Kerry Underwood


with 2 comments

In September and October I am delivering my new course – Getting the Retainer Right – in 10 cities – details and booking form here

In Hertel & Anor v Saunders & Anor [2018] EWCA Civ 1831

the Court of Appeal held that no valid Part 36 offer had been made, even though the parties had agreed before the Master that it was a valid Part 36 offer, and that it had been accepted.

The defendant, who had been ordered to pay the claimants’ costs on the claimants’ acceptance of the offer, then appealed to the High Court, arguing that contrary to their position before the Master, this was not a Part 36 offer.

The High Court agreed and ordered the claimants to pay the defendants’ costs, thus reversing the costs position under Part 36.

Here a claim had been made and the claimant then applied for permission to amend the Particulars of Claim and before they were amended the defendant wrote to the claimant stating that the claim, as currently pleaded, was bound to fail, but made an offer to settle the proposed amended claim.

That offer was purported to be made under Part 36.

This is how the Court of Appeal set out the case:

“2. This appeal raises a potential point of importance regarding the meaning of ‘claim or part of [a claim] or an issue’ as these words are used in CPR Part 36. It arises in circumstances where an offer was made by the defendants in respect of a new claim which had been indicated by the claimants by way of a proposed amendment to the particulars of claim, but which had not yet been the subject of a court order granting permission. All the pleaded claims were abandoned when that offer was accepted by the claimants. Deputy Master Lloyd said that the offer was in accordance with Part 36 and ordered that, in consequence, the defendants should pay the claimants’ costs of the abandoned claims. Morgan J allowed the appeal, finding that the offer was not in accordance with Part 36 and that, because the defendants were the successful party, the claimants should pay the defendants’ costs of the abandoned claims. The claimants appeal to this court, originally seeking to reinstate the order of Deputy Master Lloyd.”

The Court of Appeal said that the parties were not free to agree that an offer was a Part 36 offer, with the Part 36 consequences flowing, if, on analysis, the offer was not in fact a valid Part 36 offer.

The Court of Appeal said that if the offer letter fails to comply with a requirement of Part 36, then it will not be construed as complying with the rule, whatever heading it bears and whatever the objective intention of the parties – see

C v D [2012] 1 WLR 1962 and;

Carillion JM Ltd v PHI Group Ltd [2012] EWCA Civ 588.

Here the defendant argued that in relation to the proposed amendments, they do not form the whole of the claim or part of the claim, as until permission was granted, they were not part of the claim.

CPR 36 requires a Part 36 offer to 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 which part or issue.

The claimant relied on the fact that Part 36 allows an offer to be made at any time, including before  proceedings are commenced, when obviously there cannot be any issue of any pleadings.

Here, the Court of Appeal distinguished between that situation, that is an offer to settle a matter before proceedings have been issued, and the position where proceedings have been issued and there is a clear claim as per the Particulars of Claim.

Thus the Court of Appeal said that the fact that Part 36 can apply pre-commencement should not affect the proper interpretation of the words “a claim”, “a part of a claim” or “an issue” where a Part 36 offer is made after the commencement of proceedings.

The Court of Appeal then went on to say:

30. The next question is whether, in a case where proceedings are ongoing, the words ‘claim’, ‘a part of a claim’ or ‘an issue’ should be construed as meaning claims, parts of claims or issues which can be identified in or which arise from the pleadings, or whether they would also include claims, parts of claims or issues which have not been pleaded but which, for example, may have been mentioned in correspondence or in an informal conversation between solicitors.

31. In my view, this question only has to be posed for the answer to become immediately apparent. In civil proceedings, claims/parts/issues can only properly be defined by reference to the pleadings. Indeed, that is the principal purpose of pleadings. It would introduce unnecessary and unwelcome uncertainty if claims/parts/issues were given a wide definition that did not seek to anchor them to the pleadings which the parties have exchanged.

32. To take an extreme example, Mr Smith suggested in his oral submissions that, if the claimant’s solicitor introduced a possible new claim in a letter to his opponent, then that would be caught by the words of the rule, even if it had not been the subject of any formal amendment, and even if it had not been the subject of any kind of response by the defendant. I consider that such an interpretation would lead to uncertainty and confusion; it may even encourage the potential abuse of the Part 36 regime.

33Accordingly, like Morgan J, I would construe the words ‘claim’, ‘part of a claim’; and ‘issue’ as referring to pleaded claims, parts of claims or issues, and not other claims or issues which may have been intimated in some way but never pleaded. Once proceedings have started, the certainty required for Part 36 to operate properly can only be achieved by this interpretation. A new claim which has been intimated, but which is not part of the pleadings, is not therefore caught by r.36.2(2)(d) (current r.36.5(2)(d)).” 


This is a strange decision, to put it mildly.

The whole point of Part 36 is to enable parties to resolve any matter, including a matter where no proceedings have been issued.

Effectively to rule that once proceedings have been issued, then no other claim or potential claim can be resolved by Part 36 is in conflict with the words of the rule, as well as the spirit of the rule and common sense.

There may be potential for argument about what a Part 36 offer covers, and without going into detail here, there can be issues as to whether a particular expense is an item of special damages, or a disbursement in the proceedings.

Any such dispute can be resolved by the court.

Disputes about whether or not a Part 36 offer has been beaten are not uncommon, for example where the issue of interest comes up, or currency exchange rates.

That potential should not stop parties from being able to resolve potential claims once proceedings have been issued.

In this situation the intention of the parties should be the most important factor, and not subject to a highly technical construction of the rules.

I have recently dealt with the subject of when is a claim a claim in another blog, where I pointed out that the Supreme Court in the case of

Gavin Edmondson Solicitors Ltd v Haven Insurance Company Ltd [2018] UKSC21

referred throughout to “claims” and “claimants” in portal cases where no substantive proceedings had been issued.

I appreciate that it is possible to distinguish portal claims from unissued claims, but the whole issue needs a clear and authoritative statement from a superior court.

Written by kerryunderwood

September 10, 2018 at 8:10 am

Posted in Uncategorized

2 Responses

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  1. You couldn’t make this stuff up! Its utterly absurd!

    Jonathan stevens

    September 10, 2018 at 10:07 am

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