Part 36 offers and recent judgments

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One of the most successful innovations introduced by the Civil Procedure Rules (CPR) has been part 36 offers. In 2007, part 36 offers replaced payments into court as the sole mechanism under the CPR for making offers to settle, which, in the words of Lord Justice Moore-Bick, have ‘far-reaching consequences if the case goes to trial and the other party fails to obtain a judgment which is more advantageous to him than the offer’ (Gibbon v Manchester CC: LG Blower Specialist Bricklayer Ltd v Reeves [2010] EWCA Civ 726, [2010] All ER (D) 218, [2010] 1 WLR 2081.

The decision of the Court of Appeal in the conjoined cases of Gibbon and LG Blower is extremely important for practitioners who are seeking to use part 36 to their clients’ advantage.

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The central issue for the court was the extent to which the general principles of contract law apply to part 36. Previous High Court authority suggested that such principles did apply to part 36 and so, for example, rejection of a part 36 offer meant that it was no longer available for acceptance (see, for example, Pankhurst v (1) White (2) MIB [2010] EWHC 311).

However, the appeal court held that part 36 was a ‘self-contained code’ and should ‘be read and understood according to its terms without importing other rules derived from the general law, save where that was clearly intended’.

This has a number of significant ­consequences:These consequences are clearly demonstrated by the facts of Gibbon and LG Blower. In Gibbon the claimant made a part 36 offer of £2,500 which was rejected by the defendant. The defendant made a series of offers, all of which were rejected, culminating in an offer of £2,500. On rejection of that offer, the defendant then purported to accept the claimant’s part 36 offer of £2,500. The claimant contended that the offer had lapsed after it was initially rejected, or, alternatively, that the specific rejection by the claimant of the defendant’s offer of £2,500 amounted to an implied withdrawal of her own offer of the same amount. Those arguments were rejected by the appeal court, which held that an offer could only be withdrawn expressly, by complying with the requirements of CPR 36.3(7), that is, by serving written notice of withdrawal.

  • Rejection of an offer does not mean that the offer ceases to be available for later acceptance;
  • Likewise, the making of a counter-offer does not mean that the first offer ceases to be available for acceptance;
  • Likewise, the making of a further offer by a party does not mean that an earlier offer by that party ceases to be available for acceptance; and
  • Accordingly, several different (and indeed inconsistent) offers may be available for acceptance at the same time.

In Blower, numerous offers were made, and on appeal Judge Rubery held that two offers had been ‘superseded’ by a later offer. The appeal court disagreed, again holding that the offers remained open for acceptance, unless varied or withdrawn pursuant to CPR 36.3.

As CPR 36.9(2) provides that a part 36 offer may be accepted ‘at any time’ and CPR 36.10(1) provides that ‘where an offer is accepted the claimant will be entitled to costs up to the date of acceptance’ (subject to the limited exceptions set out in those rules), practitioners need to consider carefully whether part 36 offers can be left open indefinitely. If not, they must be withdrawn or varied in writing.

C v D [2011] EWCA Civ 646, (Lawtel 27 May 2011), has revealed a further pitfall. C made D an offer, boldly headed ‘Offer under CPR Part 36’ and which stated: ‘This offer will remain open for 21 days.’ When, nearly a year later, D sought to accept it, C argued that it had automatically lapsed. The appeal court held that part 36 could not accommodate a time-limited offer; all that ‘open for 21 days’ means was that the offer would not be expressly withdrawn within that period.

The readiness to interpret an offer as part 36-compliant was underlined again in Seeff v Ho [2011] (Lawtel, 11 April 2011). The claimant’s offer in respect of an appeal called for the defendants to repay the first instance costs within 14 days. When the appeal succeeded, the defendant argued that indemnity costs should not be ordered because the offer had not complied with part 36. The appeal court held that the offer had complied with part 36 in any event, but also attached weight to the letter in which it was contained, making it clear that if the offer was in any way non-compliant with part 36, the defendant’s solicitors should let the claimant’s solicitors know as soon as possible.

The appeal court went on in LG Blower to consider the additional question of whether the claimant’s judgment was ‘more advantageous’ than the part 36 offer (CPR 36.14). In the well-known case of Carver v BAA [2008] EWCA Civ 1109, the appeal court held that this question should not simply be answered in financial terms, but required a more wide-ranging view of all the facts and circumstances to decide whether the judgment was ‘worth the fight’. That judgment has been the subject of much criticism, and courts have regularly been asked to award costs to the defendant in circumstances where the claimant has recovered a higher amount than that offered. In LG Blower, the court acknowledged the criticism of Carver and Lord Justice Moore-Bick said ‘… when deciding how much weight to attach to any particular factor I think it important to see things from the litigant’s perspective rather than to be too ready to impose the court’s own view of what is and is not to his advantage. That is particularly important when dealing with money claims, both because to recover judgment for more than what was offered is legitimately regarded as success, and because a party faced with a part 36 offer ought to be entitled to evaluate it by reference to a rational assessment of his own case … In most cases obtaining judgment for an amount greater than the offer is likely to outweigh all other factors’.

Lord Justice Carnwath, concurring, added that ‘… although we are bound to hold that such "emotional" factors may be relevant, the practical application of that approach must be considered in context… As I read the decision, it was because the potential gain was so small in that case, that the court felt able to uphold the judge's approach’.

Accordingly, the judgment in Carver should not be interpreted as opening the way to a wide-ranging investigation of emotional and other factors in every case, even where the financial advantage is significant.

District Judge Graeme Smith sits at Manchester Civil Justice Centre

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