NO SPECIFIC FORM OF WRITTEN NOTICE IS REQUIRED TO WITHDRAW A PART 36 OFFER: THE ADVANTAGES AND DISADVANTAGES OF LEAVING A PART 36 OFFER OPEN

Part 36 offers are relatively easy to withdraw. This is demonstrated by the decision of Flaux J in of Supergroup Plc v JustEnough Software Corp Inc  where he rejected an application for a declaration that the the claimant had validly accepted a Part 36 offer made by the defendant. The offer had been validly withdrawn prior to “acceptance”.*

 THE FACTS

The defendant made a Part 36 offer stating how much it was willing to accept in full and final settlement of its counterclaim, it then wrote a later letter stating that all offers were withdrawn.  The claimant later served a notice of discontinuance of its claim and purported to accept the earlier offer made by the defendant.

THE CLAIMANT’S ARGUMENTS

The claimant argued

  • The letter withdrawing the offer was ambiguous and only related to costs.
  • A subsequent references to the offer in a later letter meant that the offer was still on the table.

THE DECISION: THE OFFER HAD BEEN VALIDLY WITHDRAWN

The claimant’s arguments were rejected.

  • A Part 36 offer is available for acceptance until it is withdrawn by serving written notice of withdrawal.
  • No specific form of written notice is required to withdraw a Part 36 offer. . An offeror need only serve something in writing which states in terms that the offer is withdrawn.
  • The defendant’s Part 36 offer was validly withdraw by the later letter.
  • Any reasonable solicitor would have understood that the letter withdrew the whole offer and not just the offer relating to costs.
  • The reference to the Part 36 offer in later correspondence did not revive the offer.
  •  Once withdrawn, a Part 36 offer cannot be revived, a fresh offer must be made.
  • The notice of discontinuance only the counterclaim was extant; it was not open to the claimant to accept the offer in any event.

 WITHDRAWAL OF A PART 36 OFFER: CONSIDERATION OF THE CASE LAW

In , C -v- D [2011] EWCA Civ 646, [2012] 1 W.L.R. 1962  the court considered whether a Part 36 offer which states that it is “open for 21 days” ceases to be open after 21 days or whether it will not be withdrawn for 21 days.

The relevant part of the CPR can be found at CPR Rule 36.3(5)-(7):

(5) Before expiry of the relevant period, a Part 36 offer may be withdrawn or its terms changed to be less advantageous, only if the court gives permission.

(6) After expiry of the relevant period and provided that the offeree has not previously served notice of acceptance, the offeror may withdraw the offer or change its terms to be less advantageous to the offeree without the permission of the court.

(7) The offeror does so by serving written notice of the withdrawal or change of terms on the offeree…

Rix L.J. observed, in C -v- D, that.

“17. …An essential feature of the Part 36 procedure is that a Part 36 offer remains on the table until it is formally withdrawn by a notice of withdrawal. It is because the offer remains on the table (until formally withdrawn) that the Part 36 consequences of a Part 36 offer, whether under rule 36.10 following acceptance prior to judgment, or under rule 36.14 following judgment, can be prescribed in the form which Part 36 sets out. If a Part 36 offer has been withdrawn before judgment, then the consequences of rule 36.14(2) and (3) do not flow. ”

He also referred to the case of Gibbon -v-Manchester City Council [2010] EWCA Civ 726:

“[16] In my view, attractive though these arguments are, they cannot be reconciled with the clear language of Part 36, or indeed with the scheme which it embodies. Rule 36.9(2) is quite clear: a Part 36 offer may be accepted at any time unless the offeror has withdrawn the offer by serving notice of withdrawal on the offeree. Moreover, it may be accepted whether or not the offeree has subsequently made a different offer, a provision which is contrary to the general position at common law. The rules state clearly how a Part 36 offer may be made, how it may be varied and how it may be withdrawn. They do not provide for it to lapse or become incapable of acceptance on being rejected by the offeree. That would be the case at common law, but it is inconsistent with the concepts underlying Part 36, which proceeds on the footing that the offer is on the table and available for acceptance until the offeror himself chooses to withdraw it. There are good reasons for that. An offer which appears unattractive when made, and which is therefore rejected, may become more attractive as the proceedings progress and the parties reassess the strength of their prospective cases. A defendant who chooses to leave his offer on the table may tempt the claimant into accepting it, with the benefit to himself of the consequences for costs of an offer made at an early stage. Part 36 allows a defendant (or for that matter a claimant) to decide whether to leave his offer open for acceptance or to withdraw it and make another offer later. To import into Part 36 the common law rule that an offer lapses on rejection by the offeree would undermine this important element of the scheme. It could give rise to disputes about whether the offer had been rejected in any given case, so as to render it incapable of acceptance. In Sampla v Rushmoor Borough Council [2008] EWHC 2616 (TCC) Coulson J held, largely for these reasons, that the rejection of a Part 36 offer does not render it incapable of late acceptance. In my view he was right to do so.

[17] Nor do I think that the letter of 18 February 2009 [in which the claimant had rejected a counter-offer] can be read as containing an implied withdrawal of the Part 36 offer. Rule 36.3(7) provides that an offer is withdrawn by serving written notice on the offeree. In my view that leaves no room for the concept of implied withdrawal; it requires express notice in writing in terms which brings home to the offeree that the offer has been withdrawn. If justification for that requirement is sought, it can be found once again in the need for clarity and certainty in the operation of the Part 36 procedure…”

 THE EFFECT OF NOTICE OF DISCONTINUANCE ON A PART 36 OFFER

In Joyce -v- West Bus Coach Services Ltd [2012] EWHC 404 (QB) Mr Justice Kenneth Parker discussed the effect on a Part 36 offer where a claim is dismissed for some reason (e.g. following an interlocutory inter partes hearing or final judgment being given). He observed that:

“33. There is, in my view, some tension between CPR r 36.9(2), which provides that a Part 36 offer may be accepted at any time unless the offeror serves notice of withdrawal on the offeree, and CPR r 36.11, which clearly implies, as Mr Turner QC correctly submitted, that a Part 36 offer cannot be accepted where there is in substance no claim left to be pursued (because a putative stay of the proceedings would be redundant in those circumstances). The tension between these Rules is, however, much reduced by the Claimant’s acceptance that a Part 36 offer cannot be accepted after a claim is dismissed (whether on the merits or by reason of procedural default), or judgment entered. That acceptance is consistent with CPR r 36.9(5), relied upon by the Claimant.

34. However, in my view, that acceptance is highly damaging to the Claimant’s case. The reason why the dismissal of the claim or the entry of judgment precludes the acceptance of a Part 36 offer is that on dismissal or entry of judgment the claim is to all intents and purposes at an end. But that is also the position where a statement of case or claim has been struck out under an “unless” order. The purpose of the “unless” order is to avoid the need for any further application or hearing to obtain dismissal of the claim. I am not impressed by the argument that ex hypothesi the Defendant has not requested judgment under CPR 3.5, for that is a purely formal step that follows automatically as a consequence of breach of the “unless” order and in recognition of the fact that the claim is now at an end; and in my view the implications for the acceptance of Part 36 offers should not turn upon such a relatively fortuitous nicety, where as a matter of substance the “unless” order has brought the claim to an end, no less than a final judgment or dismissal would do. ”

 PART 36 OFFERS SHOULD BE KEPT UNDER CAREFUL REVIEW – OR YOU COULD BE SUED

There are obvious advantages to claimants and defendants in making an early Part 36 offer. The advantages for claimants were considered in an earlier post on this blog.  However there are real dangers for both parties, but particularly for claimants, in failing to keep a careful review on offers that remain open.  I have now been involved in several cases where claimants had made offers which have been rejected.  Upon realizing that the case was much more serious than originally thought defendants have promptly (and quite properly) accepted the early low offer.

It is important that claimants review, and withdraw, Part 36 offers as soon as it becomes clear that the case may have a higher value.  The advantages of the Part 36 offer may be outweighed by the disadvantages of having a binding settlement at an undervalue.

 SUMMARY

  • A Part 36 offer is available for acceptance until it is withdrawn by serving written notice of withdrawal.
  • No specific form of written notice is required. An offeror need only serve something in writing which states in terms that the offer is withdrawn.
  • A withdrawn Part 36 offer cannot be revived by subsequent correspondence.
  • A Part 36 offer cannot be accepted after the claim (or part of the claim) has been discontinued.
  • It is important that all open offers are kept under careful review and withdrawn if there is reason to believe they are no longer appropriate.

 

 

*The case was reported on Lawtel on the 30th June 2014. This summary is based on the Lawtel report.

 

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