Part 36 Offer not Effective on Summary Judgment

Petrotrade Inc v Texaco Ltd (CA TLR 14 June)

CPR rule 36.21 provides for enhanced interest and costs on the indemnity basis where ‘at trial: (a) a defendant is held liable for more; or (b) the judgment against a defendant is more advantageous to the claimant, than the proposals contained in a claimant’s Part 36 offer’. What if the judgment is not ‘at trial’ but is a summary judgment? The rule does not apply because Part 24 sets out a procedure by which the court could decide a claim or a particular issue ‘without a trial’. However, the court has always had a power to order costs on the indemnity basis and to award interest at such a rate as it considered just. Furthermore, if proceedings were disposed of summarily, that would normally be at an early stage in the proceedings so that questions of costs and interest would not be as significant as they would otherwise be. It was important that courts bore that in mind otherwise claimants might be tempted not to obtain summary judgment in cases where it could be obtained, with the objective of obtaining higher rates of interest. If it were shown that this had occurred, the court would use its ample powers to ensure that a claimant did not benefit by any such tactic. The Court of Appeal declined to consider the applicability of CPR rule 36.21 because it had not been raised before the judge. CPR rule 36.1(2) states: ‘Nothing in this Part prevents a party making an offer to settle in whatever way he chooses, but if that offer is not made in accordance with this Part, it will only have the consequences specified in this Part if the court so orders’. Had that point been argued before the judge it might have been appropriate to consider awarding interest in the region of 4% above base rate for a period of 12 months and making an order for indemnity costs from the time of the Part 36 offer.