Gamal v Synergy Lifestyle Ltd
Costs – Assessment – CPR 36 offer – Respondent carrying out building works for appellant – Respondent claiming sums allegedly due under invoice for work carried out – Appellant making Part 36 offer to settle claim – Respondent failing to accept offer – Appellant making payment on account in respect of sums due – At trial judge deducting payments on account from sum assessed as due – Judgment for respondents in higher sum than Part 36 offer – Partial costs awarded in favour of respondents – Whether payments on account reducing Part 36 offer – Whether judge erring in award of costs – Appeal dismissed
The appellant appealed against a costs order that he should pay 25% of the respondent’s costs on the standard basis, to be subject to detailed assessment if not agreed. The underlying dispute concerned a contract for certain building work carried out by the respondent at a house in Victoria Square, London SW1, owned by the trustees of the appellant and occupied by her and her son and staff. In 2013, the appellant paid £6,600 to the respondents on account of the work they had carried out. In particulars of claim served in October 2014, the respondent claimed some £151,000 said to be due under an invoice for the work carried out. In August 2015, the appellants made a Part 36 offer of £15,000 in full and final settlement of the claim if accepted within 21 days. In February 2016, when the respondent had failed to accept the Part 36 offer, the appellant paid the respondent a further £10,000 on account of the works done.
At trial, the respondent accepted that the invoice was fraudulent, concocted in collusion with the appellant to assist her in obtaining payment by the trustees of some £67,000 of the invoice alleged to relate to external works to the house, specifically to the roof which had collapsed, for which the trustees would be responsible, as opposed to internal works and redecoration, which were the appellant’s responsibility. Given that the invoice was fraudulent, the judge had to assess the value of the works actually carried out. The figure he arrived at in May 2016 was £30,324.42 to which he added 20% VAT to arrive at a gross sum of £36,389.30. From that fell to be deducted the £16,600 already paid by the appellant. He arrived at a judgment sum of £19,788.97 The judge subsequently deducted VAT from the award, resulting in a judgment sum of £14,275.49.
Costs – Assessment – CPR 36 offer – Respondent carrying out building works for appellant – Respondent claiming sums allegedly due under invoice for work carried out – Appellant making Part 36 offer to settle claim – Respondent failing to accept offer – Appellant making payment on account in respect of sums due – At trial judge deducting payments on account from sum assessed as due – Judgment for respondents in higher sum than Part 36 offer – Partial costs awarded in favour of respondents – Whether payments on account reducing Part 36 offer – Whether judge erring in award of costs – Appeal dismissed
The appellant appealed against a costs order that he should pay 25% of the respondent’s costs on the standard basis, to be subject to detailed assessment if not agreed. The underlying dispute concerned a contract for certain building work carried out by the respondent at a house in Victoria Square, London SW1, owned by the trustees of the appellant and occupied by her and her son and staff. In 2013, the appellant paid £6,600 to the respondents on account of the work they had carried out. In particulars of claim served in October 2014, the respondent claimed some £151,000 said to be due under an invoice for the work carried out. In August 2015, the appellants made a Part 36 offer of £15,000 in full and final settlement of the claim if accepted within 21 days. In February 2016, when the respondent had failed to accept the Part 36 offer, the appellant paid the respondent a further £10,000 on account of the works done.
At trial, the respondent accepted that the invoice was fraudulent, concocted in collusion with the appellant to assist her in obtaining payment by the trustees of some £67,000 of the invoice alleged to relate to external works to the house, specifically to the roof which had collapsed, for which the trustees would be responsible, as opposed to internal works and redecoration, which were the appellant’s responsibility. Given that the invoice was fraudulent, the judge had to assess the value of the works actually carried out. The figure he arrived at in May 2016 was £30,324.42 to which he added 20% VAT to arrive at a gross sum of £36,389.30. From that fell to be deducted the £16,600 already paid by the appellant. He arrived at a judgment sum of £19,788.97 The judge subsequently deducted VAT from the award, resulting in a judgment sum of £14,275.49.
The sole ground of appeal was that the revised sum payable of £14,275.49 was less than the sum of £15,000 in the Part 36 offer and the judge had failed to consider or apply the provisions of CPR 36.17. The respondent argued that the case was indistinguishable from Macleish v Littlestone [2016] EWCA Civ 127; [2016] EGLR 32 so that the sum of £10,000 paid in February 2016 was a payment on account of liability and had the effect of reducing the Part 36 offer to £5,000. The appellant submitted that the reasoning in Macleish should be limited to cases where there had been an admission of liability or where the payer had made it clear that the payment was intended to reduce the amount of a Part 36 offer.
Held: The appeal was dismissed.
Where a payment was made on account of a claim, after a Part 36 offer, there was presumption of law that it was also on account of the earlier Part 36 offer. If the paying party wished to prevent the presumption from operating, it was incumbent on that party either to state expressly at the time the payment was made that it was not intended also to reduce the amount of the earlier Part 36 offer or to provide clarification to that effect promptly after the payment was made. The appellant did neither in the present case and accordingly, there was a presumption that the £10,000 payment reduced both the liability in respect of the claim and the amount of the Part 36 offer. That conclusion did not lead to uncertainty which was inimical to the purpose of Part 36. If the paying party wished to avoid the operation of the presumption on the basis that a payment was a voluntary interim payment or not intended to reduce the amount of an earlier Part 36 offer, it should say so. If it did not do so and a payment on account of the claim was made without any such qualification, then parties would know where they stood. That conclusion did not have the effect of cutting across the Part 36 regime. Given that the presumption operated as a matter of law, there was no need for the appellant to serve a notice of change in the terms of the Part 36 offer pursuant to CPR 36.9(2). Accordingly, on a proper analysis, the judgment obtained by the respondent was more advantageous than the Part 36 offer and the judge’s order in respect of costs could not be faulted: Macleish v Littlestone [2016] EWCA Civ 127; [2016] EGLR 32 applied.
Andrew Morrell (instructed by Selva & Co Solicitors) appeared for the appellant; Steven Thompson QC (instructed by Keystone Law) appeared for the respondent.
Eileen O’Grady, barrister
Click here to read transcript: Gamal v Synergy Lifestyle Ltd
