Tuesday, 30 November 2010

C v D & D2 [2010] EWHC 2940 (Ch): an offer you can't accept

So you’re a defendant in a case.  You get a letter.  It’s headed “Offer To Settle Under Part 36”.  The letter refers to Part 36 throughout.  The final paragraph is a lengthy explanation of the consequences that Part 36 sets out if you do not accept a Part 36 offer.  You would think the offer had something to do with Part 36, wouldn’t you?

Apparently not.  A judge has decided that you can ignore the multitudinous references to Part 36.  Because the letter said the offer was open for 21 days.

Which is also a requirement of the mysterious Part 36.

Yet the judge said that this particular reference to Part 36 meant the letter was not a Part 36 offer.

OK.  Time for a step back.  The English legal system is based on trying to get people to agree before trial.  Hence the almost grotesque amounts of disclosure before a trial.  It allows the parties to assess the strength of their case.  If they’re on to a loser, fine, you now know, you can now get out.  So there are extensive provisions for settlement; discussion, mediation, whole reams of “without prejudice” correspondence where the parties can be pragmatic (or even honest) about their case without telling the judge their secret fears. 

The Civil Procedure Rules are divided into separate parts, dealing with evidence, applications, special procedures and so forth; Part 36 is the one that deals with making offers.  It is a powerful weapon.  If a claimant has a claim for £50k, it can offer to take a discount - £30k, say - under Part 36.  Open for a minimum of 21 days.  If the defendant snubs the offer, they go off to trial.  If the claimant gets more than £30k, then, from the date the offer expired, the claimant can ask the court for indemnity costs – maybe 95% of his costs paid, rather than the usual 60-70% or so – and for a punitive interest rate of 10% above base.  Now imagine you make that offer and win £100m.  And you make the offer 2 years before trial.  Woo.

But the offer does not, as such, lapse.  Part 36 is clear.  An offer can be accepted later.  The 21 days minimum requirement is there to let the recipient have a think before the penalties kick in.  If party A makes the Part 36 offer open for 21 days, and party B accepts it 100 days after the offer was made, then the offer is accepted; party A will ask for the penalty costs and interest between days 22 and 100 at least, and the Court will often award them if the parties cannot agree.  If party A genuinely did not want the offer to be accepted, it should withdraw the offer.  And lose the costs protection, but them’s the breaks.

What happened in the C v D case is that the anonymous Claimant made a two-part offer to the similarly anonymous Defendants; either buy a property from C at £10m, or just pay £2m compensation.  The offer was made on 10 December 2009 and was stated to be open for 21 days; the offer was headed Part 36 and so on.  Very much aiming to get within that punishing regime.  The offer included the phrase “Regardless of which settlement offer your client chooses, the offer will be open for 21 days from the date of this letter (the "Relevant Period")”.  A thinking period for the Defendants.

The Claimant chased acceptance until mid-January 2010 (well after the 21 day period, note).  The Defendants did not accept; the parties pootled along to a trial in late November 2010.  Except on 5 November the Defendants had a change of heart.  “We’ll take it.”

That’s not what happened in this case.  The Claimant went to Court to say that the offer had lapsed way back.  It was a time-limited offer.  Once they reached 31 December 2009, it was dead and gone.  But it was still a Part 36 offer, said the Claimant.  We get the costs consequences at trial, only you cannot accept it late.

This would be a surprising construction and the judge, rightly in my view, rejected it.  The offer could either be time-limited or Part 36.  Cannot be both.  So which was it?

The judge commented on how much the letter looked like a Part 36 offer, lots of references to Part 36, the costs being claimed under the letter being the Part 36 offer, the reference to Part 36 in the heading and so on.  Even the use of the definition “Relevant Period” which pretty much matches the definition in Part 36.  Yet he ignored all those specific words and said the offer was time-limited.  All those references to Part 36?  A mistake.  Nonsense.  Mere bagatelle.  Persiflage.  That one single reference to 21 days was, in the view of the judge, betraying that the real intent of the offer letter was to rub out the multifarious references and allusions to Part 36.  Even though Part 36 requires such a period to be included.  Why?  Because the strict wording of Part 36 – wording which was changed in April 2007, perhaps overlooked by most lawyers – states that the letter must specify a period of not less than 21 days within which the defendant will be liable for the claimant's costs in accordance with rule 36.10 if the offer is accepted .  Or, in other words, instead of saying “the offer will be open for 21 days”, it should have said “the offer will be open for 21 days, after which you may only accept in the terms of Part 36” or some such addition.  You cannot import those missing words into the sentence from Part 36, even if you refer to Part 36 repeatedly.  Therefore the Defendants could not accept the offer.  It had gone. 

This in my view is a wrong construction.  The judge interpreted the offer as ambiguous, which is fair enough; the Claimant’s arguments suggested it wanted to have its costs cake and eat it.  But in construing the ambiguity, the judge preferred to read a sentence in the offer really, really, really strictly, as against the continued references to Part 36.  It was surely clear that the Claimant wanted to make a Part 36 offer, hence it going into detail on the costs consequences, and the Defendants took it as such; the Claimant after all chased up the Defendants to see if they were accepting it a couple of weeks after the time limit had gone.  Straightforward interpretation starts from the perspective that, if words are written down, the words must have some meaning.  Surely the inclusion of Part 36 stuff means the drafter wanted to be within Part 36, with the consequence that the offer should remain open afterwards.  Otherwise the time spent referring to Part 36 was wasted.  The judge basically scribbled away half of the letter because of one bit of what might be termed drafting from memory.

I understand that the Defendants have been given permission to appeal.  If I were a betting blogger, I'd have a cheeky twenty on the appeal being allowed.

30 May 2011: UPDATE - and I'd've won.  The Court held that the words "Part 36" must mean something, otherwise they wouldn't be there.  So construed the ambiguity within the remit of the Part 36 requirements.  OK, where shall I get payment?

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