Part 36 Offers: Back to Basics

Elliot Kay

Elliot Kay

Saigol v Thorney (t/a Thorney Motorsport) [2014] EWCA Civ 556

Introduction

This case concerns the costs consequences of an offer which purports to be made within the terms of Part 36 but in fact fails to meet the requisite criteria. Their Lordships held that an offer of settlement which does not fall within the terms of Part 36 does not attract Part 36 costs consequences; it is “merely a factor to take into account in deciding the fair order as to costs” (per Lord Justice Rimer, para 32).

CPR 36.2(2) sets out the criteria for an offer to amount to a Part 36 offer. Specifically, the 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 the offer is accepted;

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

e)      state whether it takes into account any counterclaim.

 The Issue

In this case, an offer had been made by the Defendant on 8th March 2012, the day before the CMC which included, inter alia, the following terms:

“1. ……….

2. Our Client will pay to your client, without any admission of liability or wrongdoing, the sum of £2,000 within 14 days from the date of a sealed consent order recording these terms;

3. ………

4. Each party is to pay their own costs.

We are instructed that this offer shall remain open to be accepted until 12 noon on Friday 9 March 2012, following which it will lapse without further notice. This is to reflect the commercial reality that our client will at this stage need to incur further expense in these proceedings  (emphasis added).”

 

In summary, the Claimant recovered damages of only £370 (after setting off the successful counterclaim against the successful claim). He had failed to beat the offer made by the Defendant. At first instance, the learned judge considered that the Claimant had failed to beat a Part 36 offer and ordered him to pay the Defendant’s costs from the date of expiry of that offer (despite having miscalculated that date).

The Claimant appealed on the basis that the offer was not a Part 36 offer and should not attract Part 36 costs consequences.

The Appeal

Their Lordships agreed. The offer had only been open for 22 hours and therefore conflicted with CPR 36.2(2).

In their Lordships view, the offer was not a valid Part 36 offer and “was merely a factor to take into account in deciding the fair order as to costs.”

In the circumstances of this case, considering the quantum involved, the conduct of the parties and the offers made (in total there had been three offers of settlement and two mediations), their Lordships held that there should be no order as to costs. The appeal was therefore allowed.

A further point, which their Lordships were not required to consider, is whether the offer further conflicted with Part 36 by requiring each party to pay their own costs. In the author’s view, that would also fail to meet the requirements of CPR 36.2(2)(b) and (c). The offer cannot have been said to be a valid Part 36 offer and was nothing more than a factor for the learned judge to consider in deciding what order, if any, should be made as to costs.

The Lesson  

If offers of settlement are made with the intention of attracting Part 36 costs consequences, the offer MUST comply with the relevant criteria of CPR 36.2(2). A defective offer cannot attract the benefits of a code it fails to qualify for; a simple lesson yet one which is frequently overlooked.

ELLIOT KAY

 

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One comment

  1. […] Eliot Kay of Zenith Chambers offers up an article on Part 36 in Back to Basics […]

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