by reason of the claimants beating their Part 36 offers is 10.75% and I so order.
13. Finally, the claimant makes an application to depart from the costs budget pursuant to CPR 3.18(b). this is an application that would need to be made in the Senior Courts Costs Office and my comments below are to assist the costs judge when considering this application.
14. At a preliminary stage, District Judge Worthington observed at a case management hearing that this case was little more complex than an RTA. With the greatest of respect, I profoundly disagree. This was an extremely complex multi-claimant personal injury action in both law and fact.
15. There was a complex issue of mixed law and fact as to whether the first and third defendants were occupiers within the meaning of the Occupiers’ Liability Act 1957. This involved a very detailed analysis of statute law and case law, including analysing the House of Lords case of Cavalier v Pope. There was a need for detailed and skilled cross-examination from Ms Foster to establish that the caretakers on the site were not employed by the third defendant, but were at all times acting as the employees of the first defendant.
16. The issue of exposure was very complicated and involved analysing four streams of evidence: the lay evidence, the internal expert evidence, the legal expert engineering evidence, the legal medical evidence, and the claimant’s medical records.
17. All of the breaches of statutory instruments by the second defendant were contested and had to be considered separately. Points were taken by the second defendant that the statutory regulations were not applicable for legal reasons and these juridical issues had to be resolved before considering factual issues….”
    1. In my judgment, these passages show that the Judge was well aware of his own findings as to which of the Appellants had committed misconduct but he was also critical of the Second Appellant (specifically in its taking of all points it could). He was much better placed than an appellate court to make such an assessment. He was well within his discretion and I can detect no error.
    2. Finally, for completeness, I should add that I consider the Judge was also well within his discretion in imposing the highest rate of interest on the costs (10% over base). His view of the poor conduct of the Appellants amply justified his orders as a proportionate response. In approaching the arguments I have considered and applied the principles identified in the Notes to the White Book Vol. 1 at 52.1.14 in relation to the limited basis for an appeal court to interfere with a costs order below.
    3. Before leaving this appeal, it is appropriate to emphasise the Chancellor’s observation in OMV at [47]:
“I should not leave the case without saying that, in my judgment, appeals on issues of the kind raised in this case should in future be rare. The judge’s discretion as to the appropriate rate of enhancement under Part 36.14(3) is a wide one as I have explained and I would not expect the Court of Appeal often to be persuaded to interfere with it”.
  1. Those comments apply with substantial force to this costs appeal.