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Gibbon v Manchester City Council & LG Blower Specialist Brick Layer Ltd v Reeves, Court of Appeal, 25 June 2010

9 July 2010
The issues

Part 36 – withdrawal of Part 36 offer – offer and acceptance – Carver v BAA.

The facts

In December 2007, Mrs Gibbon was injured when she tripped and fell in a playground, for which the City Council was responsible. Liability was admitted. On the 10th November 2008 the Council made a Part 36 offer of £1,150.00. That offer was rejected by the Claimant who made a Part 36 offer in response on the 18th November 2008, of £2,500.00.On the 24th November 2008, the Council increased its offer to £1,500.00. That offer was rejected. The Claimant’s Part 36 offer was not however withdrawn. On the 7th January 2009 the Council increased its offer to £2,500.00. On the 18th February 2009 that offer was rejected. The Claimant’s Part 36 offer was still not withdrawn. On the 26th February 2009, the City Council formally accepted the Claimant’s Part 36 offer. The Claimant’s solicitors purported to withdraw the offer on receipt of the letter and again rejected the Council’s offer of £2,500.00. The Council made an Application for a declaration that it was entitled to accept the offer made on 18th November 2008 and an Order for Judgment to be entered to reflect the fact that it had done so. The District Judge agreed. The Claimant Appealed. The Judge dismissed the Claimant’s Appeal.

In LG Blower Ltd v Reeves the claim related to work undertaken for Mr and Mrs Reeves by LG Blower for improvements on their home. A dispute arose. Mr and Mrs Reeves sought to off set the Claimant company’s final invoice against various amounts representing a loss they said they had suffered as a result of poor workmanship. The company brought proceedings for £15,793.06. Mr and Mrs Reeves counterclaimed in the sum of £9,160.60, plus damages for breach of contract. Before proceedings were commenced they made an offer of £8,023.14 in settlement of the company’s claim and tender to cheque. The Claim Form was subsequently issued. It was served on the 6th April 2007. On the 15th May 2007, a Part 36 offer was made by Mr and Mrs Reeves in the sum of £8,023.14. On the 28th August 2007 a second Part 36 offer was made in the sum of £8,188.38. This was rejected by the company. On the 9th November 2007 a third Part 36 offer was made by Mr and Mrs Reeves in the sum of £9,000.00. On the 9th January 2008 they withdrew all their offers, apart from the offer made in May 2007. On the 28th February 2008 Mr and Mrs Reeves repeated their offer of £8,188.38 but there was a dispute about whether it was a Part 36 offer and what exactly that offer was intended to refer to. The matter went to Trial when Judgment was awarded to the Claimant in the sum of £8,375.94 and when Mr and Mrs Reeves were ordered to pay half of the Claimant’s costs from 8th January 2008. Mr and Mrs Reeves appealed against the District Judge’s Judgment on the issue of costs. The Judge found on appeal that the offers in May and August 2007 had been superseded by the offer made on the 28th February 2008 and therefore the Claimant was the winner and the District Judge had made the wrong Order for costs.

In the Gibbon case the Claimant appealed. In the LG Blower case, LG Blower appealed.

The decision

Gibbon v Manchester City Council

Rule 36.9(2) was quite clear. A Part 36 offer may be accepted at any time unless the offerer withdrew the offer by serving notice of withdrawal on the offeree. Moreover, it might be accepted whether or not the offeree has subsequently made a different offer, notwithstanding that this principal is contrary to the general contractual position. The Rules state clearly how an offer may be made, how it might be varied, and how it might be withdrawn. They did not provide for it to lapse or to become incapable of acceptance on being rejected by the offeree. The concept underlying Part 36 proceeded on the footing that the offer was on the table and available for acceptance until the offerer himself chose to withdraw it. Circumstances changed as cases progressed. An offer which appeared unattractive when made might become more attractive as the case progressed and the strengths of respective cases were reassessed. To import into Part 36 the contractual Rule that an offer lapses on rejection would undermine this important element of the scheme.

An offer could not be withdrawn by implication. Part 36.3(7) provided that an offer withdrawn by serving written notice. That left no room for the concept of implied withdrawal but requires express notice, in writing, in terms which bring home to the offeree that the offer has been withdrawn. No particular form of notice was necessary but to avoid uncertainty it should include express reference to the date of the offer and its terms, together with some words making it clear it was withdrawn.

Appeal dismissed.

LG Blower Ltd v Reeves

Part 36 was a self contained code which provided expressly for the manner in which offers might be made, modified and withdrawn and as such it displaced the ordinary Rules of common law. Once made, a Part 36 offer remained open for acceptance without the need for the Court’s permission until the start of the Trial or its withdrawal. It followed that the Judge was wrong to hold that the offers made in May and August 2007 had been superseded by the offers made in February 2008. By the letter sent in February 2008, Mr and Mrs Reeves repeated their offer of £8,188.38 but did not expressly withdraw any earlier Part 36 offer which consequently remained open for acceptance. The letter, whatever its intention, did not constitute a Part 36 offer since it did not comply with the requirements of Rule 36.2(2)(b) or (c). The only Part 36 offer that the District Judge had to consider therefore was the May 2007 offer. Strictly speaking therefore it was not necessary to decide whether under Part 36 a later offer in different terms automatically varied a previous offer or to decide whether a party could make a number of different offers, all of which were open for acceptance at the same time. However, the point was important and the Court would therefore express its views. Part 36 did not provide that only one offer might be available for acceptance at any one time, nor did it provide that a later offer was to be treated as a varying or revocation of a previous offer. It would be inconsistent with the recognition as Part 36 as a self contained code to read provisions of that kind into it. The purpose of Part 36 was to promote settlement by encouraging sensible offers. There was no reason why a party should not make more than one offer and leave it to the other to decide which, if any, to accept. Or a party might, if he wished, change the terms of the original offer which then continues to stand in its varied form as from the date it was originally made. The Court accepted that in some cases there could be argument about whether a later offer was intended to vary and earlier offer or to stand alongside it. The solution was for the parties and their advisors to follow the requirements of the Rules carefully and make their intentions clear.

The true position was that the Claimant had recovered £661.38 more than the amount of the enhanced May 2007 offer.

This raised the question as to whether the Claimant had failed to obtain a Judgment more advantageous than the May 2007 offer, applying the principles set out in Carver v BAA Plc. Although the decision in Carver had been criticised by many commentators and by Lord Justice Jackson in his Review Of Civil Litigation Costs, Final Report, it was binding on the Court. It should however be recognised that what may be more important than the factors to be taken into account when applying Carver is the weight to attach to any particular factor. It was important to see things from the litigant’s perspective rather than be too ready to impose the Court’s own view of what is and what is not to the litigant’s advantage. That was particularly important when dealing with money claims. In a case where an offer had been beaten by a very small amount and there was clear evidence that the successful party had suffered serious adverse consequences as a result of pursuing the case to Judgment, those factors might be sufficient to outweigh success in pure financial terms. Such cases were likely to be rare however.

In this case it was not known on what basis the Claimant had funded the litigation or as to whether there were unrecoverable costs or, if there were unrecoverable costs, what they amounted to. Nor was there evidence of any other factor that might be set against the value of success in pure financial terms. The District Judge had proceeded on the basis that the Judgment was more advantageous than the Part 36 offer and the Court, albeit for reasons different from the District Judge’s, agreed. The District Judge was therefore faced with the task of exercising his discretion under Part 44. The District Judge had been correct in taking as a starting point the fact that the Claimant had been successful. He had gone on to take the view that the Claimant’s conduct during the early stages of the proceedings and in particular its dismissive response to sensible offers of settlement, called for an expression of the Court’s disapproval. His solution was to deprive the Claimant of its costs up to the 8th January 2008 and to order Mr and Mrs Reeves to pay only half of its costs thereafter. This Order was well within the ambit of the ambit of the District Judge’s discretion.

Appeal dismissed.

Comments

Some important principles established. In summary:

i) Part 36 is a self contained code. It should not be interpreted by reference to contractual principles.

ii) An offer remained open for acceptance until it was withdrawn.

iii) Offers, once rejected, can still be accepted later.

iv) Offers cannot be withdrawn by inference: only expressly.

v) More than one offer from a party can be on the table at the same time.

vi) Carver v BAA to be treated with caution in so far as Courts were encouraged to weigh up the non monetary costs or consequences of litigation.

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The content on this page is provided for the purposes of general interest and information. It contains only brief summaries of aspects of the subject matter and does not provide comprehensive statements of the law. It does not constitute legal advice and does not provide a substitute for it.

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