Civil Procedure Rules – Part 36 – Settlement of action – Offer and acceptance – Respondent offering to settle claim – Offer expressed to be made under CPR 36 but specifying time limit for acceptance – Appellant purporting to accept offer outside that time limit – Respondent obtaining declaration that offer no longer capable of acceptance – Whether time-limited offer falling within CPR 36 – Whether offer still open for acceptance – Appeal allowed
In December 2009, the respondent offered to settle proceedings that it had brought against the appellants for breach of contract in respect of a sale of land. The offer letter was headed “Offer to settle under CPR 36”. It stated that the offer would be open for “the relevant period” of 21 days from the date of the letter and that if the appellants did not accept the offer, and the respondent obtained a judgment that was equal to or more advantageous than that offer, it would seek a costs order in the terms of CPR 36.14.
The appellants did not accept the offer within the 21-day period; they eventually purported to accept it just before the trial date in November 2010. The respondent applied for a declaration that the offer was no longer capable of acceptance and there was no binding settlement of the action, which should proceed.
Granting the declaration, the judge held that: (i) a time-limited offer, specifying a period for acceptance, could not constitute a Part 36 offer because such an offer had to be capable of acceptance unless and until withdrawn by the service of a notice under CPR 36.9(2); (ii) the respondent’s offer letter, properly construed, was not a Part 36 offer since it created a time-limited offer that came to an end according to its own terms; and (iii) that time-limited offer was none the less valid under the common law and had expired, such that there had been no offer capable of acceptance by the appellants in November 2010: see [2010] EWHC 2940 (Ch); [2011] 03 EG 84. The appellants appealed.
Held: The appeal was allowed.
(1) Where a purported Part 36 offer stating that it was “open for 21 days” could be construed to mean either that the offer was not open after 21 days or that it would not be withdrawn for 21 days. The issue of construction had to be considered in the context of both the offer and Part 36 as a whole. On the former view, the offer could not be a Part 36 offer, even though it was intended to be one, since it was an essential feature of the CPR 36 procedure, and the costs consequences thereof, that a Part 36 offer remained on the table until it was formally withdrawn by a notice of withdrawal. A time limit could not form part of the subject matter of the offer over which an offeror within CPR 36 had autonomy: it was rather the subject matter of CPR 36 itself. Accordingly, there was a necessary inconsistency between an offer being time-limited and its being a Part 36 offer: an offer could be one or the other, but not both: Gibbon v Manchester City Council [2010] EWCA Civ 726; [2010] 3 EGLR 85; [2010] 36 EG 120 and Rolf v De Guerin [2011] EWCA Civ 78; [2011] NPC 17 considered.
Both the writer and reader of the offer letter had to be taken, objectively, to have known the legal context; the question was how a reasonable solicitor would have understood the offer in that context. There was a general principle of construction that a document should be read as a whole and that its separate parts should be construed, if possible, so as to bring rational sense and consistency to that whole: Pagnan SpA v Tradax Ocean Transportation SA [1986] 2 Lloyd’s Rep 646 applied. Further, words should be understood in such a way that the matter was effective rather than ineffective. It was common ground that the respondent’s offer was intended to be made and understood as a Part 36 offer. Since a time-limited offer and a Part 36 offer were inconsistent, the court had to consider whether the offer letter could be reasonably constructed so as not to render it time-limited. It was feasible and reasonable to read the words “open for 21 days” as meaning that the offer would not be withdrawn within those 21 days. On that view, those words were both a way of saying that there would be no attempt to withdraw within those 21 days and a warning that a withdrawal would be a possibility after that period had expired. Such a construction would save the offer as the Part 36 offer it was intended to be and would also provide both parties with the clarity and certainty to which both CPR 36 and the offer letter aspired. The respondent’s Part 36 offer had not been withdrawn in e-mails sent subsequent to the offer letter. Those e-mails were concerned only with an extension of the 21-day period and did not amount to a withdrawal of the offer. The appellants’ acceptance of the offer was effective since the respondent had made a Part 36 offer that it had not withdrawn.
It should be clearly understood that if a claimant wanted to make a time-limited offer, in the sense that the offer was to lapse of its own accord at the end of a stipulated period, such an offer could not be made as a Part 36 offer; that an offer presented as a Part 36 offer and otherwise complying with its form would not readily be interpreted in a way that would prevent it from being a Part 36 offer. Moreover, if an offeror wanted to bring its Part 36 offer to an end, so that it could not be accepted, it would have to serve a formal notice of withdrawal.
Sue Carr QC and Jonathan Hough (instructed by Rawlinson Butler LLP) appeared for the appellants; Michael Barnes QC (instructed by SJ Berwin LLP) appeared for the respondent.
Sally Dobson, barrister
