Sleaford Building Services Limited v Isoplus Piping Systems Limited

Part 36 consequences are not automatic where an offer is technically valid. The court must consider whether applying them would be unjust, including whether the offer was a genuine attempt to settle. In adjudication-enforcement proceedings, an offer requiring payment of virtually the entire adjudicated sum, while waiving only a short period of modest interest, may fail that test where the process ordinarily produces an all-or-nothing result. The prescribed enhancements, indemnity costs and additional amount may therefore be refused. Separately, indemnity costs may be ordered where there was no real defence to enforcement and the defendant used proceedings to delay payment. The burden of showing injustice remains a formidable one, but it is applied to the particular circumstances of the offer and the conduct of the parties.

The judgment concerned consequential matters following the court’s earlier decision in the Part 8 and Part 7 proceedings. The Part 8 claim seeking declarations against enforcement of an adjudicator’s decision had been dismissed, and judgment had been entered in the Part 7 claim enforcing the decision.

The issues were whether Isoplus could rely on its claimant’s Part 36 offer to obtain the enhanced consequences in CPR r.36.17(4), and what costs order should be made for the Part 7 enforcement proceedings. The offer required payment of the entire principal adjudicated sum, but waived interest for a short period. Sleaford argued that the offer was ineffective or that it would be unjust to apply the consequences. Isoplus also sought indemnity costs independently of Part 36.

1. Part 36 offer valid. The Part 7 claim was decided when the court ordered enforcement of the adjudicator’s decision. The possibility that substantive issues might be raised in separate proceedings did not prevent the Part 7 claim from being decided. Payment after judgment did not remove the advantage obtained by the claimant, particularly since the payment did not cover all interest due. The offer was therefore valid and capable of engaging CPR r.36.17.
2. Part 36 enhancements refused. CPR r.36.17(4) ordinarily requires the specified consequences unless unjust. The burden of demonstrating injustice is a formidable one, but the court must consider all the circumstances, including the terms of the offer, the stage at which it was made, the information available, the parties’ conduct and whether it was a genuine attempt to settle. The parallel proposal to stay enforcement did not resolve the payment obligation, did not stop interest accruing and did not make the Part 36 offer ineffective. The issue of Part 7 proceedings was not unnecessary or premature.
3. Nevertheless, the offer was not a genuine attempt to settle. It required payment of the whole principal sum, and the only real concession was interest worth approximately £350, representing about 0.1% of the claim. Adjudication enforcement ordinarily produces an all-or-nothing outcome, absent severance. The offer was even less generous than the 99.7% offer considered in Rawbank SA v Travelex Banknotes Ltd [2020] EWHC 1619 (Ch). It would therefore be unjust to impose the CPR r.36.17(4) consequences.
4. Costs. Isoplus succeeded in obtaining judgment and was entitled to the costs of the Part 7 proceedings. The fact that proceedings were issued in Manchester rather than London did not justify a different costs order, although it might be relevant on assessment. Indemnity costs were appropriate because no defence to enforcement ever existed, no part of the adjudicator’s decision was genuinely disputed, and Sleaford had used the proceedings to delay payment.

The application for the CPR r.36.17(4) enhancements was rejected. Interest was awarded at 4% per annum by agreement, and Isoplus received its Part 7 costs on the indemnity basis.

This was a first-instance decision concerning consequential matters following the earlier judgment in the same proceedings. The judgment records that the Part 8 claim had been dismissed and the Part 7 claim had been enforced in the earlier decision, [2023] EWHC 969 (TCC).