The High Court has construed a claimant’s offer as compliant with CPR Part 36 where it stated that the “relevant period” ran for 21 days from the date of the offer letter, rather than 21 days from the date the offer was made as required by the rules: Essex County Council v UBB Waste (Essex) Ltd (No 3) [2020] EWHC 2387 (TCC).

CPR Part 36.5(1)(c) provides that a Part 36 offer must, among other matters, “specify a period of not less than 21 days within which the defendant will be liable for the claimant’s costs… if the offer is accepted.” This is defined as the “relevant period”.

Since a Part 36 offer is made when it is served, and the offer in this case was served by email after 4.30pm and therefore deemed served the following day, the defendant argued that the offer effectively specified a relevant period of only 20 days from the date the offer was made, and was invalid for that reason. The court rejected that argument, finding that the offer could be construed as compliant.

This decision is a reminder to parties drafting Part 36 offers that the rules on deemed service as set out in CPR Part 6 apply to such offers and must be taken into account in calculating the relevant period under the rules. While the court may be prepared to construe an offer in terms that make it compliant, depending on the wording of the offer and the relevant context, it is obviously preferable to avoid any scope for argument.

Background

The claimant was awarded damages of approximately £9 million against the defendant for its breach of an agreement to design and construct a waste treatment plant in Basildon. The court dismissed the Defendant’s counterclaim of £77 million.

The current judgment addressed the issue of costs. While the parties agreed that, taking matters in the round, the claimant was the successful party in the litigation and that it was entitled to a costs order in its favour, there were several issues still in dispute including whether a Part 36 offer made by the claimant in March 2019 complied with the requirements of CPR 36.5(1)(c).

The claimant’s offer in this case was dated 7 March 2019 and stated (amongst other matters):

“If the defendant accepts the offer within 21 days of the date of this letter (the ‘Relevant Period’), the defendant will be liable for the claimant’s costs of the Proceedings (including pre-action costs) up to the date on which written notice of acceptance of this Offer is received by the claimant….”

The offer was sent by email at 4.54pm on 7 March. However, under the deemed service provisions set out under CPR 6.26, where an email is sent after 4.30pm on a given day it is not deemed served until the following business day. A Part 36 offer is not “made” for the purposes of CPR Part 36.7(2) until it is deemed served. This meant that the claimant’s offer was not “made” until 8 March.

The defendant contended that the 21 days ran from 7 March and, because the offer was not made until the following day, the relevant period would expire 20 days from the date the offer was made. The offer therefore did not comply with CPR 36.5(1)(c).

The claimant argued that the court should construe the offer such that the 21 days ran from the date of deemed service. Alternatively, the court should treat the offer as valid on the basis that any non-compliance was de minimis or because the defendant was estopped from challenging the validity of the offer.

Decision

The High Court (Mr Justice Pepperall) held that the claimant’s offer was valid. The judge cited the dictum of Stanley Burnton LJ in C v D [2011] EWCA Civ 646 (see our blog post on that decision here) that:

“Any ambiguity in an offer purporting to be a Part 36 offer should be construed so far as reasonably possible as complying with Part 36…”

While he recognised that there are limits to what can be achieved purely through construction, and referred to a number of cases in which the courts have held that purported Part 36 offers were invalid because they failed to comply with the mandatory requirements set out in the rules, in this case Pepperall J found that the offer could be construed as compliant.

The offer letter had to be construed in its proper context. As it was clearly intended to be a Part 36 offer, it would have been obvious to a reasonable person having all the background knowledge available to the parties that the wording about acceptance of the offer within 21 days was intended to be the statement of a “relevant period” in compliance with CPR 36.5(1)(c).

The statement that the relevant period ran for “21 days of the date of this letter” could reasonably be construed in one of two ways:

  • That the 21 days ran from the date stated on the face of the letter, ie 7 March. If so, a mistake was made and the offer did not comply with CPR 36.5(1)(c).
  • That the 21 days ran from the date when the offer was made, ie 8 March. Pepperall J found that it was not a forced construction to describe the date of the making of an offer contained in a letter as the date of the letter.

Applying the reasoning in C v D, the judge preferred the latter construction, since it was consistent with the clear intention to make a Part 36 offer and ensured the offer was effective rather than ineffective.

Pepperall J did not therefore have to address the question of whether, if the offer was non-compliant, the court should nevertheless treat it as valid on the basis that any non-compliance was de minimis or because the defendant was estopped from challenging the validity of the offer.

However, he made some obiter comments in case he was wrong on the construction point. In brief summary, he did not consider that the offer could be treated as valid if it had failed to comply with one of the mandatory requirements set out in CPR 36.5: in his view, there is no possibility of such an offer being treated as a Part 36 offer. The offer can of course still be taken into account under CPR Part 44 but will not gain the special advantages of CPR Part 36.

As for estoppel, the basis for the claimant’s argument was that the offer letter had stated:

“Should the Defendant require any clarification as to the terms of this Offer, or should the Defendant consider this Offer to be in any way defective or non-compliant with Part 36 of the CPR, please notify us by return and in any event within seven days of the date of this letter. Any failure to do so will be relied on by the Claimant to preclude the Defendant from attempting to avoid the adverse costs consequences of Part 36.”

The defendant’s letter rejecting the offer had not pointed out that there was an issue as to compliance with Part 36, as the service point had not yet been identified.

The claimant contended that the defendant thereby represented that the offer was a Part 36 offer and, the claimant having acted to its detriment by relying on such representation, the defendant was now estopped from taking the technical point under CPR 36.5(1)(c).

The judge referred to suggestions in previous case law that offerees who fail to take a point at the time about some defect in a purported Part 36 offer, despite a clear instruction in the offer that they should do so promptly, might subsequently be estopped from taking the point. However, Pepperall J said he was clear in his conclusion that estoppel should play no part in the Part 36 regime, including because, “as a matter of policy, the responsibility for ensuring that an offer is compliant with Part 36 should lie squarely upon the offeror and his lawyers”.

As the judge had concluded that the Part 36 offer was in fact valid, and that the claimant had obtained a judgement at least as advantageous as the terms of its Part 36 offer, he awarded the claimant the following under CPR Part 36.17(4): indemnity costs; interest at the maximum 10% over base rate on both damages and costs; and an additional amount of £75,000.

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