firm news

Rowan Turrall
Rowan Turrall,
SENIOR ASSOCIATE - SOLICITOR
more
When is a Part 36 offer not a Part 36 offer?
23 June 2012

By now one would have expected that every part of Part 36 of the Civil Procedure Rules would have been examined by the court (and commented on by us – see Part 36 Round UpNot A Penny More Not A Penny LessPart 36 Settlement Offers Again and Update on Part 36 of the Civil Procedures Rules).

However, in the case of PHI Group Limited v Robert West Consulting Limited [2012] the Court of Appeal was required to consider the effect of a purported Part 36 offer which failed to specify a period of not less than 21 days within which the defendant would be liable for the claimant’s costs if the offer was accepted.

Background

The appeal related to a set of proceedings involving, amongst other issues, contribution claims between the specialist design and build subcontractor and the consulting engineer in relation to the design and construction of a train servicing depot near Wembley Stadium. The issue before the Court of Appeal was the apportionment of costs between the parties.

Part 36.2(2) of the Civil Procedure Rules provides:

"A Part 36 offer must-

(a)    be in writing;

(b)    state on its face that it is intended to have the consequences of Section I of Part 36;

(c)    specify a period of not less than 21 days within which the defendant will be liable for the claimant’s costs in accordance with rule 36.10 if accepted;

(d)    state whether it relates to the whole of the claim or to part of it or to an issue which arises in it and if so to which part or issue; and

(e)    state whether it takes into account any counterclaim."

The letter in question was headed "Part 36 offer", stated that it was "made under Part 36 of the Civil Procedure Rules" and was"intended to have the consequences of Part 36 of the Civil Procedure Rules". It also set out that costs consequences would follow if the offer was not accepted and was not beaten at trial.

However, the letter failed to specify a period of not less than 21 days in compliance with Part 36.2(2)(c). At first instance the judge found this omission was fatal and prevented the offer from being a Part 36 offer. The claimant appealed.

Could the offer be construed as a Part 36 offer?

In the previous case of C v D [2011] Stanley Burnton LJ said:

"Any ambiguity in an offer purporting to be a Part 36 offer should be construed so far as reasonably possible as complying with Part 36." 

There have since been several cases in which the court has endeavoured to interpret letters as complying with Part 36 even though not compliant in all respects. However, in this case the Court of Appeal held that as no period had been specified at all there was no ambiguity to be resolved. The letter omitted one of requirements of Part 36 and this could not be resolved by trying to construe the letter in any other way. The offer was therefore not a Part 36 offer.

Exercise of the court’s discretion under Part 44.3

Notwithstanding the Court of Appeal’s decision that the offer did not comply with Part 36, it went on to consider whether the trial judge should have exercised his discretion to take the offer into account in accordance with Part 44.3 of the Civil Procedure Rules which he had not done as he considered the offer had been withdrawn.

As the offer was not a Part 36 offer it took effect as a contractual offer which could be withdrawn at any time before acceptance and without any particular formality being observed. At first instance the judge decided that the offer had been withdrawn because a later offer had been made. The Court of Appeal felt that there was no reason why a party could not make two different offers, either of which were capable of acceptance, though not both. Further, there was no reason in principle why one party should not make different offers successively, leaving it open to the opposing party to decide which to accept.

Accordingly, although the two offers were inconsistent it did not follow that the first offer was automatically withdrawn by the subsequent offer. The fact that the later offer was inconsistent with the first offer did not mean that the earlier offer was withdrawn by implication. The Court of Appeal therefore concluded that the defective Part 36 offer was still available for acceptance up to the trial date and should have been taken into account by the trial judge when exercising his discretion on costs pursuant to Part 44.3.

A side issue

Although the issue did not fall to be decided (as the appellant was not seeking enhanced interest even if the offer was construed as a Part 36 offer) Lloyd LJ noted that enhanced interest could only be awarded if the offer was a proper Part 36 offer. He stated that “even a minor formal or technical defect would be fatal to that entitlement”. However, indemnity costs were not restricted to Part 36 offers and could also be awarded by the court when exercising general costs discretion, although the claim would have to be justified on the relevant general principles not just by arguing that the offer was only just non-compliant with Part 36.

Practice points

The message from the case (as from the previous cases we have considered) is clear and simple – follow the provisions of Part 36 to the letter or risk a finding that it is not compliant. Whilst some of the cases have shown willingness on the part of the court to try and construe offers to comply with Part 36, if there is an omission of a key requirement then the court will not be able to intervene. Whilst the court may instead grant some leniency under Part 44.3 there is no guarantee that the outcome will be as favourable as that under Part 36. 

For more information about the issues in this article to find out more about how the Dispute Resolution team can help you please contact Rowan Turrall on 0118 952 7206 or email [email protected].

Consistent with our policy when giving comment and advice on a non-specific basis, we cannot assume legal responsibility for the accuracy of any particular statement. In the case of specific problems we recommend that professional advice be sought.

award winning law firm

Boyes Turner are proud to have received the following awards and recognition.

awards