JENNIFER LEE. Withdrawal of Pre- Action Admissions: Woodland v Stopford, PIBULJ (July 2011).

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1 JENNIFER LEE Call Year: 2007 Practice Profile Jennifer represents both Claimants and Defendants in cases involving general commercial disputes, employment disputes, bankruptcy/winding up, landlord and tenant disputes, and personal injury. She has a keen interest in the areas of contract law, sale of goods and supply of services, insolvency and costs. Jennifer has litigated in a range of forums, from county court level to the High Court, and in tribunals. She undertakes written work in all areas of civil law and will advise on all aspects of a case, where required. Jennifer accepts work on a CFA basis and undertakes work for the Bar Pro Bono Unit. Jennifer is on the Personal Injury Brief Update Law Journal (PIBULJ) panel of contributors and has published articles in the New Law Journal. She is also co- editor of the Pump Court Chambers Property Law Newsletter, and regularly contributes to the Employment Law Newsletter and to the Personal Injury Newsletter. In her spare time, Jennifer presents seminars and webinars on employment, personal injury and property law. Publications "Much Obliged: The Level of Obligation Owed by Employers to Former Employees", NLJ, September 2011 (Vol. 161, Issue 7480). Withdrawal of Pre- Action Admissions: Woodland v Stopford, PIBULJ (July 2011). The Recoverability of Counsel s Fees for Infant Approval Hearings, PIBULJ (March 2011). A Changing Landscape?, NLJ, June 2010 (Vol. 160, Issue 7422). 'Employment Law in a Nutshell: Wrongful Dismissals', The Weekly Law Review Newsletter (Summer 2008), 20. UCL Jurisprudence Review, 13th Volume (co- editor) (UCL Press, 2007). 'Human Dignity and Inviolability: The Absolute Prohibition of Torture', [2005] 12 U.C.L. Jurisprudence Review, 80.

2 PART 36 OFFERS AN OVERVIEW By Jennifer Lee, September 2012 Introduction 1. This webinar addresses some of the complexities and pitfalls under CPR Part 36. The overriding objective [CPR 1.1] requires parties to deal with cases justly, expeditiously and fairly having regard to the amount of money at stake, the complexity and importance of the case, and the financial standing of all of the parties. Parties therefore must be proportionate with litigation. 2. CPR Part 36 sets out a statutory procedure for making and responding to offers and the consequences that flow from acceptance and refusals to accept. 3. The webinar is divided into 4 segments: (a) Covers essential components of a Part 36 offer (b) The costs consequences of a Part 36 offer (c) Recent authorities (d) Tips and advice for practitioners 4. There will be an emphasis on recent developments and caselaw, including Gibbon v Manchester City Council; Blower v Reeves [2010] EWCA Civ 726 (25 June 2010); C v D and another [2010] EWHC 2940 (Ch), [2011] 2 All ER 404, [2011] EWCA Civ 646; Howell v Lees- Millais [2011] EWCA Civ 786, [2011] All ER (D) 48 (Jul). 2

3 Essential Components of a Part 36 Offer 5. The amended Part 36 came into effect on 6 April 2007 and made substantial changes to the regime: see Gibbon v. Manchester City Council [2010] EWCA Civ 726, [2010] 1 WLR 2081 and C v. D (also named Middlegreen LP v Dominion Developments (2005) Limited) [2011] EWCA Civ A Part 36 offer is not contractual. CPR 36 contains many pitfalls for the unwary. Obtain assistance from within your firm or that of counsel if you consider it is appropriate to make an offer or you are faced with responding to one. 7. The form and content of a Part 36 offer must comply with certain provisions (see rule 36.2). If not, costs consequences do not apply, as per rule The essential components of a Part 36 offer are these (see rule 36.2): (a) The offer must be in writing; (b) State that it is intended to have the consequences of Section 1 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 r if the offer is accepted; (d) State whether it relates to whole of claim or to part of it, or to an issue that arises in it and if so to which part or issue i.e. liability only; (e) State whether it takes into account any counterclaim; 9. It is a common misconception that the offer should be open for acceptance within 21 days. 3

4 10. The offer should give sufficient information to be clear as to the sums or other property in question, and if a defendant s offer must be a single sum of money [r. 36.4]. However, it does not need to state without prejudice save as to costs as this is presumed [r (1)]. 11. Interest is presumed to be included in certain circumstances [r. 36.3(3)]. If a Part 36 offer is made less than 21 days before trial, it will be treated as inclusive of all interest until a date 21 days after the date the offer was made. 12. There are special requirements in respect of certain claims. Please refer to rule 36.5 (Personal injury claims for future pecuniary loss), rule 36.6 (Offer to settle a claim for provisional damages), and rule (Deduction of benefits). Practitioners should be aware of these additional requirements when dealing with these claims. 13. There is now a useful form N242A that may be used and that contains all of the necessary formal requirements [see further the Practice Direction 36A in the White Book 2012]. 14. If the CPR 36 offer received is ambiguous you can request clarification within 7 days of receipt [r. 36.8]. 15. In respect of timings - a Part 36 offer may be made at any time, including before commencement of proceedings or in appeal hearings [r. 36.3(2)]. A pitfall occurs if a party considers that the Part 36 offer made in proceedings is valid in appeal proceedings; it is not [CPR 36.3(4)]. The effect of the relevant period means, often but not always, that it is better to make Part 36 offers as early as possible. 4

5 16. A Part 36 offer can be withdrawn or redrafted on less favourable terms during the relevant period (which is usually 21 days) only with permission of the court [r. 36.3(5)]. However, after the relevant period no such permission is required [r. 36.3(6)]. A simple notice of withdrawal and/or redrafted offer can be made [r. 36.3(7)]. 17. Another time of note is that the offer is made when it is served on the other side [r. 36.7]. Instantaneous communications are therefore best. Keep your proof of delivery. 18. To accept an offer, serve a written notice at any time during or after the relevant period, but not after trial and before judgment [r. 36.9]. There are certain circumstances where the courts permission or consent of the parties is required for acceptance [r. 36.9(3) & 36.9(4), r. 36.9(5)]. 19. Rule 36.4 relates specifically to Defendant s offers. A Defendant s offer that includes an offer to pay the sum, if accepted, at a date later than 14 days following date of acceptance, will not be treated as a Part 36 offer unless the offeree accepts the offer. 20. The costs consequences of acceptance of a Part 36 offer, and consequences following judgment, are set out in r and respectively. The current sanctions for failure to beat a C s Part 36 offer are the award of indemnity costs from the date on which the relevant period expired, and enhanced interest on both damages and costs at up to 10% above base rate. Costs Consequences 21. There are cost consequences of accepting a CPR 36 offer. Basically the claimant is entitled to a proportion, if not all of their costs, including the costs of dealing with counterclaims if the offer is so drafted [r ]. Usually the defendant is liable to pay those costs within 14 days from the date of acceptance unless the 5

6 court orders otherwise [r ] or, in practice, the same can be negotiated between the parties. Clearly, this is best done before acceptance. 22. Where a Part 36 offer is accepted within the relevant period, the following costs consequences will flow (please see the scenarios below). (a) Offer by a claimant which is accepted by the defendant within 21 days and where the offer has been made pre- action and no proceedings have been issued: (i) The defendant will pay the amount offered within 14 days; and (ii) The defendant will pay the claimant s costs on a standard basis (to be assessed if not agreed). (b) Offer by a claimant which is accepted by the defendant within 21 days and where the offer is accepted after proceedings have been issued: (i) The defendant will pay the amount offered within 14 days; (ii) The proceedings will come to an end; and (iii) The defendant will pay the claimant s costs on a standard basis (to be assessed if not agreed). (c) Offer by a defendant which the claimant accepts within 21 days of the offer by filing written acceptance at court and serving a copy on the defendant s solicitors: (i) Proceedings are stayed; (ii) The defendant will pay the amount to the claimant within 14 days; (iii) The defendant will pay the claimant s costs up until acceptance on a standard basis (to be assessed if not agreed). 6

7 23. Where the offer is accepted after the relevant period but before judgment, the following costs consequences will follow: (a) Offer by the claimant accepted by defendant after relevant period: Unless costs are agreed by the parties, the defendant will pay the claimants costs of proceedings up to that date. (b) Offer by the defendant accepted by the claimant after the relevant period: Pursuant to r , the court will usually order that the defendant pays the claimants costs of the proceedings up to the date on which the relevant period expired and the claimant pays the defendant s costs from the date of expiry of the relevant period to the date of acceptance of the offer. 24. There are complicated rules if the CPR 36 offer relates to only part of the proceedings or only some of the parties [see CPR and CPR 36.12]. 25. If the offer is not accepted, there are also cost consequences following judgment [CPR 36.14]. Much turns on which party has beaten the offer made; this can become very complicated if there are a number of offers even if some have been withdrawn. 26. The usual costs consequences following judgment where an offer has been made by the claimant but not accepted by the defendant and the case goes to trial [CPR 36.14] can be summarised as follows (please see the scenarios below): (a) The Claimant wins the claim and is awarded the same as or more than their offer: 7

8 (i) (ii) (iii) (iv) (v) (vi) The claimant will receive the damages awarded by the court; Interest at the courts discretion on the damages awarded, normally from when the loss was sustained to the expiry of the relevant period; Enhanced interest on the damages at a maximum rate of 10% over base from the day after the expiry of the relevant period to judgment; Costs on the standard basis from (potentially) the outset until the expiry of the relevant period; Costs on an indemnity basis from the expiry of the relevant period to judgment; Interest on the indemnity basis costs from the expiry of the relevant period to judgment, at a maximum of 10% over base rate. NB: Unless the court considers it unjust to do so. (b) The claimant wins the action and is awarded less than the offer: The judge will usually award the claimant the costs on the standard basis. (c) The claimant loses the action: The judge will usually order the claimant to pay the defendant s costs sometimes just from the expiry of the relevant period to judgment. 27. The costs consequences following judgment where an offer has been made by the defendant but not accepted by the claimant and the case goes to trial [CPR 36.14] can be summarised as follows (see scenarios below): 8

9 (a) The claimant wins the action and is awarded more than defendant s offer: The claimant will be awarded the costs of the claim to be paid by the defendant on the standard basis. (b) The claimant wins the action and is awarded the same or less than the defendant s offer: (i) The claimant will be awarded their costs up to the expiry of the relevant period; (ii) The defendant will be awarded their costs from the expiry of the relevant period to judgment, plus interest on those costs. NB: Unless the court considers it unjust to do so. (d) The claimant loses the action: (i) The claimant ordered to pay the defendants costs up to the expiry of the relevant period on the standard basis; (ii) The defendant will be awarded their costs from the expiry of the relevant period to judgment on the indemnity basis and plus interest. 28. Please note, however, that there is an exception to the costs consequences at paragraph 26(a) and paragraph 27(b). The costs consequences at paragraph 26(a) and paragraph 27(b) will follow unless the court considers it unjust to do so [see CPR 36.14(2) and CPR 36.14(3)]. 29. In considering whether it would be unjust to make the orders referred to, the court will consider all the circumstances of the case, including [CPR 36.14(4)]: (a) (b) The terms of any Part 36 offer; The stage in the proceedings when any Part 36 offer was made; 9

10 (c) The information available to the parties at the time when the Part 36 offer was made; and (d) The conduct of the parties with regard to the giving or refusing to give information for the purposes of enabling the offer to be made or evaluated. Authorities 30. There is a recent example of this exception being applied in the Courts: Lilleyman v Lilleyman [2012] EWHC 1056 (Ch). Facts: This was a claim under the IA Here the Claimant had failed to obtain judgment which was more advantageous to her than the Defendant s part 36 offer. Accordingly the Judge was required to apply the costs consequences in CPR 36.14(2) unless he considered it unjust to do so. Held: Briggs J accepted the Claimant s submission that in this factual matrix it would be unjust for the Defendants to recover all of their costs post the Part 36 offer because the Defendants had run up costs by pursuing the litigation on a no holes barred manner, failed to concede that the will failed to make reasonable financial provision and made unhelpful conduct allegations. Briggs J restricted the Defendants costs by 20%. He ordered the Claimant to pay the 80% of the Defendants costs plus interest at the judgment rate from the expiry of the offer. As there were a number of Part 36 offers, issues of construction were also considered. By applying Gibbon v Manchester CC [2010] 1 WLR 2081, Briggs J rejected the submission that one of the CPR 36 offers had been withdrawn because lower part 36 offers were made subsequently (it being clear that to withdraw a part 36 offer a notice compliant with CPR 36.9(2) is required). The Judge confirmed that the prescriptive rules of part 36 were to be applied, not the common law rules of contract. 10

11 31. London Tara Hotel Limited v Kensington Close Hotel Limited [2011] EWHC 29 (Ch) The court was asked to consider whether (i) there should be some disallowance or discount from the Defendant s costs; (ii) whether two particular periods should be on the standard or indemnity basis; and (iii) whether interest on those costs should run from the date of the order or be postponed to the date of assessment. In relation to Part 36 offers, the Court held that a letter which purported to offer settlement on the basis that 10% of the Claimant s legal costs would be paid could not have Part 36 consequences. A cost limitation, put simply, is inconsistent with the Part 36 regime. 32. Gibbon v Manchester City Council; Blower v Reeves [2010] EWCA Civ 726. These two cases confirm that Part 36 of the CPR is a self- contained code governed by its own provisions. General common law principles relating to offer and acceptance, the formation of contracts, do not apply. 33. Gibbon v Manchester City Council Facts: Gibbon brought a personal injury claim against Manchester City Council when she tripped and fell in a playground. The council admitted liability and several Part 36 offers between the parties then followed: on 10 November 2008 the council made a Part 36 offer of 1,150, which Gibbon rejected; on 18 November 2008 Gibbon made a Part 36 offer to accept 2,500; on 24 November 2008 the council increased their Part 36 offer to 1,500, which Gibbon rejected; and 11

12 on 7 January 2009 the council increased their Part 36 offer to 2,500, which Gibbon rejected. The council formally accepted Gibbon s offer made on 18 November 2008, claiming that it was still open for acceptance. Gibbon claimed that the council had impliedly rejected her offer of 18 November by making its offer of 24 November or, alternatively, that in rejecting the council s offer of 7 January 2009, she had made it clear that a settlement figure of 2,500 was unacceptable and this had impliedly withdrawn her offer. Held: The Court of Appeal upheld the decision of the court at first instance, and clarified that Part 36 of the CPR leaves no room for implied withdrawal or rejection of offers. The Court of Appeal reinforced the fact that a Part 36 offer can be accepted at any time unless it has been withdrawn by a letter/notice. There can be no implied withdrawal even if the offeree had rejected the Part 36 offer or made a counter offer. 34. Blower v Reeves Facts: Mr and Mrs Reeves (Reeves) engaged L G Blower Specialist Bricklayer Ltd (Blower), a building contractor, to carry out building works to their home. Disputes arose as to the quality of the work and the Reeves withheld payment of the building contractor s fees. Blower subsequently brought proceedings for unpaid sums in respect of the building works, in which Reeves counterclaimed for breach of contract. A series of offers and counter- offers followed: on 2 February 2007 Blower claimed 15,003.41; on 9 February 2007 Reeves offered to pay 8,023.14, but Blower rejected the offer; on 6 April 2007 Blower served a claim form that was stated to be 12

13 15,793.06; on 15 May 2007 Reeves made a Part 36 offer of 8,023.14; on 28 August 2007 Reeves made a Part 36 offer of 8,188.38; on 9 November 2007 Reeves made a Part 36 offer of 9,000; on 9 January 2008 Reeves withdrew all offers except offer of 15 May; on 28 February 2008 Reeves made an offer of 8,188.38, including costs and interest, not Part 36. The court at first instance found for Blower in the sum of 8, and ordered Reeves to pay half of Blower s costs from 9 January 2008, the date of withdrawal of the Part 36 offers (except for the May offer). On appeal Reeves argued that Blower s judgment sum was not materially better than their offer of 15 May 2007, in- line with the decision in Carver. HHJ Rubery held that the Part 36 offers of 15 May and August 2007 had been superseded by the non- Part 36 offer of 28 February As the judgment sum had comfortably beaten the 28 February offer, the costs approach taken by the court below had been correct. Reeves appealed. Held: The Court of Appeal has now examined the matter and found that the 15 May offer was still open, as there had been no written notice of its withdrawal. The court held that implied withdrawal could not apply to Part 36 offers under the wording of the CPR. This meant that the claimant had beaten the defendant s Part 36 offer by a relatively modest sum. 35. C v D and another [2011] EWCA Civ 646 Facts: C commenced proceedings for breach of contract in relation to a sale of land. C initially claimed specific performance, but then dropped this element, retaining only a claim for damages. In December 2009, C made an offer to the defendant to settle the proceedings on terms. The letter stated that "the offer 13

14 will be open for 21 days from the date of the letter". The letter also stated that if the offer was not accepted, it was intended to have the costs consequences as set out in Part 36. Eventually, the time limit for the offer expired and the offer was not accepted. Shortly before the trial, D attempted to accept the offer made in December C contended that the offer was no longer open for acceptance and applied to court to seek a declaration to confirm that this was the case. D argued that there had not been a notice of withdrawal served and therefore, the offer remained open for acceptance. The High Court held that: (a) (b) A time limited offer cannot be a Part 36 offer as Part 36 envisages that the offer can be accepted at any time, unless and until it is withdrawn. It cannot expire on its own terms. As such, the above wording that the offer will be open for 21 days cannot constitute a Part 36 offer. Although the offer could not constitute a Part 36 offer, it was deemed a valid time limited offer. Held: The Court of Appeal held that in order for an offer to constitute a Part 36 offer, it had to be available for acceptance prior to trial. An offer that lapsed as a matter of its own terms could not have the Part 36 costs consequences and was incompatible with the Part 36 regime. However, the Court of Appeal found it reasonable to read the words as meaning that it will not be withdrawn within 21 days. It stressed that words should be understood in such a way to make the matter effective, rather than ineffective. In doing so, the Court placed emphasis on the intentions of the offeror. In particular, the Court held that: 84. Any ambiguity in an offer purporting to be a Part 36 offer should be construed so far as reasonably possible as complying with Part 36. Once it is accepted that a time- limited offer does not comply with Part 36, one must approach the interpretation of the offer in this case on the basis that the 14

15 party making the offer, and the party receiving it, appreciated that fact. 85. I agree that the normal effect of the phrase 'the offer will be open for 21 days' is that the offer is not open for acceptance after 21 days. However,. the use of that phrase is consistent with a warning that the offer will be withdrawn after 21 days. Given the clear express intention of the respondent to make an offer complying with Part 36, it should be so construed." 36. Carillion v Phi Group [2011] EWHC 1581 (TCC), [2011] All ER (D) 19 (Jul) Facts: In 2009 Carillion JM Ltd ( Carillion ) issued a claim against PHI Group Limited ( PHI ). Carillion were the main contractor engaged to carry out the design and construction of a train servicing depot to the west of Wembley Football Stadium. PHI were the specialist design and build contractor for the soil nailing work. PHI brought a contribution claim against Robert West Consulting Limited ( RWC ). RWC were the consulting engineer and lead consultant for the overall works. PHI made an offer to RWC to settle the contribution claim (with RWC contributing 30% and PHI 70%) in February The offer was said to be made pursuant to Part 36, however it failed to specify a period of not less than 21 days in compliance with CPR Part 36.2 (2) (c). RWC did not accept PHI s offer. In May 2010, before trial, Carillion settled with PHI for 3.8m (Carillion s claim was for 7.2m). Carillion started separate proceedings against RWC in March RWC claimed a contribution from PHI. Carillion and RWC attended mediation in November PHI made an offer to RWC prior to that mediation (as they could not attend) stating the offer would only take effect if mediation were successful, but it was not. Again in November 2010, after mediation, PHI made a further offer to RWC to discontinue the contribution proceedings between RWC and PHI with each party bearing their own costs. The offer was not made pursuant to Part 36 as it prescribed costs consequences. The offer, however, was not accepted. 15

16 Held: The High Court held PHI s offer to be fatally flawed when it failed to specify a relevant period at all and indeed asked for a response within seven days. That is utterly inconsistent with Part 36, which requires a relevant period to be specified and it must be not less than 21 days. Note that seven days is far away from what the rule anticipates and, what is more, the offeree can nominate a period of any duration as the relevant period, subject to it being at least 21 days. 37. Howell v Lees- Millais [2011] EWCA Civ 786, [2011] All ER (D) 48 (Jul) Facts: The case involved an appeal by the appellant trustees against a costs order in relation to an unsuccessful application they had made in the Chancery Division. The trustees had made an application seeking the permission of the court to pursue various claims for breach of trust and professional negligence. The Court refused permission (save for the negligence claim). Following the handing down of that judgment, there was a protracted costs dispute in relation to the costs of the Chancery application. One of the key questions for the court was whether an offer made by the trustees in April 2009 (the April 2009 letter ) was a Part 36 offer, so that the trustees would be entitled to their costs in respect of the period from the beginning of May 2009 (when the 21 days referred to in the letter expired). At first instance, Sir John Lindsay held that the April 2009 letter was not a Part 36 offer, inter alia because it failed to comply with Part 36.2(c). Held: Lord Neuberger, the Master of the Rolls, said that the April 2009 letter was not a Part 36 offer because it excluded the possibility of the respondents recovering all of their costs, and only gave them the option of recovering a fixed percentage contrary to CPR Furthermore, it was time limited (contrary to CPR 36.2(c)). However, in light of the overriding objective and the recent judgment in C v D, the Court of Appeal took the view that the April 2009 letter 16

17 should, if possible, be treated as a Part 36 offer. Lord Neuberger pointed to the fact that both the trustees and respondents (a) treated the offers contained in the April 2009 letter as having been made under Part 36 and (b) said in terms that those offers were still in force well after the 21 days therein referred to had passed. Lord Neuberger went on to say that: an offer which is expressed to be a Part 36 offer and otherwise appears to comply with the requirements of Part 36, should, in the absence of good reason to the contrary, be given substantially the same effect as a Part 36 offer, when it comes to deciding costs issues. Jennifer Lee Pump Court Chambers *Law is correct as at September

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