Court of Appeal clarifies the rules on Part 36 Offers
In the landmark joint appeals of Gibbon v Manchester City Council
and L G Blower v Reeves
, the Court of Appeal held that Part 36 Offers
are open for acceptance at any point up to trial unless
they are expressly withdrawn.
The amendments to CPR Part 36 made in April 2007 introduced subtle but important changes to the regime and these appeals highlight the potential pitfalls facing solicitors.
In Gibbon, a personal injury claim, the parties made a series of P36 Offers. The defendants opening offer of £1,150 was rejected and the claimant counter offered with £2,500. The defendant rejected and offered £1,500 then £2,500. The claimant rejected both offers following which the defendant formally accepted the claimants own P36 offer of £2,500. The claimant then sought to withdraw the offer and the defendant applied to the court seeking a direction that its acceptance of claimants P36 Offer was binding.
In Blower, a contractual dispute, the defendant made a number of different P36 Offers at different stages. They then withdrew all offers apart from one and for good measure the defendant made a slightly better offer but not in P36 form. At trial, the claimant was awarded damages lower than one of the defendant’s withdrawn offers and only marginally better than one of the remaining 'active' P36 offers and the non P36 offer. The main issue in this case was whether the claimant obtained a more advantageous outcome or 'was it worth the fight' for a slightly higher monetary judgment (Carver v BAA). The Court frowned upon the uncertainty created by Carver and concluded "In most cases obtaining judgment for an amount greater than the offer is likely to outweigh all other factors".
In both cases the Court had to decide the status of the various P36 offers and their effect, if any, on the awarding of costs. The case of Gibbon clarifies that CPR Part 36 operates as a self contained or ‘stand alone’ code and the general common law principles of offer and acceptance do not apply. This allows the parties to a claim to make several P36 Offers which will remain capable of acceptance throughout the lifetime of the case unless expressly withdrawn. Subsequent offers or rejection of offers will not cause the original offer to lapse (unlike common law offer and acceptance).
These cases raise a number of crucial issues which, if ignored, could have serious consequences for parties to litigation. For example, it is vital that case handlers review previous P36 Offers from time to time and, especially if there has been a material change in circumstances eg claimant has been medically retired or their injury has worsened. It is imperative that any active P36 offers are expressly withdrawn in writing.
The 'Carver' clarification in the Blower appeal is helpful as it seeks to redress the uncertainty caused by Carver and other controversial decisions and returns the position to where Part 36 success is measured more in terms of monetary advantage than behavior and conduct issues.
This article was written by David Thomas
, Partner, Simpson Millar LLP Solicitors.