CPR 36.17(4)(c) | How To Calculate Enhanced Interest On Costs — Aggregate Method Applies

The County Court’s decision in Barry v Essex County Council [2025] EWCC 64 confirms that enhanced interest on costs awarded under CPR 36.17(4)(c) is calculated using the aggregate costs method from the date of offer expiry. This is of course a first instance non-binding decision in the county court and should be treated accordingly.

Background

The claimant, Kelly Barry, brought a claim for damages against Essex County Council for personal injuries sustained in a tripping accident on 18th March 2018. Liability was denied by the defendant. On 7th October 2019, the claimant made a Part 36 offer to settle liability on a 70/30 basis in her favour, which was rejected. The offer expired on 28th October 2019. The matter proceeded to a trial on 5th and 6th July 2023 before District Judge Mills (as he then was). Quantum was partly agreed at £27,031, subject to liability. The trial judge found wholly in the claimant’s favour on liability, making no deduction for contributory negligence, and entered judgment for the agreed sum of £27,031.

As the claimant had beaten her own Part 36 offer, the judge applied the consequences under CPR 36.17(4). He awarded an additional 10% of the damages (£2,703.10) and enhanced interest on those damages at 9% per annum from 28th October 2019 to the first day of trial, amounting to £8,971.33. Regarding costs, the judge ordered that the defendant pay the claimant’s costs up to 28th October 2019 on the standard basis, and costs from that date on the indemnity basis. Crucially, he also ordered, pursuant to CPR 36.17(4)(c), that the defendant pay “additional interest on those costs… from 28th October 2019 at the rate of 9% per annum.”

A Bill of Costs was subsequently served totalling £91,173.92. The parties later agreed the base costs at £75,000, excluding interest and the costs of the assessment. A dispute arose solely concerning the method for calculating the interest on the post-offer indemnity costs, leading the claimant to issue an application on 25th April 2025 to resolve the issue.

Costs Issues Before the Court

The single issue for determination was the correct method for calculating interest on costs awarded under CPR 36.17(4)(c). The claimant argued for the “Aggregate Costs method,” whereby interest at 9% per annum is applied to the total sum of all costs incurred from the expiry of the Part 36 offer (28th October 2019) until the date of the costs order (6th July 2023). The defendant contended for the “Individual Item method,” whereby interest is calculated separately on each individual item of costs incurred after the offer’s expiry, running from the specific date that item of work was done or the disbursement was incurred.

The Parties’ Positions

Claimant’s Submissions: Mr Meehan, for the claimant, advanced two primary arguments. Firstly, he submitted that on a natural reading of District Judge Mills’s order, the only reasonable construction was that it intended the Aggregate Costs method. His second, alternative argument was that if the interpretation remained open, the Aggregate Costs method was consistent with case law, the policy behind CPR Part 36, and practical reality. He argued that the Court of Appeal’s decision in McPhilemy v Times Newspapers Ltd, upon which the defendant relied, was not binding. He relied on the subsequent case of OMV Petrom SA v Glencore International AG, which indicated that the policy behind Part 36 had evolved to include a non-compensatory, punitive element designed to encourage settlement—a “carrot and stick” scheme. He further argued that the Individual Item method was practically unworkable, creating unnecessary complexity for costs judges.

Defendant’s Submissions: Mr Roderick, for the defendant, clarified that the Individual Item method involved recalculating the interest due each time a new cost was incurred post-offer. He contended that this method was consistent with the precedent in McPhilemy, which he submitted was binding, where the Court of Appeal had expressly ordered that interest run from the date work was done. He accepted that Part 36 now had a punitive element but argued that this was delivered through the enhanced rate of interest itself, not the method of calculation. He submitted that the Aggregate Costs method could lead to absurd outcomes, such as interest running on a counsel’s brief fee for some three years before it was actually incurred. He argued for consistency with the principle that interest on damages typically runs from the date the loss was incurred. Finally, he asserted that the Individual Item method was practical and straightforward to operate using spreadsheets and electronic bills.

The Court’s Decision

Deputy District Judge Rathod found in favour of the claimant, holding that the Aggregate Costs method was the correct approach. The decision was reached for several key reasons.

• • • First, on a straightforward construction of District Judge Mills’s order, the judge found that the wording indicated a clear intention to apply interest at 9% per annum to the entirety of the post-offer costs from a single specified date. This aligned with the “broad brush” approach to interest on costs endorsed by Lord Neuberger in Simcoe v Jacuzzi UK Group plc, which discouraged overly detailed and prolonged arguments on such points.
    • Second, the judge held that he was not bound to follow the specific outcome in McPhilemy. He analysed that the ratio of McPhilemy concerned the trial judge’s erroneous exercise of discretion in refusing Part 36 consequences, not the precise mechanics of interest calculation. The specific order made in that case was a product of its own facts and was not an issue that had been fully argued. Furthermore, the judge found McPhilemy to be of limited persuasive authority as it pre-dated the Jackson reforms, which introduced a stronger “carrot and stick” policy into Part 36, and its reasoning was based on compensating a claimant for loss of use of money paid on account—a factor not present in this case where a conditional fee agreement was used.
    • Third, the Court of Appeal’s decision in Petrom was found to dilute the authority of McPhilemy. The judge noted that in Petrom, the Chancellor held that enhanced interest awards under Part 36 were not purely compensatory and could include a non-compensatory element. This shift in policy supported an interpretation that could lead to a more punitive result for a defendant who rejected a reasonable offer.
    • Fourth, the judge rejected the defendant’s argument that the Aggregate Costs method produced an “absurd” result by potentially accruing interest on costs before they were incurred. He stated that if this was the outcome of a rule designed to encourage settlement, it was a fair consequence for a defendant who chose not to accept an offer. He also found the defendant’s analogy with interest on damages to be a false one, noting that in personal injury cases, a simple half-rate from the date of accident is often used to avoid complexity.

Finally, the judge agreed with the claimant that the Individual Item method was unworkable in practice. It would add significant complexity to detailed assessments and, crucially, would be impossible to apply in cases involving summary assessment of costs, where individual dates of incurrence are not examined. The Aggregate Costs method, in contrast, was consistent with authority, the policy of Part 36, and practical reality.

The application was therefore allowed, and it was declared that interest should be calculated at 9% per annum on the aggregate of all costs incurred from 28th October 2019 to 6th July 2023.

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