Kerry Underwood

PART 36 COVERS SUBSEQUENT CLAIMS: HERTEL DISTINGUISHED

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The matters dealt with in this piece are examined in great detail in my three volume, 1,300 page book Personal Injury Small Claims, Portals and Fixed Costs – price £50 and available from Underwoods Solicitors here.

Kerry Underwood offers consultancy services in relation to this and other matters and details are here.

In

Calonne Construction Ltd v Dawnus Southern Ltd [2019] EWCA Civ 754

the Court of Appeal upheld the validity of a defendant’s Part 36 offer relating to an unpleaded counterclaim and which provided for interest at 8% a year after the expiry of the relevant period for accepting the Part 36 offer.

Here, the defendant in proceedings made an early Part 36 offer taking into account a counterclaim which it said it had, but which had not been pleaded at that stage.

The offer also made a specific claim for interest at 8% a year.

The offer read:

 

WITHOUT PREJUDICE SAVE AS TO COSTS

OFFER MADE PURSUANT TO CPR PART 36

As you are aware, we are in the process of preparing our client’s defence and counterclaim which will be filed on 3rd March 2017. . .

. . . We are therefore, authorised by our client to make your client, the following offer to settle under Part 36 (“the Offer”).

This Offer is intended to have the consequences set out in Part 36 of the Civil Procedure Rules. In particular, your client will be liable for our client’s costs up to the date of notice of acceptance which must be in writing (“Notice of Acceptance”), in accordance with CPR 36.11, if the offer is accepted within 21 days (“the Relevant Period”).

This offer will remain open for a period of 21 days from the date of receipt of this letter.

Terms of the Offer

Our client is willing to settle the whole of your client’s claim contained within the claim number HT2016000331, together with the counterclaim which our client will shortly be issuing within the same proceedings:

  1. You pay to our client the sum of £100,000 (“the Settlement Sum”) payable within 14 days of service of the Notice of Acceptance.
  2. The Settlement Sum does not include costs and, as mentioned above, your client will be liable to pay our client’s costs on the standard basis, to be assessed if not agreed, up to the date of service of Notice of Acceptance if this Offer is accepted within the Relevant Period.
  3. The Settlement Sum is inclusive of interest until the relevant period has expired. Thereafter, interest at a rate of 8% per annum will be added.

. . .”

The defendant subsequently served its defence and counterclaim.

The claimant failed at trial to match the defendant’s Part 36 offer and the claimant also lost part of its claim, but the defendant failed in some of its allegations.

Consequently the trial judge ordered the claimant to pay 75% of all of the costs of the defendant, on the standard basis up to expiry of the relevant period, and on the indemnity basis thereafter.

The trial judge rejected the claimant’s contention that the Part 36 offer was invalid as it included an as yet unpleaded counterclaim. The Court of Appeal upheld that ruling.

Given the breadth and reach of Part 36, the claimant’s contention was, on the face of it, hopeless.

However the claimant’s argument was supported by the fairly obviously wrong decision in

 

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

 

which I deal with in detail in my blog – PART 36: WHEN IS A CLAIM NOT A CLAIM?

Here the trial judge said that he was bound by, or must pay attention to, the Court of Appeal decision in  AF v BG [2009] EWCA Civ 757 which had not been cited in the Hertel case.

In AF v BG the Court of Appeal held that it did not matter that a counterclaim had not yet been pleaded as Part 36 specifically sanctions an offer before the commencement of proceedings.

“So the fact that the counterclaim had not been formulated or pleaded does not of itself matter.”

Although the Court of Appeal here distinguished Hertel, it is safe to say that Hertel is no longer to be regarded as good law.

In any event it related to the old CPR 36.10(2) which is no longer in the Civil Procedure Rules, and the replacement similar provision must now be interpreted as here in the Calonne case.

 

Comment

In my blog – PART 36: WHEN IS A CLAIM NOT A CLAIM? I described the Hertel decision as “a strange decision to put it mildly.”

I am glad that the Court of Appeal now agrees.

 

Interest

The Court of Appeal also held that the inclusion of a term as to interest after the end of the relevant period for accepting the Part 36 offer did not render it invalid.

Here the interest rate was 8%.

However, the Court of Appeal said that it would still be a valid offer if the rate was 25%, or 200%.

An offeror in those circumstances may find that the judgment was not more advantages than the offer and thus lose the Part 36 benefits.

Furthermore the offeree could make its own Part 36 offer in the same terms, without the offending rates of interest.

“It seems to me therefore, that there is no reason whether of policy or otherwise which renders an offer invalid for the purposes of Part 36 if it includes provisions as to interest after the expiration of the Relevant Period. After all, as Flaux LJ pointed out in the course of argument, there is nothing wrong with a party making a Part 36 offer expressed as a specified sum which includes interest during the Relevant Period calculated on the basis of a particularly high rate. He just has to take the consequences when it comes to be determined whether the offer has been “beaten”.”

Written by kerryunderwood

May 9, 2019 at 11:23 am

Posted in Uncategorized

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