Two recent appeals confirm that Part 36 CPR is a self- contained code which does not import all of the general rules of contract law

05/07/2010

In two appeals heard together the court was asked to consider the interpretation and effect of CPR Part 36.

In the first action Gibbon appealed against the local authority in circumstances where Gibbon had made a Part 36 offer of £2,500. The local authority had initially made lower offers but it eventually offered the full £2,500. Gibbon rejected that offer without withdrawing her Part 36 offer, which the local authority then formally accepted. The judge found that the local authority had been entitled to accept the offer and was entitled to its costs from the date of the offer.

Gibbon's appeal was dismissed on the basis that Part 36 placed the onus on her to positively withdraw an offer that she no longer wished to be available for acceptance.

The Reeves had made a series of Part 36 offers in settlement of a claim brought against them by builders (LG Blower). One was made in May 2007 and a second in August, which was repeated the following February.
LG obtained judgment and there was an issue about whether the sum award bettered R's May offer. The judge resolved that by holding that the February offer, which was not as advantageous to LG as the sum awarded, superseded all previous offers.

The issue in both cases was whether Part 36 embodied a self-contained code or whether it was subject to the general law of contract insofar as it failed expressly to provide otherwise.

Gibbon submitted that her Part 36 offer was no longer open for acceptance when the local authority had purported to accept it, arguing that the local authority's initial rejection made it incapable of acceptance. Alternatively, she argued that her rejection of the offer of £2,500 amounted to an implied withdrawal of her Part 36 offer.

The Court of Appeal held that Part 36 was a self-contained code, prescribing the manner in which an offer might be made and the consequences flowing from accepting or failing to accept it.

The Court noted that although basic concepts of offer and acceptance clearly underpinned Part 36, it was not to be understood as incorporating all the rules governing the formation of contracts nor was it desirable. It was to be read and understood according to its terms without importing other rules derived from the general law, save where that was clearly intended.

In relation to Gibbon, it was held that arguments could not be reconciled with the clear language of Part 36, which clearly stated how an offer could be withdrawn and did not provide for an offer to lapse or to become incapable of acceptance upon rejection by the offeree. Rather, it proceeded on the footing that the offer was available for acceptance until withdrawn. There were good reasons for that and to import into Part 36 the common law rule that an offer lapsed on rejection by the offeree would undermine that element of the scheme. Nor was there any room for the concept of implied withdrawal of an offer as the rules required express notice in writing in clear terms. Such notice had, for the avoidance of uncertainty, to include an express reference to the date and terms of the offer and had to make it clear that it was being withdrawn.

In relation to the Reeves, their February offer did not supersede the May offer. The May offer had not been withdrawn in the manner set out in the rules so it remained open for acceptance. It was not, however, as advantageous to R as the amount awarded. Carver v. BAA Plc (2008) EWCA Civ 412 laid down that in deciding whether a judgment was more advantageous to a litigant than a Part 36 offer, the court had to take account of all aspects of the case including emotional stress and financial factors. However, the weight to be given to those factors remained a matter for the judge and it was important to see things from the litigant's perspective rather than to be too ready to impose the court's own view of what was and was not to his advantage. That was particularly important when dealing with money claims, where to recover judgment for more than what was offered was legitimately regarded as success.

The Court held that:
"Quite correctly the District Judge took as his starting point the fact that the claimant had been successful, having recovered a substantial proportion of its claim in the face of a defence which, at the start of the trial, denied that anything was due. However, he considered that the claimant's conduct during the early stages of the proceedings, in particular its dismissive response to sensible offers of settlement, called both for an expression of the court's disapproval and for a reward for Mr. and Mrs. Reeves. Nonetheless, he criticised them for changing their position in January 2008 and deciding to contest the claim in its entirety, which he considered had increased the costs of both parties without any real prospect of success. His solution was to deprive the claimant of its costs for the period up to 8th January 2008 and to order Mr. and Mrs. Reeves to pay only half of its costs thereafter."

The Court also noted that the Reeves' February offer did not comply with the requirements of Part 36. Consequently it was not necessary to decide whether, under Part 36, a later offer in different terms automatically varied a previous offer. However, that point was important. It was possible for a party to make several offers in different terms, all of which could at any one time be capable of acceptance.

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