King v City of London Corporation

Civil Procedure Rules 1998 Part 36 is a self-contained and highly prescriptive code. An offer to pay or accept a sum of money must comply with rule 36.5 in its entirety, including the mandatory requirement that it be treated as inclusive of all interest. Interest cannot be hived off as a severable part of the claim. An offer excluding interest is invalid even where it concerns only the principal sum or is made in detailed assessment proceedings. Rule 36.5(4) does not convert an expressly interest-exclusive offer into one including interest. A party may make such an offer outside Part 36, but it will not attract Part 36 consequences.

The appellant had obtained a consent order requiring the respondent to pay £250,000 plus costs to be assessed if not agreed. In the detailed assessment proceedings, he made an offer to accept £50,000 in full settlement of the costs, expressly excluding interest. The bill was later assessed at £52,470 excluding interest.

The Deputy Master held that the offer was not a valid Part 36 offer. His Honour Judge Dight CBE dismissed the appeal. The Court of Appeal considered whether an interest-exclusive Part 36 offer could be valid generally or in detailed assessment proceedings, and whether the offer could nevertheless be treated as inclusive of interest.

1. Appeal dismissed unanimously. Newey LJ gave the leading judgment. Coulson LJ agreed with his reasoning. Arnold LJ agreed with the result, while expressing reservations about the wording of the rules.
2. Part 36 is a self-contained and highly prescriptive procedural code. Under rules 36.2(2) and 36.5, an offer must comply with the whole of rule 36.5 to obtain the specified Part 36 consequences. Rule 36.5(4), although expressed in terms of how an offer will be treated, imposes a mandatory requirement that an offer to pay or accept a sum of money be inclusive of all interest. This was consistent with the approach in Gibbon v Manchester City Council [2010] EWCA Civ 726, Mitchell v James [2002] EWCA Civ 997, C v D [2011] EWCA Civ 646, Shaw v Merthyr Tydfil County Borough [2014] EWCA Civ 1678 and James v James [2018] EWHC 242 (Ch).
3. Interest is ancillary to the claim for Part 36 purposes. It is not a severable part of the claim which can be left open while the principal sum is offered. The availability of offers relating to part of a claim under rule 36.2(3) therefore did not permit an interest-exclusive offer. Rule 36.6(1), the costs provisions in rule 36.13(4), and the history of Part 36 reinforced that conclusion.
4. The same interpretation applied to detailed assessment proceedings. Rule 47.20(4) applies Part 36 to those proceedings subject to specified modifications, none of which affects the treatment of interest. Interest may also be disputed where delay engages rules 47.8 or 47.14. The approach of Nicol J in Horne v Prescot (No 1) Ltd [2019] EWHC 1322 (QB) was therefore not followed. Hertel v Saunders [2018] EWCA Civ 1831 concerned a materially different situation and did not assist the appellant.
5. Rule 36.5(4) could not rewrite the express words of the offer and treat it as inclusive of interest. The offer was non-compliant and consequently did not attract Part 36 benefits. Practice Direction 47 could not control the interpretation of Part 36.

Arnold LJ considered that the apparent policy issue should be revisited by the Civil Procedure Rules Committee and suggested that the rule or the practice direction should be amended if interest-exclusive offers were not intended to be permitted.

1. County Court at Central London: The Deputy Master held that the interest-exclusive offer was not a valid Part 36 offer. His Honour Judge Dight CBE dismissed the appellant’s appeal.
2. Court of Appeal (Civil Division): The appeal was dismissed. The court held that an interest-exclusive offer could not be a valid Part 36 offer, either generally or in detailed assessment proceedings.