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C v D, Court of Appeal, 27 May 2011

6 June 2011
The issues

Part 36 offers – time limited offers – whether Part 36 offer could be time limited.

The facts

C brought an Application seeking a declaration that an offer to settle an action that C had made in a letter dated 10th December 2009 and expressed to be made for the purposes of CPR Part 36 was no longer open for acceptance and had not been accepted.

The action related to a claim for damages in respect of breach of contract in relation to a sale of land. It was headed “Offer to settle under CPR Part 36″. Throughout it there were many references to Part 36. The letter contained a reference to the offer being open for 21 days from the date of the letter and a reference to its intention to have the consequences set out in Part 36 of the Civil Procedure Rules. The letter went on to state that if the offer was not accepted and C obtained an equal or more advantageous Judgment, that C would then rely on CPR 36.14 to seek an Order for costs, including an Order for costs on the indemnity basis, with interest at up to 10% above base rate.

The offer was not accepted within the 21 days mentioned. Almost a year later, and 3 weeks before Trial, D purported to accept the offer. C submitted that a time limited offer was not capable of being a Part 36 offer.

The decision

The decision of the Court of Appeal in Gibbon v Manchester City Council had demonstrated the need for clarity and certainty in the operation of Part 36. An essential part of the procedure was that an offer made under Part 36 remained on the table until formally withdrawn by a Notice of Withdrawal.

In Onay v Brown, a decision of the Court of Appeal considering a differently worded offer, Lord Justice Carnwath had said that it seemed important in the interest of certainty that when the Part 36 jurisdiction was expressly invoked, the Court should generally take that at face value and as far as possible give effect to the consequences as envisaged by the Rules. Three issues arose for consideration in this case.

Firstly, could a Part 36 offer be made in terms which limited the acceptance of the offer to a stipulated period, such that the offer lapsed at the end of that period?

Secondly, what was the true construction of an offer being “open for 21 days” in the context of what was clearly intended to be a Part 36 offer?

Thirdly, if withdrawal of a Part 36 offer was necessary, was the Respondent’s offer withdrawn either by the time limited terms of the offer itself or by the emails which had followed it?

Issue 1
Part 36 did not contain an express exclusion of a time limited offer. The essence of the matter however was that, for a Part 36 offer to have effect in terms of costs consequences after Trial had to be an offer which had not been withdrawn, but which had remained on the table. After the initial period of 21 days, during which the Defendant remained liable for the Claimant’s costs had expired, the offerer could withdraw the offer only by serving Notice of Withdrawal on the offeree. In the absence of withdrawal the offeree could accept the offer at any time. There was no room for an offer which was neither withdrawn before or after the expiry of the relevant period but lapsed as a matter of its own terms. If a Part 36 offer was to lapse, it had to be formally withdrawn.

Issue 2
There were two possible meanings to the words “open for 21 days”. One was that the offer lapsed at the end of 21 days. The alternative meaning was that the offer was open for 21 days but that after those 21 days it might be withdrawn.

There was a general principle of construction that a document should be read as a whole and its separate parts should be so construed so as, if possible, to bring rational sense and consistency to that whole. Here, a time limited offer and a Part 36 offer were inconsistent. The offer was intended to operate as a Part 36 offer, as was clear from its title and the reference to Part 36 in the Civil Procedure Rules in the text of the letter. There was one feasible and reasonable construction of the offer which avoided it being construed as a time limited offer and that was the meaning that it was open for 21 days and might be withdrawn thereafter. This was in line with the second principle of construction, namely that words should be understood in such a way that the matter was effective rather than ineffective.

Issue 3
Did the terms of the offer or the subsequent emails amount to a withdrawal of the offer? In the Court’s Judgment none of the emails amounted to a withdrawal of the offer but were concerned with an extension of the 21 day period. Withdrawal now had to be seen within the context of the decision in Gibbon.

Appeal allowed.

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