Claimant who only beat part 36 offer because of post-Brexit fall in sterling denied usual rewards

Offer was in sterling but award was in dollars

Offer was in sterling but award was in dollars

A claimant who only beat his part 36 offer because of the fall in the value of sterling since the Brexit vote has been denied the usual benefits of enhanced interest, indemnity costs and an additional payment that would have been the maximum £75,000 given the sums at stake.

The offer was in sterling but the judgment in US dollars, and in considering whether it would unjust to make the order under part 36, the High Court described the recent fall in sterling to be “a highly material circumstance”.

Ruling in Novus Aviation Ltd v Alubaf Arab International Bank BSC(c) [2016] EWHC 1937 (Comm), Mr Justice Leggatt said: “At the time when the part 36 offer was made, the sterling/dollar exchange rate stood at around £1=$1.68. Today it is around £1=$1.31. Ignoring the complicating factor that a judgment obtained at an earlier date would have included less interest, it was only when the value of sterling fell to around £1=$1.43 that the judgment sum of US$5,430,923 became as advantageous to Novus in money terms as the amount of its part 36 offer.

“That did not happen until February of this year. Thereafter the exchange rate fluctuated either side of that level. At the start of the trial the exchange rate was around £1=$1.46. It was only after the UK’s referendum on 23 June 2016 that sterling fell sharply thus significantly reducing the dollar value of the part 36 offer.

“If judgment had been entered at any time between the start of the trial on 26 April and 23 June 2016, Novus would not have beaten its part 36 offer and orders for interest at an enhanced rate and indemnity costs could not have been made. It is only through the happenstance that the judgment was not handed down until 30 June 2016 that the possibility of making such orders exists.”

As a result, Leggatt J said it would be unjust to make the order under part 36.

“The reality is that if at almost any time between the date when the offer was made and the end of the trial Alubaf had accepted the offer, the sum received by Novus would have been worth more than the judgment which it has ultimately obtained (even ignoring the time value of money).

“It would in these circumstances be adventitious and inconsistent with the principle of risk allocation which underlies part 36 to penalise Alubaf for not accepting the offer.”

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