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	England and Wales High Court (Commercial Court) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Commercial Court) Decisions >> East West Corp v DKBS 1912 & Anor [2002] EWHC 253 (Comm) (27 February 2002) URL: http://www.bailii.org/ew/cases/EWHC/Comm/2002/253.html Cite as: [2002] 2 Lloyd's Rep 222, [2002] EWHC 253 (Comm), [2002] 2 LLR 222

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IN THE HIGH COURT OF JUSTICE
QUEENS BENCH DIVISION
COMMERCIAL COURT

		Royal courts of Justice Strand, London, WC2A 2LL
		27 February 2002

Mr Justice Thomas :

1. On 7 February 2002 I gave judgment ([2002] EWHC 83 (Comm)) in favour of the claimants in two actions brought by them against the defendants (P&O and Maersk) for misdelivery of containers which were delivered without presentation of the bills of lading. Although the parties were agreed on the principles applicable to the ordinary award of interest and costs, the claimants advanced a novel argument in relation to their claim to be entitled to enhanced interest and indemnity costs.

The interest ordinarily payable.

2. It is the well established practice of this Court to award interest on sterling judgments at base rate plus 1% save in unusual circumstances. In Kuwait Airways Corporation v. Kuwait Insurance Co SAK [2000] Lloyds IRLR 678, the authorities were comprehensively reviewed by Langley J. He decided that the nearest equivalent of base rate plus 1% for judgments in US dollars was US Prime rate. I agree with his views for the reasons set out in his judgment. In this case, the defendants have agreed that, as the judgment is in US dollars, interest should be awarded by reference to US Prime rate, and have agreed to 1% above that rate.
3. The parties are also agreed, subject to the argument on CPR Part 36, that the date from which interest should run is the date of the accrual of the cause of action. They are agreed that is the date on which the containers were wrongly released. In the case of Maersk the dates are as follows:

Bill of Lading (1) and (3) 17 November 1998

Bill of Lading (2) 27 January 1999

Bill of Lading (4) 18 November 1998

Bill of Lading (6) 1 February 1999

Bill of Lading (7) 21 November 1998

The date on which the container carried under bill of lading no 5 was not certain; doing the best I can, I find that the relevant date is 30 November 1998. In the case of the P&O the relevant date is 15 March 1999.

4. The parties have agreed to calculate the interest which would ordinarily be payable on that basis.

The costs ordinarily payable and interest on such costs

5. The claimants succeeded in the actions and they are therefore ordinarily entitled to costs. However, Maersk and P&O contended that I should make a deduction from the costs otherwise payable, because the claimants had failed on a number of issues relating to title to sue at common law and under the Carriage of Goods by Sea Act 1992. For the reasons set out in my judgment, the claimants only succeeded against P&O and against Maersk on all the bills of lading, except Maersk bill of lading No.4, on the basis of the claim in negligence, as I concluded that they had no title to sue on any other ground. Under Maersk Bill No 4 (for the reasons set out in paragraphs 23-25 of my judgment) the claimants retained their rights as shippers; they therefore, on the basis of the findings I made, succeeded in their claim in contract and bailment, as well as in negligence.
6. The issues raised on title to sue were, for the reasons set out at paragraphs 13-61 of my judgment, complex. They occupied some court time and further time out of court in preparing very detailed written submissions of law. It is clear that some costs were specifically referable to these quite distinct issues and, in accordance with the principles set out in CPR Part 44, my order on costs should reflect the claimants' failure on many of the issues raised on this topic. However the bulk of the costs were plainly incurred in relation to the other matters in the claim, particularly the dispute over the law of Chile. In the circumstances I consider I should reflect this in reducing the costs to which the claimants would otherwise be entitled by 7.5%.
7. The claimants also claimed interest on costs under CPR Part 44.3.6. They provided a schedule which showed that, although an initial amount was paid on account of costs (as one would expect) in October 2000 and January 2001, the bulk of the payments were made in late September 2001. Although the dates of payment and the amounts of the payments were provided, I was not provided with any calculations on the amount of interest claimed. Given the sums involved in this case, the dates of payment and the low base rate for interest on sterling (in which the sums were paid), the overall amounts involved are not large. It seems to me, however, that it is right in principle that a claimant who has paid money out on account of costs should be compensated from the date of payment, although I have to make allowances for the fact that on assessment or agreement the amounts incurred by the claimants might be reduced. Taking all the circumstances into account I consider that the proper exercise of the discretion would be to order interest on costs which are agreed or held to be payable should be paid at the rate of one per cent above base rate from 1 October 2001.
8. Were it not therefore for the further argument advanced by the claimants, the simple order in this case would be that the claimants were entitled to 92.5% of the costs of these actions against Maersk and P&O respectively to be assessed on a standard basis, if not agreed together with interest from 1 October 2001 on such costs. I therefore turn to consider the claim for indemnity costs and enhanced interest on the basis of the Part 36 offer and a novel argument.

The claim to an enhancement on the basis of Part 36 offers

9. On 14 June 2001 the claimants made Part 36 offers in both actions; they offered to accept a sum which I was told amounted to 75% of the claim and interest plus costs (to be assessed if not agreed). The offer was stated to be open for 21 days. The offer was not accepted by either P&O or Maersk. At the time the offer was made, although this court had ordered the exchange of experts' reports, exchange had not taken place. The exchange did not take place until 7 August 2001. It appears that part of this delay was attributable to Maersk and P&O, though it is right to record that the claimants were only ready to exchange on 5 July 2001. Although there may therefore have been a day or two in which the claimants were ready to exchange before their Part 36 offer expired, there would not really have been an opportunity to reflect on the experts' reports before the Part 36 offers expired. However, it does not seem to me that on the facts of this case that matters. The issues between the parties, including the issues on Chilean law, were clear from the pleadings; in this type of litigation with highly experienced solicitors on both sides, Maersk and P&O were in a position to make an assessment of their prospects. They decided to continue with the action. The claimants did better than they proposed in their Part 36 Offer.
10. The position is therefore governed by CPR Part 36.21:

"(2) The court may order interest on the whole or part of any sum of money (excluding interest) awarded to the claimant at a rate not exceeding 10% above the base rate for some or all of the period starting with the latest date on which the defendant could have accepted the offer without needing the permission of the court.

(3) The court may also order that the claimant is entitled to-

(a) his costs on an indemnity basis from the latest date when the defendant could have accepted the offer without needing the permission of the court; and

(b) interests on those costs at a rate not exceeding 10% above the base rate.

(4) Where this rule applies, the court will make the orders referred to in paragraphs (2) and (3) unless it considers it unjust to do so. (Rule 36.12 sets out the latest date when the defendant could have accepted the offer.)

(5) In considering whether it would be unjust to make the orders referred to in (2) and (3) above, the court will take into account all the circumstances of the case including –

(a) the terms of any Part 36 offer

(b) the stage in the proceedings when any Part 36 offer or Part 36 payment was made;

(c) the information available to the parties at the time when the Part 36 offer or Part 36 payment was made; and

(d) the conduct of the parties with regard to the giving or refusing to give information for the purpose of enabling the offer or payment into court to be made or evaluated…."

11. Before considering the application of those provisions to the Part 36 offer made in June 2001, it is necessary to consider the novel argument advanced by the claimants. They claim that they are entitled to enhanced interest and indemnity costs not merely from June 2001 (when they made an express Part 36 offer), but from the earlier date at which they made clear they were prepared to settle. That earlier date was the date at which they put forward the claim on which I decided in their favour; they were, they said, always prepared to settle for 100% of that claim; this was a case where there was no real issue on the amount of the damage. They said that they were therefore entitled to that enhanced rate and to indemnity costs from the date they made that clear. That was seven days after their letter before action in the Maersk action written in August 1999 (with a slight modification in respect of bill of lading No 7) and from seven days after the amendment of their particulars of claim in the Maersk action (5^th December 2000) when they claimed the amount which I held they were entitled to recover
12. The claimants accepted that no express Part 36 offer had been made before June 2001; that did not matter as they had always been prepared to settle for 100% of their claim. They submitted it was part of the culture of the CPR to encourage parties to settle and to avoid proceedings. They referred to CPR 44PD, 8.4 which provides:

"..In deciding what order to make about costs the court is required to have regard to all the circumstances including any payment into court or admissible offer to settle made by a party which is drawn to the court's attention (whether or not it is made in accordance with Part 36…)"

13. I do not accept the argument. It was submitted by Maersk and P&O, CPR Part 36.21 was plainly inapplicable. That rule could not apply because the judgment was not more advantageous to the claimants as the claimants had not recovered more than the claimants had sought in the letter before action or in the amended particulars of claim. That argument is correct, but I do not think it appropriate to decide the matter simply on that technical ground. Maersk and P&O submitted that if this technical ground were the only basis for the inapplicability of the Part 36.21, then it would always be open to the claimant to enclose with the letter before action or the claim form a letter framed in terms of a Part 36 offering to settle at 98% or 99% of the claim.
14. It is clear to me that Part 36 and the provisions of PD44 8.4 are directed at offers to settle in the ordinary sense of the word. The purpose of the provisions is set out in the judgment of Lord Woolf MR in Petrotrade Inc V Texaco Limited [2001] 4 All ER 861. At paragraph 63 Lord Woolf explained that "part of the culture of the CPR is to encourage parties to avoid proceedings unless it is unreasonable to do otherwise." There can, of course, be cases where the answer is obvious; but in the overwhelming majority of cases where, as here, there is a genuine dispute, the Part 36 offer is aimed at an offer to settle, that is to say a genuine offer to settle and not some tactical ploy for the purpose of advancing a claim under Part 36.21. The purpose of the award of an enhanced rate of interest or indemnity costs is to encourage parties to make offers of settlement in the ordinary sense of that word. It is to compensate the claimant who has made an offer that should have been accepted for the risk of continuing with the action and to bring home to the defendant the risks being run by not accepting it.
15. No offer to settle in the ordinary sense of the word was made in this case by the claimants until June 2001; it is the offers then made which I consider to be relevant for the application of the principles in CPR Part 36.21.
16. CPR Part 36.21 requires the court to make an order for costs on an indemnity basis and enhanced interest, unless it considers it unjust to make the orders. It is not a penal provision and no stigma is attached to any award: see Petrotrade at paragraph 63 and McPhilemy v Times Newspapers Ltd [2001] EWCA Civ 933 at paragraph 11. In considering whether it is unjust, I have had regard to the level at which the offer was made and its terms, the fact that it was made sufficiently far in advance of the trial to save a considerable amount of the costs incurred in bringing the Chilean lawyers to London and the fact that the essence of the claimants' case was known to Maersk and P&O at the time of the offer (even though the experts' reports had not been exchanged). I do not consider there was anything in the conduct of the parties in relation to the provision of the information that affected the matter either way.
17. Taking those matters into account, it seems to me that this was an offer that should have been accepted; as I said in my judgment, ordinarily a ship owner has no defence to the delivery of cargo without presentation of a bill of lading. Their essential defence was based upon the law of Chile (on which Maersk and P&O were in a far better position to have all the available information than the claimants) and on issues of title to sue. I thus consider that from 7 July 2001, it would not be unjust to make an order for the claimants to be entitled to costs on an indemnity basis and to interest at an enhanced rate.
18. In considering the enhancement of the rate of interest, circumstances will vary infinitely; although I have considered the decision of Aikens J in The Vergina (No 3) [2002] 1 Lloyd's Rep 238, the particular circumstances of that case are different to this. I have had regard to the disruption caused to the claimants' business, the size of the claim and the rate of interest which has been agreed as the ordinary rate. This is not a case where there was any real disruption to the business of the claimants; I accept that Mr Balani had to spend time in Chile dealing with matters and with the allegation (until it was withdrawn) that they failed to mitigate. However those issues apart, the issues were essentially issues of law, both of Chile and of England and Wales. Although Mr Balani had to come to London to give evidence, the court was able to mitigate the inconvenience by sitting late one evening so he did not have to spend a weekend in London. He did, however, have to endure the strain and anxiety of the proceedings, as the claimants were family businesses which were funding the litigation on their own and without insurance. I have also had regard to the fact that Maersk and P&O have agreed a generous rate of interest by agreeing to pay as an ordinary rate 1% over US Prime. I have also taken into account the proportionality of the enhancement as viewed against US Prime rates over the relevant period. In those circumstances, therefore, I consider that the enhanced rate of interest from 7 July 2001 should be a further 1% over the agreed rate of US Prime plus 1%.
19. I have also considered whether viewed overall, an order for indemnity costs and the enhancement in the rate of interest achieve the fairer result to which Lord Woolf referred in Petrotrade. In McPhilemny, Chadwick LJ said at paragraph 19 that the exercise of the powers could not lead to a fairer result if it led to the claimants

"receiving more than can properly be regarded as a full and complete recompense for having to resort to, to pursue and to endure the strain and anxiety of legal proceedings. An exercise of the powers which led to the claimant receiving more than could properly be regarded as compensation, in that enlarged sense, would, in my view, necessarily be penal in nature."

Viewed in this way, I am satisfied that the award I propose making would be proper compensation and not penal.

20. I therefore order the defendants to pay 92.5% of the claimants costs on a standard basis until 7 July 2001 and thereafter on an indemnity basis; I also order interest be paid on the sums due under the judgment at US prime plus 1% until 7 July 2001 and thereafter at US prime plus 2%.

Permission to appeal and other matters

Permission to appeal

21. Maersk and P&O seek permission to appeal on all the issues other than my findings on the law of Chile; apart from the finding of negligence, these are all pure issues on the law of England and Wales. They submit that the questions raise issues of general importance. Normally such points arise under bills of lading where there are the traditionally opposed insurers on both sides; however, these claimants are not insured and have paid the costs themselves; given that the costs of both side already exceed the sums in issue, the claimants, in detailed written submissions, vigorously oppose the application for permission. Although I have very considerable sympathy with the position in which the claimants have found themselves in this action and now face, P&O and Maersk are correct in stating that the issues raised, apart from my findings on negligence in the particular circumstances of the case, are issues of general importance. If P&O and Maersk wish the Court of Appeal to consider those issues, then they should have permission to do so. The issue of negligence is within a narrow compass and Maersk and P&O could succeed in their defence of the actions on their arguments of law, even if they were negligent. It would not, therefore, be right to refuse permission on that short separate issue, as it would only add to the costs if permission had to be sought from the Court of Appeal on that finding.
22. When I handed down judgment, I extended time for lodging any notice of appeal, so that Maersk and P&O could consider the issues on which they might seek permission. They now seek a further extension of 28 days from the date of this decision before lodging their notice of appeal. As they wish to take leading counsel's advice on the issues involved, it seems to me that they should be given time, particularly given the relatively small sums involved and the uninsured position of the claimants. Pending their decision on whether to appeal, I order a stay of execution of the judgment, which would be continued if they lodge a notice of appeal.

Payment on Account of Costs and Security for Costs

23. The claimants have provided security for costs on the sum of £80,000. The money has been paid into court. When this sum was ordered there was no evidence before the Court as to the claimants' assets. I have been provided with a statement by Mr Balani of the claimants' assets; these show that each of the claimants has not insubstantial equity in properties owned.
24. Furthermore at trial, as recorded at paragraph 11 of my judgment Maersk and P&O's contention that the claimants had not mitigated their loss was abandoned; they do not seek leave to appeal on Chilean law. If I had concluded that Maersk and P&O were entitled to succeed on one of the issues of the law of England and Wales which they had advanced and which enabled them to defeat the claims, then I would have nonetheless determined, exercising my discretion under CPR Part 44.3(4), that they should bear the costs of the Chilean law and mitigation issues. Although it would be for the Court of Appeal, in the event of a successful appeal to determine the question of costs, nonetheless the claimants' success on those parts of the case are an important factor.
25. To date, the claimants have incurred costs of about £225,000; I am satisfied that well over 60% would have been incurred on the Chilean law and mitigation issues. In those circumstances, although I am not prepared to order a payment on account of costs, I consider that I should order the payment out of court to the claimants of the amount deposited by way of security for costs together with the interest that has accrued thereon.

Costs of the applications for costs and interest

26. Taking into account the overall success of the claimants on the issues argued, I consider that my order as to the costs of the actions should also apply to any additional costs incurred in the applications for interest, costs and interest on costs.