Telefónica UK Ltd v The Office of Communications

JurisdictionEngland & Wales
CourtCourt of Appeal (Civil Division)
JudgeLord Justice Phillips,Lord Justice Arnold,Lord Justice Peter Jackson
Judgment Date29 October 2020
Neutral Citation[2020] EWCA Civ 1374
Docket NumberCase No: A4/2019/1327
Date29 October 2020

[2020] EWCA Civ 1374




Adrian Beltrami QC Sitting as a Deputy High Court Judge


Royal Courts of Justice

Strand, London, WC2A 2LL


Lord Justice Peter Jackson

Lord Justice Arnold


Lord Justice Phillips

Case No: A4/2019/1327

Telefónica UK Limited
The Office of Communications

Benjamin Williams QC (instructed by DWF Law LLP) for the Appellant

Ajay Ratan (instructed by The Office of Communications) for the Respondent

Hearing date: 1 July 2020

Approved Judgment

Lord Justice Phillips



CPR 36.17(4) provides that, where a claimant has obtained judgment against a defendant which is at least as advantageous as the proposals contained in a Part 36 offer made by the claimant, the court must, unless it considers it is unjust to do so, order that the claimant is entitled to four specified forms of enhanced relief. This appeal concerns the circumstances in which the award to the claimant of some or all of the specified relief may be considered to be unjust.


On 17 May 2019 Adrian Beltrami QC, sitting as a deputy judge of the Commercial Court (“the Judge”) gave judgment, following a trial, in favour of the appellant (“Telefónica”) against the respondent (“Ofcom”) in the principal sum of £54,379,489.05 together with simple interest of £2,995,007.55.


It was common ground that Telefónica had thereby obtained a judgment more advantageous than an unaccepted Part 36 offer that it had made on 6 April 2018. The Judge accordingly awarded Telefónica indemnity costs from 28 April 2018 pursuant to CPR 36.17(4)(b) and an “additional amount” of £75,000 pursuant to CPR 36.17(4)(d). The Judge refused, however, to award an enhanced rate of interest (above the agreed commercial rate of 2% above base rate) on either the principal sum for which judgment was entered ( CPR 36.17(4)(a)) or the costs Telefónica incurred after 28 April 2018 ( CPR 36.17(4)(b)), holding that it would be unjust to do so.


Telefónica now appeals that refusal, contending that the Judge, having accepted that the Part 36 offer was a genuine attempt to settle (and having awarded two of the four “enhancements”), articulated no proper basis for regarding the award of an uplifted rate of interest as unjust. In particular, Telefónica contends, the Judge failed to recognise or consider that there was a discretion as to the level of uplift to be awarded (provided the rate, after the uplift, does not exceed 10% above base rate), and that concerns as to the proportionality and fairness of an uplift could and should have been addressed in that way. Telefónica seeks an uplift of 3% in the rate of interest, making a total rate of 5% on both the principal judgment sum and costs.


Ofcom resists the appeal, contending that the Judge had a wide discretion on the issue of costs which he exercised without erring in principle, taking into account the wrong matters or reaching a perverse conclusion. In the alternative, Ofcom argued that, even if there was a basis for setting aside the Judge's decision, any uplift in interest rate should be nominal only.

The background facts


Telefónica's claim was one of four claims brought by mobile network operators for restitution of annual licence fees paid to Ofcom between 2015 and 2017 pursuant to a fee-setting regulation 1 that had been quashed in judicial review proceedings (on appeal to this court 2). The four claims were ordered to be heard together, each turning on the same question of law regarding the appropriate measure of restitution.


On 6 April 2018, prior to the commencement of the proceedings, Telefónica made a Part 36 offer on the basis that Ofcom would pay Telefónica £52.82 million together with compound interest for the relevant period at an annual rate of 0.56%. The offer was in the same principal sum as Telefónica had demanded in a Letter of Claim of the same date.


The offer was not accepted and Telefónica issued the claim form on 8 May 2018.


On 25 July 2018 the Supreme Court handed down judgment in Prudential Assurance Co Ltd v Revenue and Customer Commissioners [2018] UKSC 39, deciding that compound interest is not available in unjust enrichment claims for restitution of money payments.


As a result, on 8 August 2018, Telefónica made a second Part 36 offer, this time on the basis of payment of £52.82 million without any interest. That offer was also not accepted.


On 18 February 2019 Telefónica notified Ofcom that it had undercalculated its claim by £1.56m, bringing the total claimed to £54.38m. Notwithstanding that increase in the amount claimed, the Part 36 offers were not withdrawn and so remained open for acceptance without penalty.


At the trial, which commenced on 1 May 2019, Ofcom did not dispute that £54.38m was the sum Telefónica had paid under the (invalid) 2015 Regulations, less what would have been payable under the 2011 Regulations.


A reserved judgment was handed down in all four claims on 17 May 2019, determining the issue of law in favour of the mobile network operators 3. Telefónica was therefore awarded the full amount of its revised principal claim, plus simple interest at 2% above base rate.


After handing down his judgment on the substantive claims, the Judge heard argument on consequential issues, including Telefónica's entitlement to enhanced relief under CPR 36.17(4). The Judge proceeded to determine that entitlement in an ex tempore judgment, to which I shall return below.

The relevant provisions of CPR Part 36


The rule provides, so far as relevant, as follows:

“(1)… this rule applies where upon judgment being entered—


(b) judgment against the defendant is at least as advantageous to the claimant as the proposals contained in a claimant's Part 36 offer…

(2) For the purposes of paragraph (1), in relation to any money claim or money element of a claim, “more advantageous” means better in money terms by any amount, however small, and “at least as advantageous” shall be construed accordingly.


(4) Subject to paragraph (7), where paragraph (1)(b) applies, the court must, unless it considers it unjust to do so, order that the claimant is entitled to—

(a) interest on the whole or part of any sum of money (excluding interest) awarded, at a rate not exceeding 10% above base rate for some or all of the period starting with the date on which the relevant period expired;

(b) costs (including any recoverable pre-action costs) on the indemnity basis from the date on which the relevant period expired;

(c) interest on those costs at a rate not exceeding 10% above base rate; and

(d) provided that the case has been decided and there has not been a previous order under this sub-paragraph, an additional amount, which shall not exceed £75,000…

(5) In considering whether it would be unjust to make the orders referred to in paragraphs (3) and (4), the court must 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 was made, including in particular how long before the trial started the offer was made;

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

(d) the conduct of the parties with regard to the giving of or refusal to give information for the purposes of enabling the offer to be made or evaluated; and

(e) whether the offer was a genuine attempt to settle the proceedings.

(6) Where the court awards interest under this rule and also awards interest on the same sum and for the same period under any other power, the total rate of interest must not exceed 10% above base rate…”

The authorities


Lord Woolf MR explained the purpose of and approach to the enhancements under (what is now) CPR 36.17 in Petrotrade Inc v Texaco Ltd (Note) [2002] 1 WLR 947 as follows:

“64. The power to order indemnity costs or higher rate of interest is a means of achieving a fairer result for the clamant. If a defendant involves a claimant in proceedings after an offer has been made, and, in the event, the result is no more favourable to the defendant than that which would have been achieved if the claimant's offer had been accepted, without the need for those proceedings, the message of [r.36.17] is that, prima facie, it is just to make an indemnity order for costs and for interest at an enhanced rate to be awarded. However, the indemnity order need not be for the entire proceedings, nor …need the award of interest be for a particular period or at a particular rate. It must not however exceed the figure of 10% [above base rate] referred to in Part 36.

65. There are circumstances where a just result is no order for costs or no interest even where the award exceeds an offer made by a claimant. [Rule 36.17] does no more than indicate the order which is likely to be made by the court unless it considers it is unjust to make the order. The general message of [r.36.17], when it applies, is that the court will usually order a higher rate of interest than the going rate. As to what the additional rate of interest should be, it is not possible to give specific guidance…”


In Webb v Liverpool Women's NHS Foundation Trust [2016] 1 WLR 3899, the Court of Appeal stated that, in exercising its discretion under CPR 36.17(4), the court must take into account that the unsuccessful defendant could have avoided the costs of the trial if it had accepted the claimant's Part 36 offer, as it could...

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT