Rowlands & Ors v Bryn Alyn Community (Holdings) Ltd

Trial and appeal proceedings are separate for the purposes of Part 36. A pre-trial Part 36 offer does not protect a claimant during an appeal. A further offer must be made in the appeal proceedings.

Interest on damages ordered by a trial judge under Rule 36.21(2) runs only until the trial judgment. The appellate court determines any consequences for the later period.

Where Rule 36.21 applies, the prescribed orders must be made unless they would be unjust. Interest on indemnity costs compensates the claimant for financing unnecessary litigation. It should reflect the cost of money and avoid penal or double compensation. Public funding does not, without more, make such an award unjust.

Several claimants obtained judgments for general damages against the defendants. Certain claimants had recovered more than their pre-trial Part 36 offers. Connell J ordered the second defendant insurer to pay enhanced interest on damages and indemnity costs, but refused interest on those costs. He also denied Part 36 relief to one claimant.

The second defendant appealed the enhanced-interest order. The claimants challenged the refusal of interest on costs by respondents’ notice. The Court of Appeal’s earlier judgment in the main appeal increased the award to the claimant who had initially been denied Part 36 relief, removing that issue.

The remaining questions were the date to which Rule 36.21(2) interest ran, whether the claimants had compromised their challenge concerning interest on costs, and the appropriate costs orders.

1. The second defendant succeeded on the judgment-date issue, while the claimants succeeded on their cross-appeal concerning interest on costs. The judgment was that of the court, delivered by Waller LJ.

2. Trial and appeal proceedings are separate for Part 36 purposes. Applying P&O Nedlloyd BV and Utaniko Limited [2003] EWCA Civ 174, a pre-trial offer does not invoke Part 36 protection during an appeal. A claimant seeking that protection must make a further offer in the appeal proceedings.

3. Accordingly, where a trial judge orders interest on damages under Rule 36.21(2) until judgment, the relevant endpoint is that judge’s judgment. The Court of Appeal alone determines whether Part 36 or another discretion should affect the period between the first-instance and appellate judgments. No appeal-stage offer had been made here, and any appellate Part 36 application would have failed. An attempt to obtain the same result under Rule 40.8 would also have failed on the facts.

4. Objectively construed, the parties’ correspondence compromising and defining issues in the second defendant’s appeal did not abandon the separate challenge made by respondents’ notice to the refusal of interest on costs.

5. Rule 36.21 required the orders specified in paragraphs (2) and (3) unless they would be unjust. The judge had not applied that requirement correctly when refusing interest on costs, so the Court of Appeal exercised the discretion afresh.

6. Interest under Rule 36.21(3)(b) compensates a claimant for the cost or loss of using money to fund litigation which acceptance of the offer would have avoided. Following McPhilemy v Times Newspapers Ltd (No 2) [2002] 1 WLR 934, interest may run from when the work was done or liability for a disbursement was incurred where evidence does not establish the dates of actual funding. Its rate should reflect the cost of money. The measure must avoid double compensation and must not operate as a penalty.

7. Public funding did not justify a different result. The second defendant was ordered to pay interest at 4% above base rate on the relevant costs from the date the work was done or liability for disbursements was incurred until Connell J made the costs order. Costs followed the parties’ respective success on the appeal and cross-appeal.

• Court of Appeal (Civil Division): In [2003] EWCA Civ 383, the second defendant succeeded in limiting Rule 36.21(2) interest to the date of the first-instance judgment. The claimants succeeded in obtaining interest on indemnity costs.

• High Court, Queen’s Bench Division: Connell J awarded enhanced interest on general damages and indemnity costs following successful Part 36 offers, but refused interest on those costs. The citation of that judgment is not stated in the judgment.