Learning Curve v Lewis: Part 36 consequences and quantum disputes

In Learning Curve (NE) Group Limited v Richard Huw Lewis & Anor [2025] EWHC 2491 (Comm), HHJ Russen KC addressed consequential matters following his earlier substantive judgement on warranty breaches under a share purchase agreement. The case provides important guidance on Part 36 offers, interim payments on account, and enhanced interest rates.

Part 36 clarity and payment appropriation

The claimant's Part 36 offer of £5,211,625 matched precisely the sum awarded at trial. The defendants argued the offer lacked clarity because it remained silent on whether a prior payment of £783,325 under an indemnity claim should be treated as additional to or included within the offered sum.

HHJ Russen KC rejected this argument, finding the offer properly contemplated settlement of both the warranty claim and the defendants' counterclaim for return of the £783,325. The defendants had neither acknowledged the offer nor sought clarification under CPR 36.9 at the relevant time. The judge noted that by analogy with cases like Synergy Lifestyle Ltd v Gamal [2018] EWCA Civ 210, payments on account must be presumed to form part of any settlement sum in the absence of contrary clarification.

The judge emphasised that treating the offer as requiring £5,994,950 (the offer sum plus the prior payment) would produce an "absurd result". The pleadings had clearly stated the claimant elected to pursue either warranty or indemnity claims but not both, meaning any prior payment necessarily counted towards the larger warranty claim.

Part 36 consequences and the "formidable obstacle"

The defendants contended that applying CPR 36.17(4) consequences would be unjust, citing the claimant's shifting quantum case—from £6.8 million in the claim form to over £10 million in particulars of claim. HHJ Russen KC found this argument reinforced rather than undermined the offer's effectiveness. The defendants could have settled at approximately half the pleaded sum but chose to contest liability comprehensively.

Citing Smith v Trafford Housing Trust [2012] EWHC 3320 (Ch), the judge noted the "formidable obstacle" facing parties seeking to escape Part 36 consequences. The claimant had given the defendants a year's notice before trial to compromise at exactly the figure ultimately awarded, sparing themselves substantial ongoing costs and interest.

Enhanced interest rates and costs on indemnity basis

The court awarded interest at 2% above base rate for the period from the SPA date until expiry of the Part 36 relevant period, rising to 8% above base thereafter until the judgement date. This reflected evidence that the claimant borrowed at rates equivalent to 4.5–7.14% above base, with the enhanced rate incorporating a non-compensatory element permitted under CPR 36.17(4)(a) per OMV Petrom SA v Glencore International AG [2017] EWCA Civ 195.

The court ordered costs on the indemnity basis from 28 February 2024, rejecting the defendants' submission that costs should be capped at 50% based on alleged exaggeration of the claim. The defendants' "die hard" approach in contesting every issue meant they had passed up the opportunity to settle at the Offer sum.

Payment on account at 100% of budget

Departing from the usual practice of ordering 90% of budgeted costs, HHJ Russen KC ordered payment on account of £1,257,382 representing 100% of the claimant's approved costs budget. This reflected that significant costs would be assessed on the indemnity basis, meaning CPR 3.18 protections would not apply to much of the bill. With invoiced costs totalling £2,210,133.75, the budgeted sum represented only 57% of the total and was unlikely to constitute overpayment.

The judge refused permission to appeal on all four proposed grounds and declined a stay of execution, finding insufficient evidence that an appeal would be stifled absent a stay given the defendants' apparent resources and anticipated CGT rebate.