Kerry Underwood

PART 36: WITHDRAWAL OF ORIGINAL OFFER

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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.

This scenario is the real facts of an ongoing case.

In a personal injury claim the defendant made a Part 36 offer of £75,000 in April 2018.

In January 2019 the defendant made a revised Part 36 offer of £25,000 and was granted permission to serve an amended defence pleading fundamental dishonesty.

The revision to the Part 36 offer was made by amending the original form N242A, crossing out the figure of £75,000 and inserting the figure of £25,000 and crossing out the previous date of April 2018 and redating the offer 7 January 2019.

The provision allowing 21 days for acceptance remained as in the original Part 36 offer and this revised offer of £25,000 was accepted within 21 days.

The claimant argues that costs are payable up to the date of acceptance in January 2019, on the basis that the claimant is entitled to rely on the clear wording of the revised Part 36 offer and the fact that it was accepted within 21 days.

Had the defendant not wished to pay costs up to the date of acceptance, then the defendant should have made Calderbank offer to that effect.

That was the effect of the decision in

Ballard v Sussex Partnership NHS Foundation Trust [2018] EWHC 370 (QB).

The defendant argues that that case is not relevant because it relates to a withdrawn offer, rather than a revised offer and refers to the case of Burrett v Mencap Limited 14 May 2014,  where an offer was varied, rather than withdrawn, although in that case the variation was deliberately silent as to the time limit for acceptance and so when accepted the costs consequences ran from the original offer, rather than the revised one.

Burrett v Mencap Limited was in any event decided under the Civil Procedure Rules in force in 2014 and in April 2015, CPR Part 36 was extensively revised and new CPR 36.9 and 36.17 filled the gap identified in Burrett, which was in any event a first instance decision of a District Judge.

What Part 36 says, in difficult language, is that if the offer is revised by improving it, then the offeree, that is the claimant in this case, has 21 days from that revised offer to accept it.

That makes sense. Otherwise a defendant could make a ridiculously low offer of say £2,000 at the outset of the case, knowing full well that it will never be accepted, but subsequently make a perfectly acceptable offer of say £100,000 years later, but with the benefit of the offer being treated as being made at the beginning, with the defendant getting all of its costs from the date of expiry of the unacceptably low offer.

However, Part 36 is silent as to what happens the other way around, that is when an offer is revised downwards and then accepted.

It may be that this was never envisaged, as obviously the starting point would be that if a claimant is not prepared to accept, as here, an offer of £75,000, then why should it accept an offer of £25,000?

That would suggest that the clock does indeed run from the time of the first offer, and again there is logic in that.

After all, if an offer is revised downwards from £75,000 to £25,000, then all the claimant has to do to avoid the Part 36 consequences is to beat that offer of £25,000, whereas before revision the claimant would have had to beat the offer of £75,000.

Thus although the offer is much less attractive on the face of it in a normal case, the risks to the claimant are very much lower.

If the original offer is not withdrawn by the new offer, then the old offer remains capable of acceptance, which on the face of it is absurd, but the courts have consistently held that Part 36 is a self-contained code which is not subject to the usual rules of contract.

For example, as a matter of contract, a counter-offer amounts to a rejection of the original offer, but that is not the case with Part 36.

Thus if a claimant makes a Part 36 offer of, say, £30,000, and a defendant counter-offers at £20,000, that is not a rejection of the claimant’s Part 36 offer, which remains open for acceptance by the defendant, in contrast with the position in contract at common law.

Either the second offer must operate as a withdrawal of the initial offer, or the initial offer must still be open for acceptance.

It must indeed be one or the other, and the defendant’s contention that neither applies, must be wrong.

Could the claimant in these circumstances accept the original offer and argue that he is in entitled to £75,000?

That may encourage the defendant to agree that the true position is that that original offer has been withdrawn, which should then make it a simple matter of an acceptance of the subsequent offer of £25,000 in the usual way, with the usual costs consequences following, as though the original offer had never been made, and of course that is the effect of a withdrawn offer.

What CPR 36.17(7) actually says is:

“(7)

Paragraphs (3) and (4) do not apply to a Part 36 offer—

(a) which has been withdrawn; 

(b) which has been changed so that its terms are less advantageous to the offeree where the offeree  has beaten the less advantageous offer;

(c) made less than 21 days before trial, unless the court has abridged the relevant period.”

(8)

Paragraph (3) does not apply to a soft tissue injury claim to which rule 36.21 applies.

(Rule 44.2 requires the court to consider an offer to settle that does not have the costs consequences set out in this Section in deciding what order to make about costs.)”

Thus the costs consequences do not apply to a Part 36 offer which has been withdrawn.

Obviously, that is an issue in this scenario but the defendants are saying that the offer has been revised and not withdrawn.

CPR 17(7)(b) provides that the costs consequences do not apply to a Part 36 offer:

which has been changed so that its terms are less advantageous to the offeree where the offeree has beaten the less advantageous offer;”

What Part 36.17(7)(b) deal with is the position where the claimant beats that less advantageous offer, and so in this case that would involve achieving more than £25,000.

The rest of 36.17(7) is not relevant here.

There is a further problem with CPR 36.17(7) in that it clearly envisages, as a different concept, an offer which has been withdrawn – CPR 36.17(7)(a) – and an offer which has been changed so that its terms are less advantageous to the offeree… – CPR 36.17(7)(b).

If the effect of any downwards revised offer is to withdraw the original offer, then (a) appears to be otiose, as the circumstances in (b) would constitute the withdrawal of the original offer in any event.

Thus the claimant should accept the original offer.

That would of course be a late acceptance meaning that the client would not get costs from the date of expiry of the original offer, and would have to pay the defendant’s costs from the expiry of the original offer to date.

However, given that the difference between the two offers is £50,000, it is likely that both the client and the solicitors would be very much better off accepting that original offer.

 

Comment

Best just to toss a coin on all Part 36 matters.

Saves court time.

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Written by kerryunderwood

June 4, 2019 at 9:30 am

Posted in Uncategorized

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