Sale of land — Settlement of action — Claimant making Part 36 offer to settle claim for damages for breach of contract — Claimant later stating offer no longer open and not accepted — Defendants contending offer validly accepted – Claimant seeking declaration that offer no longer open — Whether time-limited offer capable of falling within Part 36 — Application allowed
In December 2009, the claimant’s solicitor sent an offer letter to the defendant’s solicitor headed “offer to settle under CPR 36”. The letter stated that “the offer will be open for 21 days from the date of this letter” and “if your clients do not accept this offer and our clients obtain a judgment which was equal or more advantageous than this offer, our clients will rely on CPR 36.14 to seek a cost order in the following terms…”. The offer was not accepted within the 21-day period.
The claimant subsequently brought an action seeking damages for breach of contract, having withdrawn a claim for specific performance. In November 2010, before the trial of the action, the defendants purported to accept the earlier offer. However, the claimant applied for a declaration that the offer was no longer capable of acceptance and that there was no binding settlement of the action which should therefore proceed. The defendants contended that so that they had validly accepted the offer there was no need for a trial.
The issues for the court were whether: (i) a time-limited offer that had to be accepted within a specified time constituted a Part 36 offer if it was not accepted within the stated period; and (ii) the offer letter in the instant case created a time-limited offer.
Held: The application was allowed.
A time-limited offer could not constitute an offer within the meaning of CPR 36, which established that an offer had to be capable of acceptance unless and until withdrawn by the service of a notice within CPR 36.9(2). An offer could be changed, but the costs sanction under CPR 36.14(6) would not apply if its terms were less advantageous.
The proper approach to CPR 36 had been dealt with by the Court of Appeal in Gibbon v Manchester City Council’ LG Blower Specialist Bricklayer Ltd v Reeves and another [2010] EWCA Civ 726; [2010] 36 EG 120.
CPR 36.9(2) provided a strong indicator of the sort of offer with which Part 36 was concerned, namely that it was an offer that was at least capable of being withdrawn and was not one that came to an end according to its own terms.
CPR 36.14(3) placed a severe costs sanction on a defendant that did not accept a Part 36 offer where there was a judgment against it that was at least as advantageous to the claimant as the proposals contained in the claimant’s Part 36 offer. However, the sanction did not apply where the Part 36 offer had been withdrawn or where the terms were changed so as to be less advantageous to the offeree and that offeree had made a better offer. The policy of Part 36 was to encourage a defendant to accept a reasonable Part 36 offer, but where that offer was not kept open, by being withdrawn or changed detrimentally, the sanction would cease to apply. The successful offeror could take the benefit of the provisions, as the quid pro quo only, if it had left it open to the offeree to accept the offer. It would not be consistent with that policy if a time-limited offer made the defendant subject to the risk of the CPR 39.14(3) sanction while not obliging the claimant to leave its offer open.
It was not arguable that a condition about the time for acceptance could have effect as a term of a Part 36 offer. It was more naturally to be seen as part of a process for acceptance of the offer than a term of theoffer itself.
The claimant’s offer letter did not envisage the possibility of acceptance after the expiry of the 21-day period that it specified. The draftsman had misunderstood the meaning of CPR 36 and had not appreciated that a time-limited offer was not capable of being a Part 36 offer. Accordingly, the letter could not be construed by reference to the meaning of CPR 36. Properly construed, it was not a Part 36 offer at all. It was instead a valid time-limited offer, which had no longer been capable of acceptance by November 2010.
Michael Barnes QC (instructed by SJ Berwin LLP) appeared for the claimant; Jonathan Seitler QC (instructed by Rawlinson Butler LLP) appeared for the defendants.
Eileen O’Grady, barrister
