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Currency fluctuations and Part 36 offers to settle

16 September 2016

​Novus Aviation Ltd v Alubaf Arab International Bank BSC(c) [2016] EWHC 1937 (Comm) is relevant when unforeseen fluctuations in the currency exchange rate between the time of a Part 36 offer and the time of judgment affect whether the Part 36 offer has been ‘beaten or not’. The court ruled that the value comparison between a judgment and a Part 36 offer should be done on the date of the court’s order. The only reason that the claimant obtained a judgment (in U.S. dollars) which was more advantageous than its Part 36 offer (in pound sterling) was as a result of the post Brexit vote fall in pound sterling. In these circumstances, the court found it unjust to order the normal Part 36 costs consequences which apply where an offer has been beaten at trial. 

Novus’ Part 36 offer

Novus made an offer under the Civil Procedure Rules Part 36 (CPR Part 36 offer) to Alubaf in pound sterling but the amount for which judgment was entered in favour of Novus was in USD. If applying the (post‑Brexit vote) exchange rate at the time of judgment (GBP 1 = USD 1.31), then Novus no doubt obtained a judgment which was more advantageous than its Part 36 offer. However, if applying the (pre‑Brexit vote) exchange rate at the time of Novus’ offer (GBP 1 = USD 1.68), the converted amount of the offer in USD was substantially more that the judgment amount.

In determining whether the CPR Part 36 costs consequences should apply, when should the relevant comparison be made? Is it: (i) when the Part 36 offer was made, (ii) at the end of the “relevant period” (as defined in CPR 36x.3(1)(c), now CPR 36.3(g)), which period could extend to the end of the trial, or (iii) at the time of judgment?

The currency in which Novus conducts its business and suffered loss is USD, and this was relied on by Alubaf as a basis for arguing that the relevant comparison to be undertaken is at the time when Novus made its offer. However, Leggatt J ruled that this cannot trump what is set out in the rules. The relevant time at which to make the comparison in money terms between the judgment and the Part 36 offer is specified as being “upon judgment being entered”, which means the date when the order containing the court’s judgment is made.

The fall in the pound sterling/dollar exchange rate meant that Alubaf became liable for Part 36 costs consequences in circumstances where it otherwise wouldn’t have been had the trial taken place earlier and/or had the judgment been handed down prior to the Brexit vote. Indeed, if judgment had been entered at any time between the start of the trial (on 26 April) and 23 June 2016, Novus would not have beaten its Part 36 offer and orders for interest at an enhanced rate and indemnity costs could not have been made.

Was it unjust to order the costs consequences

CPR 36x.14(3), now CPR 36.17(4), provides the court with discretion not to order the costs consequences if “it considers it unjust to do so” and, by CPR 36x.14(4), now CPR 36.17(5), the court is to “take into account all the circumstances of the case”. In the court’s view, it is a highly material circumstance that the only reason why Novus has beaten its Part 36 offer is the recent fall of the pound sterling against the dollar. As such, the court considered that:  “it would in these circumstances be unjust to make orders under CPR 36x.14(3) for any part of the period between the date on which “the relevant period” expired and today’s date. The reality is that if at almost any time between the date when the offer was made and the end of the trial Alubaf had accepted the offer, the sum received by Novus would have been worth more than the judgment which it has ultimately obtained (even ignoring the time value of money). It would in these circumstances be adventitious and inconsistent with the principle of risk allocation which underlies Part 36 to penalise Alubaf for not accepting the offer.”


This judgment is particularly relevant in circumstances where a Part 36 offer is made in one currency and the quantum of damages ordered by the judgment is in a different currency, and unforeseen fluctuations in the currency exchange rates have been observed between the time of the offer and the time of judgment. The court decision provides some comfort to parties in Alubaf’s position in finding that it is unjust to order the costs consequences for any part of the period between the date on which the relevant period of the offer expired and the judgment date. In order to achieve greater certainty, an offering party should consider making an offer in the same currency in which the claimant’s loss is likely to be suffered, so as to mirror the currency in which the quantum of damages would be ordered by the court. 

Further information

This case summary is part of the Allen & Overy Litigation and Dispute Resolution Review, a monthly publication.  For more information please contact Sarah Garvey, or tel +44 20 3088 3710.    ​​