Part 36 payments, interest and
patients
Who
receives the interest on money paid into Court may be a matter of little practical
significance, but this is obviously not always the case. Where the sum of money
is large the interest accruing in even a relatively short period of time could
be appreciable. In the context of claims involving children and patients, some considerable
time may elapse between the date of the payment and the date of the approval
hearing. In those circumstances, who is entitled to the interest and for what
period?
The
starting point is CPR Part 36 PD 7.10(1) which provides:
“Unless the parties have agreed otherwise:
(1) interest accruing up to the date of acceptance
will be paid to the offeror, and
(2) interest
accruing as from the date of acceptance until payment out will be paid to the
offeree.”
It is
therefore always open to the parties to make provision for the interest on any
money in court, but in the absence of such express provision it is necessary to
identify ‘the date of acceptance’.
This
question was considered very recently in the case of John Brennan (by Joy
Brennan his Litigation Friend) v (1) Eco Composting Limited and (2) J. Bascombe
Contractors Limited [2006] EWHC 3153 (QB).
Save that
Mr Brennan was a patient as the consequence of injuries sustained as a result
of the Defendants’ alleged negligence the background facts are unimportant. On
19th September 2005 a Part 36 payment of £600,000 was made and on 29th March 2006 the Claimant’s solicitors intimated that they wished to accept that
payment, for which settlement they needed to seek the Court’s approval. The
matter came before the Court on 3rd October 2006.
There was
a further delay occasioned by an application to take the money out of Court,
which was subsequently withdrawn, and Silber J finally determined the
Claimant’s application on 10th November 2006. The settlement was
approved subject to further argument on the interest that had accrued on the
money in Court.
Each side
contended that they should be entitled to the interest from 19th September 2005 to 3rd October 2006 (there being no dispute that the
Claimant was entitled to the interest thereafter).
The
answer shortly put was that the Defendants were entitled to the interest, this
conclusion flowing principally from the interaction between the case of Whitwood
v Drinkall [2003] EWCA Civ 1547 and CPR Part 21.10.
Although Whitwood itself was founded on the much earlier House of Lords’ decision in Dietz
v Lennig Chemicals Limited [1969] 1 AC 170, its conclusion came as
something of a surprise to many practitioners at the time. The Claimant in Whitwood was a child who had sustained severe head injuries after being hit by a car
while out on her bicycle. An offer on liability was initially accepted, only to
be withdrawn 18 months later before the Court had approved the settlement. It
was held that, ‘regrettable though it might seem, the defendants here were
entitled to renege on their agreement as they did,’ (per Simon Brown LJ
paragraph 19).
The basis
of the decision was the conclusion reached in Dietz that a settlement
requiring the Court’s approval, ‘was only a proposed settlement until the court
approved it. Either party could lawfully have repudiated it at any time before
the court approved it,’ (per Lord Pearson at p.190).
Consistently
with these decisions Silber J held that the use of the word ‘acceptance’ in CPR
Part 36 PD 7.10(1) must mean ‘valid acceptance’ and that a valid acceptance did
not take place until the Court approved the settlement. Not only is this in
line with the decisions cited above but it follows the plain meaning of CPR
Part 21.10(1) which provides in relation to claims by or against children or
patients that:
“no settlement, compromise or payment and no acceptance of
money paid into court shall be valid, so far as it relates to the claim by, on
behalf of or against the child or patient, without the approval of the court.”
The
Claimant’s arguments to the contrary were given relatively short-shrift. They were
essentially two-fold and may be summarised as follows:
Firstly,
rule 31 of the Court Fund Rules 1987 provides that where a claimant is under a
disability, money paid into Court is placed into a basic account immediately,
as opposed to in other cases where there is a 21 day delay (in case notice of
acceptance is lodged). Because interest thereby accrued from an earlier date it
was said that this indicated an intention that claimants under a disability
should be entitled to that interest from the date of payment in. Four reasons were
given for rejecting that submission:
1) In the absence of any
specific provision the difference in the date that interest accrued did not of
itself indicate that any other difference in treatment of interest payable to
these two groups of claimants was intended;
2) There was no such
specific provision to suggest that the allocation of interest should be
approached differently as between these groups of claimants;
3) The way the CPR and the
Court Fund Rules are drafted is wholly consistent with an intention that this
should be the only difference;
4) CPR Part 36 PD 7.10(1)
applies to all payments into Court with no indication that the two groups of
claimants should be treated differently.
Secondly,
CPR Part 36 PD 7.10(1) is only a Practice Direction and not a rule of court and
it should be interpreted in accordance with CPR Part 1.1 and 1.2 so as to allow
some discretion in the Court. This argument was also rejected. Silber J could
see nothing unjust in only allowing a claimant to receive interest only after
the Court’s approval had been obtained. An approval hearing could normally be
arranged speedily and the claimant was not bound by the acceptance in the same
way that the defendant was not bound.
More
fundamentally, however, it was said that this submission gave insufficient
weight to the significance and role of Practice Directions generally.
Citing
Auld LJ in R (Mount Cook Land Limited) v Westminster City Council [2003]
EWCA Civ 1346 and the notes at paragraph 2.3.4 of the Civil Procedure 2006 Vol.
1 Silber J stressed the following propositions:
1) All involved in civil
proceedings ought to be able to rely on practice directions as indicating the
normal practice of the courts unless and until they are amended;
2) Practice directions
provide guidance that should be followed; and
3) Practice directions
should nevertheless yield to the rules if there is a clear conflict between
them.
Given the
ruling that there was no injustice in the outcome it followed that there was no
conflict with CPR Part 1.1 or 1.2.
The
outcome of this appeal was perhaps unsurprising in the light of the decisions
referred to above and the wording of CPR Part 21.10(1). It is also unlikely to
give rise to any injustice but serves as another reminder to those dealing with
claims involving children and patients that once settlement is reached, it is
important to act quickly to secure the Court’s approval.
Ben
Leech
12 King’s Bench Walk
January 2007
