30 November 2017Print This Post

High Court: 10% part 36 uplift applies to damages plus basic interest

RCJ

Edward Pepperall QC: Home Office should have accepted offer

The High Court has made it clear that the additional 10% uplift on damages the courts can award for beating a part 36 offer means an uplift on damages plus basic interest.

Edward Pepperall QC, sitting as a deputy High Court, also said that the court’s focus under part 36 must be “upon the conduct of the litigation”, and not on “whether the claimant had led a blameless life up until the moment when a tort was committed against him”.

The High Court was considering the case of Abdulrahman Mohammed, a Somalian who Mr Pepperall described in the substantive judgment as a “prolific and violent offender”.

Mr Mohammed was awarded £78,500 plus interest for unjust imprisonment for a total period of 445 days. Mr Mohammed’s solicitors, Leigh Day, had earlier made the Home Office a part 36 offer of £70,000.

Considering first the enhanced interest he should award under rule 36.17(4)(a), Mr Pepperall said: “While judges are required to take into account ‘all of the circumstances’, it does not follow that each circumstance prayed in aid will necessarily be relevant to the exercise of the court’s discretion under part 36.

“As I explained in my main judgment, the fact that Mr Mohammed is a criminal who had been lawfully imprisoned on a number of occasions did not mean that he was not entitled to compensation for false imprisonment, but it did moderate the award.”

Delivering judgment in Mohammed v the Home Office [2017] EWHC 3051(QB), Mr Pepperall said that among the relevant matters in calculating enhanced interest were the Home Office’s own submissions on quantum, which valued the case “very much in the region of the part 36 offer”.

Mr Pepperall said Leigh Day’s offer of £70,000 should “always have been recognised as a reasonable offer that put the Home Office at risk under part 36 in the event that liability was established”.

Another factor was the time between offer and judgment, with over seven months elapsing between the deadline for accepting the offer and the trial.

Mr Pepperall said that despite Mr Mohammed’s criminal background, “through the skill of his legal team”, he prosecuted the claim reasonably. In contrast, the Home Office “should have recognised the weakness of its defence significantly earlier than 4.03pm on the afternoon before trial”.

Mr Pepperall said: “The judgment handed down by Hayden J on 3 March 2016 clearly demonstrated the difficulties with the Home Office’s case and should have led to an earlier concession of liability.

“Specifically, the Home Office should have re-evaluated this case on receipt of the part 36 offer. Had it done so, it should, in my judgment, have recognised that the offer should be accepted.

“That said, it is plainly more desirable that a party should undertake a last-minute reassessment and make a late concession of liability than that it should persist in a bad defence.”

The judge awarded enhanced interest on his damages award of £78,500 plus basic interest, at the rate of 6% over base from the date of the part 36 offer on March 23 2017 until judgment.

Turning to the 10% uplift, Mr Pepperall said the parties were in dispute over whether it should be applied to the gross award of damages for beating the part 36 offer or the net award.

He said a third possible approach to interest under rule 36.17(4)(d) was to apply the uplift to damages plus all the interest awarded, including enhanced interest under rule 36.17(4)(a).

However, Mr Pepperall said that his judgement, the proper construction was clear.

“In calculating the additional amount, the court should take into account the gross award that would have been made but for part 36. That is the sum that the court was about to award when taken to the part 36 offer.”

This included basic interest, whether awarded pursuant to contract or the court’s discretionary power, but excluded any enhanced interest awarded under rule 36.17(4)(a).

Mr Pepperall accordingly awarded an uplift of 10% on his damages award plus agreed interest under the Senior Courts Act 1981 at a rate of 2% p.a from service of proceedings to judgment.

By Nick Hilborne

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