Following the recent case of Marsh -v- MOJ we have been asked to consider Thirlwall LJ decision on indemnity costs and whether the same should be payable as a result of the change in discount rate in March this year. The Defendant argued that the Claimant should not recover costs on the indemnity basis as but for the change in the discount rate the Claimant would not have exceeded the offer of £233,500.00 with reliance made upon the decision of Leggatt J in Novus Aviation Ltd vs Alubaf Arab International Bank [2016] EWHC 1937 (Comm).

The Judge concluded in that particular case that it would be unjust for the consequences of Part 36 to follow when the reason that the sum had been exceeded was because of a dramatic fall in sterling just after the EU referendum on 23 June 2016. It was the Judge’s belief that if Judgment had been entered at any other time the Claimant would not have beaten his offer and as such it would be unjust to the paying party to order indemnity costs for that reason.

However, the Claimant in this case did not believe that the cases were parallel and that the position in this case were different. Whilst it is clearly true that £286,572.87 (settlement awarded) was at all times worth more than £180,000 and £223,500 – which were the offers from the paying party, the stark reality is that had the matter reached Trial sooner or the case timetable been tighter at any stage, Judgment would have been reached before March 2017 and thus the damages would have been less than the amount of the Part 36 offer.

It was the Claimant’s case that in reality the position was no different from that which occurs when medical evidence changes in a way that cannot be foreseen and in particular, computation of life expectancy as a result of scientific research. These are vicissitudes of litigation and they don’t make it unjust for part 36 consequences to flow.

However, it was vital for the Court to consider the offers previously made, and whether they were a genuine attempt at settling matters and avoiding further costs being incurred. The Court considered that the Defence filed in between the two offers made as being a “significant misjudgement” and that regardless of the reasoning why the contents of the Defence were as they were it was the conduct of the Defence that was such that from that date indemnity costs were payable. The reality was the Claimant had done better than the second offer by a very significant margin irrespective of the change in the discount rate. It was, in Thirlwall LJ’s view, that there was no arguable injustice.

Accordingly, he ordered that the Defendant should pay to the Claimant additional sums pursuant to CPR 36 as follows:

Additional interest from 8 November 2016 (date of expiry of the second offer) at 8.5% on general damages and on past losses at 10%.
The additional award be made in the sum of 10% of the damages as prescribed by part 36 i.e. £28,657.29.
Following this decision came the issue of payment on account of costs. Again it was Thirlwall LJ’s view that just because there was likely to be a significant argument about the final sum which was to be payable, this was not a good reason not to order a reasonable sum on account. The issue over the level of costs payable was a matter for Detailed Assessment, however, the Defendant argued for the purposes of a payment on account that this should be calculated on base costs only, with no uplift or insurance premium. However, Thirwall LJ could not see any evidence of why this should be. It was noted that there was no exact science to undertaking the calculation, however doing the best he could on a somewhat rough and ready basis he accepted that there was not much likelihood of the final Bill of Costs being less than £900,000.00. Subsequently, he took a reasonable proportion of that, the sum of £600,000.00 and ordered that the Defendant pay this sum on account.

It is abundantly clear that yet again the Courts are taking each case on its own merits in terms of payments on account, and more specifically in terms of the sums involved. Cases that have not been cost managed are still having ongoing uncertainties with regards to what level of costs are likely to be awarded as a payment on account.