C v D and Another

Hearing dates: Tuesday 19 April 2011

The critical issue raised by this appeal is what it means in a purported CPR Part 36 offer to say that the offer is "open for 21 days". On one view it means that the offer is not open after 21 days. On another view it means, in its context, that the offer will not be withdrawn for 21 days. That would reflect the terms of Part 36. Indeed, the judge, Warren J, held that Part 36 does not allow for a time limited offer, since a Part 36 offer can only lapse upon service of a written notice of withdrawal. However, the judge nevertheless held that the phrase "open for 21 days" meant that the offer lapsed without express withdrawal, with the consequence that what was made as a Part 36 offer failed to be one, albeit it survived as an offer under the common law.

In the present case, the offeree purported to accept the offer (well) outside the 21 days. The offeror submits that the offer had lapsed.

On this appeal, the offeree submits that the judge was wrong in his construction of the offer. The offeror submits that the judge was wrong to say that Part 36 could not admit a time limited offer.

The judge also found that, had the offer been a Part 36 offer, it had never been withdrawn. The offeror submits that the judge was wrong about that as well. The offeror says that the offer was withdrawn by reason of the terms in which was made, alternatively by subsequent emails.

The parties' dispute

The offeror, claimant in these proceedings, had sold development land to the offeree, the defendant, for a price of just under £12 million. A dispute arose as to whether a condition precedent of their contract had been fulfilled. The defendant said it had not, and declined to complete the transaction. The claimant originally sought specific performance of the sale, but has now given up the pursuit of that remedy and limited itself to a claim in damages. At the time of the offer, however, the claim for specific performance was still being maintained.

The claimant is in this court the respondent, and the defendant is the appellant. I will refer to the parties as claimant or respondent or offeror and defendant or appellant or offeree, as appears most appropriate. The parties have been anonymised as C v D because of the possibility that a trial might have to take place.

The offer

The offer was made in a letter dated 10 December 2009, written by the claimant's solicitors to the defendant's solicitors.

The letter was headed " Offer to Settle under CPR Part 36". It began by commenting on the dispute. It said that the claimant was in discussions to sell the land to a third party, which would quantify a loss. Or, if the land was not resold, the defendant would have to buy it at the original contract price. In addition, the claimant was also incurring holding costs and interest. Those costs would fall on the defendant in any event. The letter then proposed a " Settlement Agreement" as follows:

"Our client's proposal is this:

1. [The defendant guarantor] purchase the property for £10,500,000; or

2. whilst there is no certainty as to the [third party] purchase of the Property, our client is willing to drop the action for specific performance and settle the claim at for £2,000,000.

Regardless of which offer your client chooses, the offer will be open for 21 days from the date of this letter (the " Relevant Period"). Your clients can thus walk away from the dispute by the year end having achieved an attractive settlement. [The judge referred to this paragraph as the "Offer Paragraph", which is a convenient device.]

Both offers are intended to have the consequences set out in Part 36 of the Civil Procedure Rules and are to settle all matters raised in the proceedings.

Failure to Accept this Offer

If your clients do not accept this offer and our client obtains a judgment which is equal to or more advantageous than this offer, our clients will rely on CPR 36.14 to seek an order in the following terms:

(i) that your clients will pay our client's costs up to the expiry of the Relevant Period;

(ii) that your clients pay our client's costs on the indemnity basis from the date on which the Relevant Period expired, with interest on those costs of up to 10% above base rate and interest on the whole or part of any sum awarded at up to 10% above base rate for some or all of the period starting from the same date.

We await your response."

It is common ground that this offer was intended to be made pursuant to Part 36, as its language demonstrates. As will appear from the terms of Part 36 set out below, the concept of a "relevant period" and the consequences set out in CPR 36.14, are all part of the structure of Part 36.

It is also common ground that the issue of construction as to the meaning of "open for 21 days" has to be considered in the context of the offer, and of Part 36, as a whole.

It is therefore necessary to consider Part 36 in some detail.

CPR Part 36

Part 36 provides in relevant part as follows:

" 1. Part 36 Offers to Settle

Scope of this Section

36.1 (1)…

(2) Nothing in this Section prevents a party making an offer to settle in whatever way he chooses, but if the offer is not made in accordance with rule 36.2, it will not have the consequences specified in rules 36.10, 36.11 and 36.14…

Form and content of a Part 36 offer

36.2 (1) An offer to settle which is made in accordance with this rule is called a Part 36 offer.

(2) A Part 36 offer must –

(a) be in writing;

(b) state on its face that it is intended to have the consequences of Section I 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 rule 36.10 if the offer is accepted;

(d) state whether it relates to the whole of the claim or to part of it or to an issue which arises in it and if so to which part or issue; and

(e) state whether it takes into account any counterclaim…

(3) Rule 36.2(2)(c) does not apply if the offer is made less than 21 days before the start of the trial…

Part 36 offers – general provisions

36.3 (1) In this part

(a) the party who makes the offer is the "offeror";

(b) the party to whom an offer is made is the "offeree"; and

(c) the "relevant period" means –

(i) in the case of an offer made not less than 21 days before trial, the period stated under rule 36.2(2)(c) or such longer period as the parties agree;…

(3) A Part 36 offer which offers to pay or offers to accept a sum of money will be treated as inclusive of all interest until –

(a) the date on which the period stated under rule 36.2(2)(c) expires;

(b) if rule 36.2(3) applies, a date 21 days after the date the offer was made…

(5) Before expiry of the relevant period, a Part 36 offer may be withdrawn or its terms changed to be less advantageous, only if the court gives permission.

(6) After expiry of the relevant period and provided that the offeree has not previously served notice of acceptance, the offeror may withdraw the offer or change its terms to be less advantageous to the offeree without the permission of the court.

(7) The offeror does so by serving written notice of the withdrawal or change of terms on the offeree…

Acceptance of a Part 36 offer

36.9 (1) A Part 36 offer is accepted by serving written notice of the acceptance on the offeror.

(2) Subject to rule 36.9(3), a Part 36 offer may be accepted at any time (whether or not the offeree has subsequently made a different offer) unless the offeror serves notice of withdrawal on the offeree…

(3) [This rule lists four cases where the court's permission is needed to accept a Part 36 offer. None of them applies in this case. The fourth of them (d) is where "the trial has started". So permission is not needed to accept an offer after the "relevant period" has expired.]

Costs consequences of acceptance of a Part 36 offer

36.10 (1) Subject to…paragraph 4(a), where a Part 36 offer is accepted within the relevant period the claimant will be entitled to the costs of the proceedings up to the date on which notice of acceptance was served on the offeror…

(4) Where –

(a) a Part 36 offer that was made less than 21 days before the start of trial is accepted; or

(b) a Part 36 offer is accepted after expiry of the relevant period,

if the parties do not agree the liability for costs, the court will make an order as to costs.

(5) Where paragraph (4)(b) applies, unless the court orders otherwise –

(a) the claimant will be entitled to the costs of the proceedings up to the date on which the relevant period expired; and

(b) the offeree will be liable for the offeror's costs for the period from the date of expiry of the relevant period to the date of acceptance…

The effect of acceptance of a Part 36 offer

36.11 (1) If a Part 36 offer is accepted, the claim will be stayed…

Costs consequences following judgment

36.14 (1) This rule applies where upon judgment being entered –

(a) a claimant fails to obtain a judgment more advantageous than a defendant's Part 36 offer;

(b) judgment against the defendant is at least as advantageous to the claimant as the proposals contained in a claimant's Part 36 offer.

(2) Subject to paragraph (6), where rule 36.14(1)(a) applies, the court will, unless it considers it unjust to do so, order that the defendant is...