Hochtief (UK) Construction Ltd & Anor v Atkins Ltd

Where a claimant beats its own Part 36 offer, the prescribed consequences ordinarily follow unless it would be unjust to impose them. The regime is intended to encourage settlement, not punish defendants, and does not depend on unreasonable conduct. The court must consider all the circumstances, including the offer, the information available, the timing, the parties’ conduct and whether the offer was genuine.

The enhanced interest rate must be proportionate. Part 36 is a self-contained costs code, but it permits a proportional or issues-based costs order where justice requires it. A successful claimant may therefore recover enhanced Part 36 benefits while bearing the costs of a distinct claim on which it failed.

The claimants succeeded against Atkins in relation to a Bridge claim but failed in relation to a separate Underpass claim. In the earlier judgment, the claimants were awarded damages and interest totalling £802,475.35 for the Bridge.

The claimants had made a Part 36 offer of £875,000, including interest. The judgment sum, including interest, was £879,847.76. The consequential hearing concerned the effect of the offer, the appropriate costs order, costs budgets and a payment on account of costs. The central issues were whether the Part 36 consequences would be unjust and whether the claimants should recover all or only a proportion of their costs.

1. Part 36 consequences. The claimants had beaten their offer, so CPR 36.17 was engaged. The offer was made at an early stage, after investigations and remedial works had been completed, when the parties had sufficient information to assess the merits. It was a genuine attempt to settle. It would not be unjust to impose the prescribed consequences.
2. The purpose of the regime, as explained in McPhelmy v The Times Newspapers Ltd (No 2) [2001] EWCA Civ 933, is to provide a settlement incentive and achieve a fairer result, rather than punish unreasonable conduct. The court therefore ordered enhanced interest at 6% above base rate, indemnity costs from expiry of the offer and the additional sum of £65,123.77. The rate was appropriate because Atkins’ conduct did not justify the maximum rate identified in OMV Petrom SA v Glencore International AG [2017] EWCA Civ 195.
3. Costs. The small margin by which the offer was beaten did not displace the Part 36 regime. However, the Bridge and Underpass claims were physically, factually, technically and financially distinct. It would be unjust to require Atkins to pay the costs of the unsuccessful Underpass claim. Following Webb v Liverpool Women’s NHS Foundation Trust [2016] EWCA Civ 365, Part 36 is a self-contained code but permits a proportional costs order. Atkins was ordered to pay 85% of the claimants’ costs.
4. The court was too late to amend the approved costs budget, applying the reasoning in Elvanite Full Circle Ltd v Amec Earth and Environmental (UK) Ltd [2013] EWHC 1643 (TCC) and Board of Trustees of National Museums and Galleries on Merseyside v AEW Architects and Designers Ltd [2013] EWHC 3025 (TCC). The adjournment and second experts’ joint statement could justify departure at detailed assessment. A payment on account of £500,000 was ordered.

The judgment itself records an earlier judgment in favour of the claimants on the Bridge claim and against them on the Underpass claim: [2019] EWHC 2109 (TCC). Permission to appeal was refused at the consequential hearing.