Gamal v Synergy Lifestyle Ltd

An unqualified payment made on account of the claim after a Part 36 offer is presumed also to be made on account of that offer. The presumption applies whether or not the payment follows a formal admission. It correspondingly reduces the sum payable if the offer is accepted.

The payer may prevent that result by making clear, before judgment or acceptance, that the payment is voluntary, interim, or is not to reduce the offer. The reduction operates by law and does not require notice changing the offer under Part 36 of the Civil Procedure Rules.

The respondent contractor brought a claim for payment for building works. The Central London County Court assessed the works, gave credit for payments already made, and initially entered judgment including VAT. It also ordered the appellant to pay 25% of the respondent’s costs after finding that the respondent had beaten the appellant’s £15,000 Part 36 offer.

The judge later corrected the judgment sum to remove VAT, reducing it to £14,275.49. The appellant contended that this was less than the offer and that the costs order should therefore be altered. The central issue was whether a subsequent £10,000 payment for the works reduced the amount of the earlier Part 36 offer when comparing it with the judgment.

1. Appeal dismissed unanimously. Flaux LJ, with whom Arden LJ agreed, held that the £10,000 payment was an unqualified payment on account of the claim for the building works. It was therefore presumed also to be a payment on account of the earlier Part 36 offer.

2. The reasoning in Macleish v Littlestone [2016] EWCA Civ 127 was not confined to payments following formal admissions. Its critical feature was that the payment was on account of the claim as a whole. A contrary approach would produce the anomalous result that acceptance of an offer could entitle the claimant to receive both the payment and the full stated offer.

3. The payer can displace the presumption by stating, when making the payment or before judgment or acceptance, that it is a voluntary interim payment or is not to reduce the offer. In the absence of such qualification, the payment reduces both the liability on the claim and the offer by the same amount.

4. This consequence arose as a matter of law. It was not a variation of the offer requiring notice under rule 36.9(2) of the Civil Procedure Rules. The effective value of the £15,000 offer was therefore £5,000. The corrected judgment of £14,275.49 remained more advantageous to the respondent, so the County Court’s costs order stood.

• Court of Appeal (Civil Division) — Dismissed the appellant’s appeal and upheld the costs order.
• Central London County Court — Judge Bailey assessed the building-work claim and ordered the appellant to pay 25% of the respondent’s costs. He later corrected the judgment sum to remove VAT.