Pankhurst v Lee White Motor Insurers Bureau

Under Civil Procedure Rules rule 36.14(3)(a), enhanced interest for a claimant who beats a Part 36 offer is available only on an item of the judgment which would itself attract interest. It cannot be awarded on damages for future loss where ordinary interest is unavailable.

The court cannot recast Part 36 to correct any perceived imbalance between claimant and defendant offers. Under rule 36.14(3)(c), the court may refuse interest on indemnity costs where, having regard to all the circumstances, an additional award would be unjust, disproportionate or unfair.

The claimant suffered catastrophic injuries when an uninsured driver struck him while he was cycling. He sued the driver and the Motor Insurers Bureau, which contested the claim. After succeeding on liability, the claimant made a Part 36 offer. The Motor Insurers Bureau later made its own offer before the quantum trial.

MacDuff J awarded damages and periodical payments. Each party had bettered its own Part 36 offer. The judge awarded enhanced interest on general and special damages, and indemnity costs for part of the litigation, but declined enhanced interest on future-loss damages and on costs.

The claimant appealed those two refusals. The central issue was whether rule 36.14 required those further interest awards.

1. Appeal dismissed. Jackson LJ held, with whom Leveson LJ and the Chancellor agreed, that the judge correctly refused enhanced interest on damages for future loss.

2. An award under rule 36.14(3)(a) rewards an effective settlement offer rather than compensating delay in payment. Nevertheless, the binding ratio of McPhilemy v Times Newspapers Ltd (No 2) [2001] EWCA Civ 933 confines enhanced Part 36 interest to items which already merit ordinary interest. The principle is not confined to defamation. Future-loss damages attracted no ordinary interest, so no enhanced interest could be awarded on them.

3. Any perceived imbalance in the incentives created by Part 36 was for the Rule Committee or Parliament, not judicial alteration of the Rules. The claimant's after-the-event insurance was also relevant to the claimed unfairness, since it covered his adverse costs and its recoverable premium was payable by the Motor Insurers Bureau under section 29 of the Access to Justice Act 1999.

4. The judge was entitled to refuse interest on indemnity costs under rule 36.14(3)(c). The award had to be just, fair and proportionate. The conditional fee and insurance arrangements, the substantial success fee, the existing indemnity-costs order and payments on account gave no basis to disturb the judge's conclusion that further interest would be unjust.

5. Leveson LJ added that, in an appropriate personal-injury case, meaningful reward for an effective claimant offer may still be achieved by enhancing interest on general damages and unpaid special damages, which ordinarily attract interest. Part 36 should not encourage tactical delay while future-loss damages increase.

• Court of Appeal (Civil Division) Dismissed the claimant's appeal from MacDuff J's refusal to award enhanced Part 36 interest on future-loss damages and indemnity costs.
• Queen's Bench Division MacDuff J awarded enhanced interest on general and special damages, and indemnity costs for part of the proceedings, but refused enhanced interest on future losses and costs.