Case No: A2/2003/0670
Neutral Citation Number: [2003] EWCA Civ 1716
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE QUEEN’S BENCH DIVISION
MR JUSTICE ANDREW SMITH
Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 18th December 2003

Before :

LORD JUSTICE WALLER
LADY JUSTICE HALE
and 
LORD JUSTICE CARNWATH
- - - - - - - - - - - - - - - - - - - - -
Between :

	Nedlloyd Lines UK Ltd & Anor	Appellant	
	- and -		
	CEL GROUP Ltd	Respondent	

- - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - - - - - -

Alexander Layton QC (instructed by Davies Arnold Cooper) for the Appellant
Richard Lord QC (instructed by Prettys) for the Respondent

Hearing date : 7th November 2003
- - - - - - - - - - - - - - - - - - - - -
SUPPLEMENTARY JUDGMENT: 

Lady Justice Hale:

This is a judgment of the court

1.	This is a postscript to the judgment we handed down on 27 November 2003. The order to be made was agreed save for the basis upon which the respondent's costs of successfully resisting the appeal were to be assessed. The respondent seeks indemnity costs with interest at an enhanced rate. The appellant resists both. 

2.	On 20 May 2003, the respondent made a Part 36 offer to settle the appeal for £5000 less than the aggregate value of the sums it was entitled to under the first instance judgment, later damages settlement, interest and costs. This was open for acceptance until 11 June 2003. The appellant rejected this offer by a counter offer which was in turn rejected. 

3.	The appellant accepts that CPR rule 36.21 applies once a respondent has bettered his offer, even by the narrowest of margins, and that the court will order indemnity costs with interest unless it considers it unjust to do so. The appellant argues that it would be unjust in this case, for two reasons. First the discount offered was so small as not to be a genuine and realistic offer to settle. Second the respondent had the benefit of a conditional fee agreement covering its solicitor's fees (but not counsel's) so that there was little risk to it in continuing to fight but a greater potential liability to the appellant in doing so.

4.	In our view, the respondent should have its costs on an indemnity basis from 11 June 2003. This Court has held, in Utaniko Ltd v P & O Nedlloyd BV [2003] EWCA Civ 174, [2003] 1 Lloyd's Rep 265, that a respondent who wants to protect itself against the costs of the appeal cannot rely on a Part 36 offer made before trial but must make a further Part 36 offer. Everyone should know where they stand. In particular, the appellant should know whether the respondent has resiled from the earlier offer and what its position now is. But in our view too much should not be expected of a respondent who merely wishes to retain the benefit of the judgment it has already obtained, especially in an all or nothing appeal such as this. The respondent cannot seriously be expected to make an offer based on giving up a substantial part of what it is currently entitled to, when the appeal turns on a pure point of construction to which there is only one answer, whether that proffered by the appellant or that proffered by the respondent. 

5.	We do not see that the CFA affects that. It increases the appellant's risks of losing, because the paying party will have to pay the success fee and after the event insurance premium. That may enhance the attractions of keeping the other costs to a minimum by settling before the appeal is heard. But it is a factor which any litigant faced with an opponent with a CFA will have to take into account at every stage in the overall calculation of the costs and benefits of continuing to fight the case. 

6.	The respondent argues for interest on its appeal costs at 4% above base rate from a mean date of 1 September 2003 to avoid the expense of ascertaining when each element of costs was incurred. The appellant argues for interest at 2% above base rate from 24 October 2003. We agree that it is sensible to avoid the extra expense and the mid point between 11 June when the offer could have been accepted and the hearing of the appeal on 7 November, ie 1 September 2003, is an appropriate date. We accept, however, that the existence of the CFA will have affected the sums actually required from the respondent in respect of solicitor's fees, so that a rate of 2% would be appropriate.