Edwards Duthie Shamash’s senior commercial consultant litigation lawyer, Nick Macleish had a resounding success recently in the Court of Appeal. The appeal and cross-appeal in Littlestone & Others v Macleish [2016] EWCA Civ. 127 were heard by Lady Justices Black and Gloster sitting together with Lord Justice Briggs on 9th February 2016 and the Judgment was handed down on 10th March 2016.

The case originally concerned a dilapidations claim arising following Mr Macleish’s former partners in Macleish Littlestone Cowan solicitors (‘MLC’) leaving a property in Snaresbrook E11, of which they were Tenants ‘…in a dreadful condition…’ according to Nick’s surveyor.

Proceedings were issued in January 2013 and the following month MLC made a CPR Part 36 offer in the sum of £35,000. They then served a Defence on 1st March 2013 and in that Defence they admitted liability for £17,504 which they set out in their Defence and by reference to an annexed copy of the Schedule of Dilapidations. The aggregate amount admitted was made up both from items in the claim which were admitted in full and items which were admitted in part. The Defendants then made a payment on account of £17,504 by reference to their Defence.

Before receipt of such payment, a letter was sent by Edwards Duthie Shamash to MLC which stated –

‘For the avoidance of any doubt we are instructed to point out that the payment you propose to make will be accepted by our client on account on his claim only, since of course the figure in your Defence is disputed and we shall be serving a Reply when we file the Claimant’s Allocation Questionnaire with the court.’

When Nick made a Claimant’s Part 36 offer in October 2013, to accept the sum of £54,000 inclusive of interest and VAT but less the £17,504 paid on account, MLC responded claiming that this offer was only £1,496 apart from their own Part 36 offer, because they maintained that they were entitled to combine their offer of £35,000 and their payment on account of £17,504 to make a total Part 36 offer on their part of £52,504.

The trial Judge, HHJ Deborah Taylor found that MLC had not genuinely intended that their admitted payment could or should be aggregated with their Part 36 offer of £35,000, but rather had taken advantage of an ambiguity (of their own making) following Nick’s Part 36 offer of October 2013.

Mr Macleish offered in mid-November 2013 to agree damages with MLC and leave the question of costs to the court to be decided instead of a 4/5 day fully contested trial in January 2014, but MLC rejected that proposal out of hand on 20th November 2013 saying that they were ‘…not willing to become embroiled in satellite litigation over costs.’. The irony of that statement was certainly not lost on the three members of the Court of Appeal!

MLC and their counsel, Mr Alan Tunkel of 3 Stone Buildings, Lincoln’s Inn did not at any stage of negotiations with Mr Macleish mention the fact that they were seeking to rely upon Obiter Dicta of Lord Justice Moor-Bick in Gibbon v Manchester City Council; LG Blower Specialist Bricklayer v Reeves & Another [2010] 1 WLR 2081. They failed to mention Blower until early December 2014 when the trial Judge heard submissions regarding costs, interest and some minor peripheral matters relating to her Judgment.

HHJ Taylor awarded Nick Macleish damages of £48,409.40 together with interest and agreed service charges, with a small deduction for an agreed insurance premium rebate and she ordered MLC to pay his costs of the proceedings, on the standard basis. MLC appealed claiming that Nick had failed to beat their Part 36 offer (adding both the proffered £35K and the payment on account of £17,504 together) and Nick cross-appealed on the ground that the trial Judge should have made the award of costs in his favour, so as to reflect his contractual entitlement to an indemnity for costs incurred in the recovery of sums due from MLC as his tenants, pursuant to the terms of the Lease.

In his Judgment of 10th March 2016, agreed unanimously by his colleagues, Lord Justice Briggs wasted no time finding in fully in favour of Nick Macleish and rejecting MLC’s argument that a Part 36 offer which is followed by a payment on admissions has its value augmented by the amount of the admissions payment, pursuant to what was said by Moore-Bick LJ in Blower, at paragraph 37 and/or that the effect of the admissions payment was to reduce, pro tanto, the amount of Nick Macleish’s claim so that in reality…he obtained judgment only for the net amount derived from subtracting the admissions payment from the aggregate of the damages plus interest which resulted in the figure less than the face value of the Part 36 offer.

In paragraphs 19 and 20 his Judgment LJ Briggs said:

’19. In my judgment the true analysis of the relationship between the Part 36 offer and the admissions payment is as follows. First, the Part 36 offer was, from start to finish, an offer to settle the entirety of the Claimant’s claim for £35,000, no more and no less. Nothing in the correspondence about, or the making of, the admissions payment made any reference to the Part 36 offer.’
’20. Secondly, the admissions payment was plainly made, and indeed accepted, on the basis that it was a payment on account following admissions, against the claimant’s entire claim. It did not cease to be the same claim for damages for dilapidations and interest which had been originally pleaded, merely because part of it was admitted, and a payment made in accordance with those admissions. Thus it would, plainly, fall to be taken into account as a part payment of any larger sum awarded by way of damages, as indeed it later was.’

LJ Briggs refered to the absurdity of MLC’s primary case and their counsel’s submissions and at paragraph 23 he stated:

‘23. I consider that the critical flaw in the defendants’ primary case is that it fails to address the obvious reality that an admitted payment on account of a claim, following a Part 36 offer in a higher amount must, in the absence of an agreements to the contrary, be taken as being made as much on account of the Part 36 offer to settle the claim as it is made on account of the claim itself.’

And at paragraph 24:

’24. The absurdity is, in my view, by no means confined to a case where aggregating the Part 36 offer and the admissions payment would produce a sum larger than the claim. It arises from the fact that the admissions payment is made on account.’

Having dismissed MLC’s appeal, the C.A. then went to uphold Nick Macleish’s cross-appeal regarding the exercise by the trial Judge of her discretion as to the basis of assessment of costs under the CPR where there is a contractual entitlement already agreed between the parties.

In accordance with the principles in the well-known case of Gomba Holdings (UK) Ltd and Others v Minories Finance Limited Ltd and Others (No. 2) [1993] Ch. 171 at 190 – 1 and 194 – 5, the court awarded Nick Macleish his costs of the proceedings to be assessed on the indemnity basis, if not agreed.

Nick Macleish’s own counsel were Nicholas Bacon Q.C. of 4 New Square, Lincoln’s Inn and Adam Walker of 7 Bedford Row Chambers.

March 2016
(A copy of the approved Judgment of Lord Justice Briggs and Lady Justices Black and Gloster is attached here).

March 2016