A month ago, Free Movement reported on the detention of Abdulrahman Mohammed. He was awarded the substantial sum of £78,500 by the High Court after being detained unlawfully by the Home Office.
In a subsequent judgment, the same court has increased the amount the Home Office must pay, after it came to light that lawyers acting for Mr Mohammed had proposed to settle the case for £70,000 back in March 2017, in a so-called ‘Part 36 offer’.
Offers to settle
Part 36 offers are governed by the Civil Procedure Rules. They were introduced as part of the Woolf reforms in the 1990s, with the aim of settling claims more quickly and preferably outside of court.
A claimant can make a Part 36 offer to settle a case, offering to accept a payment in return for withdrawing his or her claim. Similarly, a defendant can also make an offer, payable on the condition that the claimant withdraw.
It is where these offers are not accepted, and the claim continues, that the provisions of Part 36 spring into action.
Essentially, where a party makes an offer to settle, is rebuffed, but nonetheless goes on to get a better result later in proceedings, there will be financial penalties for the party that refused to settle at an earlier stage. The penalties run from the date of that refusal.
The March offer
On 2 March 2017 lawyers representing Mr Mohammed offered to withdraw the claim if the Home Office coughed up £70,000. This offer was refused, and the matter proceeded to trial over six months later, with all of the associated legal costs (on both sides).
As we know, the award arrived at by the court was £78,500 plus 2% interest from the date the claim was made, and payment by the Home Office of Mr Mohammed’s legal bills.
Because this result was more advantageous than the rejected Part 36 offer, Rule 36.17(4) of the Civil Procedure Rules kicked in. It required the court, unless it considered it unjust to do so, to award the following in addition:
(a) up to 10% interest on the compensation awarded running from the date that the Home Office refused to settle
(b) Mr Mohammed’s legal costs calculated on the indemnity rather than the standard basis (explained below), together with (c) interest on those costs at not more than 10% above base rate; and
(d) a further additional amount, not exceeding £75,000, calculated at 10% of the award
As this shows, the court has significant discretion to penalise parties who act unreasonably during the course of litigation, with scope to adjust the percentage of interest payable on the award as it sees fit.
Calculating the increased award
(a) Enhanced interest
When calculating the extent of the financial penalty, the court is required to take into account all of the circumstances of the case, but with a particular focus on the conduct of the litigation.
In this case, the court found that the Home Office
should have recognised the weakness of its defence significantly earlier than 4.03 pm on the afternoon before trial.
The judge also found that the Home Office should have reappraised the case when it received the offer to settle, although the department got some credit for withdrawing when it did.
The enhanced award of interest was therefore calculated at 6% over base.
(b) & (c) Indemnity costs, plus interest
The Part 36 provisions also make clear that the costs of the lawyers representing Mr Mohammed (to be paid by the Home Office) are calculated on an “indemnity” basis.
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Normally, lawyers claiming costs on a standard basis have to show that those costs are proportionate. However, there is no such requirement on an indemnity basis, and the onus is on the paying party to show that any costs incurred are unreasonable. Calculating on an indemnity basis makes it likely that Mr Mohammed’s lawyers will recover a greater amount than they otherwise would have.
Sticking the boot in, the court also awarded interest to the lawyers on those costs at 6% above the base rate.
(d) The “additional amount”
There was some discussion about whether this should be 10% of the amount originally awarded (which was £78,500), or 10% of the award and the £2,753 interest on it added together (so 10% of £81,253), with previous High Court authority to back either approach.
Mr Edward Pepperall QC opted to include interest in the calculation, meaning an additional amount of a little over £8,000 rather than a little under. Icing on the cake for Mr Mohammed.
The power of Part 36
Part 36 gives the court significant powers to encourage litigants to behave reasonably throughout the course of a case. Much like the bonus point system in Premiership rugby, it encourages positivity from all sides right up until the final whistle.
Mr Mohammed, an unpleasant man by all accounts, was made considerably better off by the unlawful implementation of Home Office detention policies. As a result of how it litigated this case, he is richer still.