INTEREST ON PART 36 OFFERS: COURT OF APPEAL DECISION TODAY: “THE LAW REPORTS ARE OVER-FULL OF CASES IN WHICH PARTIES MADE OFFERS OUTSIDE THE SCOPE OF PART 36 AND THEN UNSUCCESSFULLY SOUGHT TO OBTAIN THE PART 36 BENEFITS LATER”
In King -v- City of London Corporation  EWCA Civ 2266 the Court of Appeal set out the position in relation to whether an offer exclusive of interest can be made. I am grateful to Matthew Hoe from Taylor Rose for sending me a copy of the judgment King v City of London CA judgment
“The law reports are over-full of cases in which parties made offers outside the scope of Part 36 and then unsuccessfully sought to obtain the Part 36 benefits later”
The claimant made a Part 36 offer on costs which was said, expressly, to exclude interest. The offer was not accepted. The claimant did better than the offer. The question was whether the Part 36 offer was a valid offer. Both the Deputy Master and the Circuit Judge on appeal held that an offer that excluded interest was not a valid Part 36 offer.
THE COURT OF APPEAL DECISION
There is a detailed consideration of the rules and history of Part 36. The Court of Appeal found that a Part 36 offer must include interest. Lord Justice Newey stated
40. In my view, an offer of “£x exclusive of interest” would not have been one relating to “part” of a claim under the original version of CPR Part 36 and is no more to be seen as one in respect of “part” of a claim for the purposes of the present-day Part 36. Part 36 proceeds on the basis that interest is ancillary to a claim, not a severable part of it. Just as a party cannot make a Part 36 offer providing for costs consequences other than those prescribed by Part 36, so a Part 36 offer must, if it offers to pay or accept a sum of money, be inclusive of all interest, as CPR 36.5(4) says. Interest cannot be hived off. True it is that, on occasion, there may be room for substantial dispute as regards interest and that the amount at stake could be large, but the same could be said about costs.
41. In short, it seems to me that a Part 36 offer cannot generally exclude interest
THE POSITION IS NO DIFFERENT IN DETAILED ASSESSMENT PROCEEDINGS
After a detailed consideration of the rules Lord Justice Newy concluded:
31.In the circumstances, an offer exclusive of costs cannot, in my view, be a valid Part 36 offer even if made in respect of detailed assessment proceedings.
WAS THE OFFER TO BE CONSTRUED AS INCLUDING INTEREST IN ANY EVENT?
The Court also rejected an argument that the offer could be construed as an interest inclusive offer.
“To my mind, however, it is inconceivable that CPR 36.5(4) was meant to turn an offer specifically stated to be exclusive of interest into one including interest. That would grossly distort the offeror’s intentions. Had the City accepted the offer, Mr King would have found himself unable to claim interest even though he had said in terms that interest was to be excluded. Further, if on detailed assessment Mr King had been awarded, say, £49,000, he could have claimed to have beaten his £50,000 offer on the footing that the £50,000 was to be taken as representing a lesser figure plus interest even though the 12 December letter had said otherwise”