Are You Still Open? – Can A Part 36 Offer Extinguish An Earlier Offer?

profile_colin_richmond1By Colin Richmond

 

The judgment of Mr Andrew Hochhauser QC in the case of DB UK Bank Ltd (T/A DB Mortgages) v Jacobs Solicitors [2016] EWHC 1614 (Ch) provides an important lesson regarding the distinction between Part 36 offers and those that are not made by way of Part 36 when it comes to the relevance of counter-offers.

The position at common law has long been that a counter-offer has the implied effect of rejecting the original offer, meaning that it can no longer be accepted. The position in relation to Part 36 offers is different, in that such offers remain open for acceptance until they are withdrawn, regardless of whether or not the Part 36 offer is rejected by the offeree or any counter-offers are made.

FACTS

In DB v Jacobs, the defendant made an offer in settlement. The offer was not a Part 36 offer, nor was it capable of being construed as such due to the way that it was worded. The offer was made without prejudice, save as to costs (WPSAC). The claimant made a counter-offer, which was a Part 36 offer, in response.

Shortly before trial the claimant purported to accept the defendant’s original offer. The defendant argued that the offer was no longer open for acceptance as the claimant’s counter-offer had the effect of rejecting and thus extinguishing it.

HELD

The judge found that when a Part 36 offer was made in response to another Part 36 offer, the common law principle of implied rejection did not apply, Part 36 being a “self-contained code.”

However, in this case the defendant’s offer was not a Part 36 offer. It therefore followed that:

  1. because one is dealing with an initial common law offer, the impact on it of any counter offer has to be addressed by reference to common law principles. A Part 36 offer is still a counter-offer.”
  2. The result therefore is that once the Bank’s Part 36 offer was made on 19th May 2016, the Solicitors’ WPSAC Letter was rejected as a result and was no longer available to be accepted.”

Accordingly, there was no agreed settlement and it was appropriate for the matter to proceed to trial.

The full judgment is available on Lawtel.

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