Blackham v Entrepose UK [2004] EWCA Civ 1109

Case No B2/2004/0311[2004] EWCA Civ 1109
IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM NOTTINGHAM COUNTY COURT
(HIS HONOUR JUDGE O'RORKE)
Venue Royal Courts of JusticeDate Tuesday, 27th July 2004
Strand
London, WC2
B E F O R E:
LORD JUSTICE BROOKE
VICE-PRESIDENT OF THE COURT OF APPEAL, CIVIL DIVISION
LORD JUSTICE BUXTON
LORD JUSTICE CARNWATH
Between
STEPHEN BLACKHAMRespondent-v-
Between
ENTREPOSE UKAppellant
(Computer-Aided Transcript of the Palantype Notes ofSmith Bernal Wordwave Limited190 Fleet Street, London EC4A 2AGTel No: 020 7404 1400 Fax No: 020 7831 8838Official Shorthand Writers to the Court)
MR A BROUGH (instructed by Messrs Lyons Davidson, Bristol BS1 6AD) appeared for AppellantMR R MALLALIEU (instructed by The James Smith Partnership, Skegness PE25 2AG) appeared for Respondent
J U D G M E N T

LORD JUSTICE BROOKE:

[1]This is an appeal by the defendants and a cross-appeal by the claimant from an order made by Judge O'Rorke in the Nottingham County Court in this personal injuries action on 3rd February 2004, whereby he ordered that judgment for the claimant made in his earlier order dated 18th December 2003 be amended to the sum of £40,854.03; directed that there be payment out of monies in court to the claimant's solicitors in part satisfaction of the judgment (together with ancillary orders as to interest and the payment of the balance of the judgment sum); and directed that the defendants pay the claimant's costs but limited to 70% of such costs incurred from 3rd December 2001 including the hearing of 3rd February 2004. The judge himself granted the defendants permission to appeal on the interpretation of CPR 36.20 and its bearing on the order for costs. On 14th June 2004 I granted the claimant permission to cross-appeal since he wished to challenge the judge's deduction of 30% in the costs awarded to him from 3rd December 2001 onwards.[2]The issue on the appeal arose in this way. The claimant sustained an accident at work to his dominant right thumb on 1st May 1998. His claim form was issued on 10th April 2001, and on 12th November 2001 the defendants' solicitors gave notice of a payment into court which increased the gross amount of the compensation payment offered to £40,000. In the notice it was stated that the defendants had reduced this sum by £9,770.12 in accordance with section 8 of and Schedule 2 to the Social Security (Recovery of Benefits) Act 1997, and in this respect the notice complied with the requirements of CPR 36.23(3). By CPR 36.22(1) this Part 36 payment notice was to be treated as inclusive of all interest until the last day on which it could be accepted without needing the permission of the court.[3]As I have said, the judge eventually directed that judgment be entered in the sum of £40,854.03. This sum was of course inclusive of interest which continued to accrue after the claimant had decided not to accept the sum of £40,000 in court. On 3rd December 2001, the award, inclusive of interest, would have been only £39,644.71 and in these circumstances the defendants contended that the claimant had failed to better the Part 36 payment, and that the costs they had incurred after 3rd December 2001 should be paid to them by the claimant.[4]In a careful judgment the judge rejected this contention. He was concerned that there should be some certainty in the rules, so that parties might know where they stood. He was also concerned that if there were to be a more lax interpretation of CPR 36.20 then there might be unforeseen complications. In this context he mentioned the question whether a court should also discount its award of damages for personal injury to take into account the true value of such an award at an earlier stage, and to factor out the effect of inflation on the value of the award between the latest date on which the payment into court might have been accepted without the permission of the court and the date of trial.[5]The judge suggested that a defendant could protect his position by making additional payments into court as to interest accumulating on the award. He realised that such a payment would have the effect of reopening the payment offer represented by the payment into court, but he said that he was afraid that this was the nature of the beast. He explained this phrase by saying that it was the intention of Part 36 to enable such a situation to arise from time to time in order that payments into court could keep pace with the development of the case.[6]In the pre-CPR regime in the county court, under CCR O 11, r 7(1), the court was bound in such a case when exercising its discretion as to costs to "take into account, to such extent, if any, as may be appropriate in the circumstances, both the fact that money has been paid into court and the amount of the payment." RSC O 62, r 9(1)(b) contained a similar rule. The normal rule in those days was that the defendant would receive his costs from the last date the payment into court could have been accepted without leave if the claimant failed to "beat" the payment in. RSC O 22, r 1(8), which was added by amendment in 1982, was in these terms:
"For the purposes of this rule, the plaintiff's cause of action in respect of a debt or damages shall be construed as a cause of action in respect also of such interest as might be included in the judgment, whether under section 35A of the Act or otherwise, if judgment were given at the date of the payment into court."
This in turn referred back to the language of O 22, r 1(1) which provided that:
"In any action for debt or damages any defendant may at any time pay into court a sum of money in satisfaction of the cause of action in respect of which the plaintiff claims ..."
[7]Against that background, the court's former practice in a case like the present was described in the 1999 White Book, Vol 1, note 22/1/10 on page 411 in these terms:
"The operation of para.(8) will have the effect that the trial Judge may have to make a special calculation of interest at the end of the trial for the purpose of deciding whether the payment into Court was adequate at the time that it was made, in order to determine what order for costs should be made. Thus if the trial Judge awards £x by way of damages and the defendant has paid into Court £y, which exceeds £x, then a calculation may have to be made as to what the amount of interest would have been if judgment were given for £x at the date of the payment into Court. If such figure amounts to £a, and if £x + £a exceeds £y, the result would be that the amount recovered by the plaintiff will have exceeded the amount paid into Court by the defendant, so that the plaintiff will be entitled to be awarded the whole costs of the action. But it is thought that this calculation would not be very difficult and is likely to arise comparatively rarely."
[8]The governing rule in the Civil Procedure Rules is CPR 36.20, which provides that:
"(1) This rule applies where at trial a claimant – (a) fails to better a Part 36 payment; ... (2) Unless it considers it unjust to do so, the court will order the claimant to pay any costs incurred by the defendant after the latest date on which the payment ... could have been accepted without needing the permission of the court."
I have already referred to the effect of CPR 36.22 in relation to interest.[9]The question we have to decide on this appeal is this: did the claimant at trial fail to better the Part 36 payment?[10]In my judgment in deciding whether the claimant bettered the Part 36 payment it is necessary to compare like with like. If the defendants paid in, say, £39,000 plus £1,000 interest calculated up to the last day when the claimant could have accepted the payment without having to obtain permission, then if the claimant only received at trial £38,800 plus £950 interest up to that date, he will not have bettered the Part 36 payment. It would be a misuse of language to say that he bettered it because he received at trial £38,800 plus £950 plus a further £500 of interest between the date he should have accepted the payment in and the date of trial. Mr Mallalieu, who appeared for the claimant, was unable to explain any policy reason why a payment into court should include a prudent allowance for interest accruing in the future up to the date of trial when the purpose of the offer is to provide a sum which if accepted the claimant can invest on his own account, being no longer kept out of it by non-payment.[11]I do not regard the judge's suggestion about "topping up" the interest payments as being at all satisfactory. If a "top-up" payment of interest is made this will expose the defendants, as the judge realised, to the risk of having to pay the whole of both sides' costs from the date the claimant ought to have accepted the money in court to the date he accepts it together with the top-up payment of interest. Such a result would be thoroughly unjust and thus inconsistent with the overriding objective (see CPR 1.1(1)).[12]Mr Mallalieu encouraged us to consider the language of CPR 36.23(4) which is the closest the draftsman of CPR Part 36 got to a definition of the word "better". That rule is concerned with the effect of statutory deduction of benefits on the Part 36 regime, and Part 36.23(4) provides:
"For the purposes of rule 36.20, a claimant fails to better a Part 36 payment if he fails to obtain judgment for more than the gross sum specified in the Part 36 payment notice."
[13]In my judgment, when a judge applies this rule he should first ask himself what the payment into court represented (in this case payment of the whole of the claimant's damages claim, plus interest up to 3rd December 2001) and then consider whether the amount for which he has directed judgment to be entered, as compared with that payment, is less than that amount. If Judge O'Rorke had followed this principle, he would have compared the sum of £40,000 with the sum of £39,644.71 for which he was entering judgment in respect of the damages claim plus interest up to 3rd December 2001 and would have concluded that the claimant had failed to better the Part 36 payment. In other words, judges should perform the exercise prescribed in the note to the 1999 White Book which I have cited above. Mr Mallalieu was unable to suggest any reason why the draftsman of the CPR, with its emphasis on the desirability of early settlement (see, for example, CPR 1.4(2)(e) and (f)) should have introduced a regime less favourable to defendants wishing to settle a case by making a payment into court than the regime which preceded it.[14]I consider that it is preferable to reach a just solution to this problem by interpreting the word "better" in Part 36.20 in the way I have suggested rather than to leave judges to exercise a discretionary jurisdiction under CPR 44.3(4)(c), because this alternative route would be bound to lead to inconsistencies between courts and between judges in the same court.[15]It is therefore unnecessary for us to consider the issues which arose on the cross-appeal which was based on the hypothesis that the judge's interpretation of the word "better" was correct. Mr Mallalieu, however, wished to call similar arguments in aid of his contention that we should consider it unjust (within the meaning of CPR 36.20(2)) to order the claimant to pay the defendants' costs after 3rd December 2001. In this context when deciding what was just he encouraged us to take into account the matters, so far as they were relevant, which are referred to under CPR 36.21(5).[16]Mr Mallalieu's arguments were founded on the submission that this was a difficult claim to evaluate so far as the claimant's advisers were concerned. There was not much difficulty about valuing it up to 30th September 2001 (although the claimant originally held out for a higher rate of projected post-accident earnings than the judge awarded him). On 30th September 2001, however, the claimant had an attack of angina which reduced his earning power quite independently of the accident, and in the autumn of 2001 he was receiving conflicting medical advice on the type of operation, if any, which should be performed on his thumb, and its likely outcome. We were told that it was a later bout of angina in mid-2003 which finally put paid to any claim for loss of earnings after 30th September 2001, and the judge made no award in the event.[17]I can see that it is possible that considerations like this might have affected the mind of a judge as to the incidence of costs if an application had been made after 3rd December 2001 to take out the sum in court. But no such application was ever made, and as late as 9th April 2003 the claimant served a schedule in which he claimed £141,000 for past and future loss of earnings, in contrast to the far smaller sum he was eventually awarded. In my judgment it would not be unjust to make the ordinary order as to costs prescribed by CPR 36.20(2). I have taken into account the arguments advanced by Mr Mallalieu as to the information which was available to the claimant in December 2001, but in that month he had to weigh up the benefits and the risks involved in refusing to accept the sum in court. He gambled that he would receive a higher award at the trial and he lost the gamble.[18]I would therefore direct that this court should alter the judge's order to the extent that the claimant is ordered to pay the costs of the defendants from 3rd December 2001 onwards, in place of the order made by the judge in respect of that period. I would therefore allow the appeal and dismiss the cross-appeal.

LORD JUSTICE BUXTON: I agree. I would only add one very small point, in respect of the cross-appeal and the reasonableness of the offer and Mr Blackham's advisers consideration of it. The judge in fact did (in paragraph 25 of his judgment) assess that point, even though it did not arise on his principal finding, and, with the advantage of his intimate knowledge of the trial, considered that it was a very reasonable offer which should have been seriously considered by Mr Blackham at that stage.

[20]Apart from that, I entirely agree with everything that has fallen from my Lord. Although we are differing from the careful judgment of the learned judge below, there is nothing that I wish to add.

LORD JUSTICE CARNWATH: I agree with both judgments.

ORDER

Appeal allowed and cross-appeal dismissed with costs assessed at £5,250; detailed assessment of the claimant's Legal Service Funding certificate; order for costs against the claimant not to be enforced save by way of set-off against the costs and/or damages that have been awarded to him. (Order not part of approved judgment) ______________________________