McPhilemy v Times Newspapers Ltd (No.4)
Reference:  EWCA Civ 933;  1 WLR 934;  4 All ER 861;  EMLR 858
Court: Court of Appeal
Judge: Simon-Brown, Chadwick & Longmore LJJ
Date of judgment: 20 Jun 2001
Summary: Defamation - Libel - Costs - Claimant's Offer to Settle - CPR Part 36.21 - Consequences of Claimant doing better than offer made - Indemnity Costs
Instructing Solicitors: Bindman & Partners
At the trial of his libel claim against the Sunday Times, the jury awarded the Claimant £145,000 general damages. Earlier in the proceedings, he had made a Part 36 Offer to Settle of £50,000, which was not accepted by the Defendants. The trial judge refused to make an order for indemnity costs and interest on damages and costs on the grounds that it would be unjust to do so in the particular cirumstances of the case because (i) an award of indemnity costs was punitive in nature and carried a stigma; (ii) the issues had been complicated and the Defendants could not be criticised for taking it to trial; and (iii) libel awards do not attract interest. The Claimant appealed.
The proper approach to be adopted when considering what order to make under CPR Part 36.21.
(1) The judge’s exercise of discretion on the issue of indemnity costs was fundamentally flawed. Such an award was not punitive in nature and did not necessarily imply any condemnation of a defendant’s conduct. (2) The purpose of indemnity costs was to redress the injustice of costs which would otherwise accrue to a successful claimant for having had to fight a case for longer than was reasonably necessary. There was no injustice in an order for indemnity costs being made. (3) The Claimant should have interest on his costs at the rate of 4% above base, from the date that those costs were incurred until judgment, and at the judgment rate thereafter. Appeal allowed. An order for indemnity costs of the appeal would also be justified, given the terms of the judgment in the substantive appeal (McPhilemy v Times Newspapers Ltd (No.3)).
The Court held that no “stigma” necessarily had to attach to an order for indemnity costs under the Part 36 regime. The rationale for indemnity costs under CPR 36.21 was commercial and it was not necessary to find any conduct worthy of opprobrium as a pre-condition of making an order for indemnity costs where the criteria under CPR 36.21 were otherwise satisfied. The Claimant in this case had cleared the Part 36 offer by such a margin that there was no room for any argument that an element of vindication was being supplied by the Statement in Open Court that would usually follow the acceptance of a Part 36 Offer. Whether a claimant has “done better” than his Part 36 offer will raise interesting questions in cases where the damages awarded are much closer to the sum offered. However, that interesting argument will have to wait for another day.